Contradictory views on China's `growth story'

HYDERABAD, AUG. 14. Contradictory views came to the fore from amongst academics and intelligentsia during a conference on "China Vs India" at the Indian School of Business (ISB) here with some citing China's growth story as a `role model', while some others felt China was `unstable' and warned of a crisis similar to that of Japan (in 1990s) or the subsequent Asian crisis.

Member of the Planning Commission, Anwarul Hoda, took the middle path saying liberalisation came at a good pace, though perhaps a little slower than in China. It is difficult for the Government to `bulldoze' its way in a democracy. Slowness if any, could be attributed to `gradualism' and inherent difficulties of a democracy rather than lack of willpower, he felt.

Quantitative restrictions (imports) have gone, import duties came down, there is no licensing nor a cap on foreign investments in many sectors including services. India is constrained by resource availability in infrastructure development, but is trying out the private-public partnership path, he said.

`Poor model'

John Talbott, author of several books including one on China, and an ISB consultant, said China was unstable and a poor model for development. He pointed out 50 per cent of its bank loans $ 675 billion were `bad'. Unemployment was understated and was as high as 120 million, accounting numbers did not add up and 99 per cent of state undertakings misstated profits. Its advantage was non-market cheap labour. It was cheap because it was `coerced' and employers had monopoly and the Government on their side. China was a threat to world stability and was carrying backward economic plunge of developing world, he felt.

Banking crisis

Mr. Sanjeev Sanyal, Director and Senior Economist of Deutsche Bank, felt China was going `down the path to a banking crisis'. Savings shift was accompanied by investment booms and eventually to misallocations of capital and ultimately to banking crisis. China's savings and investment was over 40 per cent of GDP. India's savings and investment was 22-23 per cent but India was unique and attempted to introduce prudential norms.

`Shanghai best'

Gopi Gopalan, Consultant (GE) felt there was no place better than Shanghai saying "If you don't take to China you are missing the boat." Deepak Goyal, Engagenment Manager with Mckinsey, said China's growth was driven by investment and productivity. The latter was 2-5 times that of India in most sectors. Street prices of most consumer durables were 30 per cent cheaper than India. India needed to reduce import duties, eliminate SSI reservations, more labour reforms and to kick start Special Economic Zones growth, he observed.

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