China and India: economic performance, competition and cooperation: an update

Abstract

China and India chose similar economic development strategies in 1950 of near autarky, industrialization, and the dominance of the state in the economy. China came out of insulation and began reforming its economy in 1978. India’s hesitant and piecemeal reforms, initiated in the 1980s, became systemic and broader in 1991. Since 1980, China has grown at an average rate of around 10% per year and India at 6%, though both have experienced a slow down since 1997. China became the world’s fourth largest exporter in 2002. India’s exports also grew, though not as fast as China’s. Both are experiencing a protectionist backlash. The paper reviews the economic performance of the two countries, particularly of the macroeconomy and of the external sector. It argues against exaggerating the significance of the growing regional disparities within each country, it argues against exaggerating their significance. The two compete in world markets, and therefore, have a common interest in a liberal world trading system. Their cooperation in the Doha Round of trade negotiations would be mutually beneficial and would promote the interests of developing countries.