Libmonster ID: IN-1416

The balance of power on the "world chessboard" seems to be increasingly determined by the real achievements of the leading Asian players, which for a long time makes it extremely important to analyze and clarify the trajectories, proportions and key factors of their development.

DYNAMICS, INTERNAL AND EXTERNAL GROWTH PROPORTIONS

Not everyone will necessarily agree with this, but the most important event of recent decades was not the collapse of the Soviet system, but the powerful economic rise of Asian giants-China and India. Thirty years ago, very few people spoke about the possibility of this new "Asian breakthrough" (after Japan, South Korea, and Taiwan) and very few people believed in it. However, if we are to be precise and look at things in what is called economic retrospect, we can see that there was not a one-time breakthrough: in reality, there was a multiphase acceleration in the pace of their economic development.

In 1870-1950, when India and China were in a state of colonial and semi - colonial dependence, the average annual growth rate of their per capita GDP did not exceed 0.1 - 0.3% in the trend 1. In 1950-1980, when these countries gained independence, but their development took place in a semi-autarkic mode, mainly relying on the public sector and the private sector. with a significant restriction on private initiative, the GDP growth rate per capita reached an average of 1.1 - 1.3% annually in India and a maximum of 2.6 - 2.7% in China. The indicators have significantly increased in comparison with the previous period. But in general, they did not differ significantly from the entire group of developing countries.

About three decades ago, serious reforms2 began in China and then in India, aimed at implementing domestic and foreign economic liberalization2, while - it is very important to emphasize-maintaining macroeconomic and political stability and manageability of the process of market-oriented transformations (in these countries, as in Asian NIS, national strategies are developed and implemented).- economic development plans). The reforms were accompanied by an impressive increase in capital accumulation for these poor countries, the scale of which, let us clarify, turned out to be much larger in China than in India.

1 Economic dynamics were characterized by high instability. In some periods, there was a significant decline in the indicator of gross product per capita [see: Maddison, 2003, p. 180, 182, 184; Bairoch, 1997, p. 1017; Melyantsev, 1996, p. 145; Fridman and Belchuk, 2006, p.68, 78, 114].

2 For a discussion of "turning points" in India's economic growth, see Rodrik and Subramanian, 2005, p. 193-228.

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These factors and a number of others, including the natural / comparative advantages of the two Asian giants (huge masses of not only cheap, but also very proactive and mobile labor force), contributed to a significant acceleration in the growth rate of per capita GDP in 1980-2005: in China, at least, up to 5.9 - 6.1% and in India-up to 3.9-4.1% (which was significantly higher than in other developing countries)3. In the context of globalization and intensive relocation (outsourcing) to the (semi -) periphery of the world economy of the most important segments of production from "post-industrializing" countries, poor but more or less adequately managed countries (which are also able, due to the huge size of their population, to realize the "market scale effect") have received serious chances for development 4.

Research shows that growth stability is an important indicator and factor of economic development (helping to reduce inflationary expectations and investment risks, stimulating capital accumulation, including attracting FDI). If in the 1950s - 1970s the fluctuation rate of gross product growth in India reached 110-120%, and in China-150-160%, then after the beginning of liberal economic reforms in the countries under consideration (in 1981 - 2005), the instability of growth in them decreased to 31-33%. For comparison, we note that in developed countries, on the contrary, the instability of GDP dynamics has increased: in the United States - up to 65%, in Japan-up to 78%, in Germany - up to 107% 5.

Due to the impressive absolute GDP volumes of China and India (calculated in purchasing power parities, 69-70% and 30-31% of the US gross product in 2005, respectively) [see: World Bank. World Development Report, 2007, 2007, p. 288-289] 6 and very high growth rates, their contribution to the growth of the world gross product

3 Existing calculations and estimates of the levels and rates of their economic development need to be clarified. Some overestimation of economic dynamics may be due to underestimation of the initial level of development, underestimation of the size of the informal sector, as well as underestimation of deflators and other reasons. Let us emphasize that if there are no particularly strong complaints about the macroeconomic statistics of India, a country with a long democratic tradition (the largest democracy in the world), in which the system of national accounts, which generally meets international standards, was laid down by the British, then there are many questions about Chinese statistics. Chinese economic growth is phenomenal (see the works of J. M. Berger, V. G. Gelbras, V. V. Karlusov, V. V. Mikheev, V. S. Myasnikov, I. N. Naumov, A.V. Ostrovsky, V. Ya.Portyakov, M. A. Potapov, A. I. Salitsky, A. S. Selishchev, M. L. Titarenko, etc.). But a thorough and thorough clarification of its scale would be very useful (for the author's adjustment of China's GDP growth rate, see [Melyantsev, 2006 (2)]. It is worth noting that, judging by the data of Indian experts, in 2002-2005 The real growth rate of Chinese GDP was two to three percentage points lower than the official one, reaching an average of 6.5 - 7.5% annually [Finance India, 2006, p. 1147].

4 According to a number of international experts, among the BRIC countries, which also include Brazil and Russia, which generally differ in their raw material export specialization, China and India, which are currently much poorer in terms of per capita GDP, currently have the most serious prospects for technical and technological modernization [see: Lloyd, Turkeltaub, 2006].

5 The coefficient of weather fluctuation (instability) is calculated by the following formula:

F = {[Σ (, - ) 2] n-1}0.5(y-1) *100, (%), where F is the fluctuation coefficient, yi,y are, respectively, the GDP growth rate in the i-th year and the average annual GDP growth rate for the period, covering n years [calculated from: Melyantsev, 1996, p. 261, 263-265; Maddison, 2003, p. 64, 86, 174; IMF. World Economic Outlook, 2006, p. 189-190, 195]. To be fair, the rate of instability of economic growth in the three leading developed countries decreased slightly in 2001-2006: in Germany and Japan, respectively, to 96-97% and 68-69%, and in the United States, perhaps more significantly, to 46%. The last digit can be adjusted. The fact is that English experts have proposed alternative, lower indicators of the dynamics of American GDP [calculated from: Economic Report..., 2007, p. 358; Measuring America's Economy..., 2004].

6 Data for 2006 are being updated. According to our preliminary estimates, in 2006 the corresponding indicator reached 73-74% in China and 32% in India compared to the US level [see Output, Prices, and Jobs, 2007]. The calculations are somewhat tentative. For the two Asian countries under review, data on their GDP in PPP terms were obtained by experts from the World Bank and the Pennsylvania Center for International Comparisons based on extrapolation and a series of regressions. However, the same methodology is used to calculate indicators for many other developing countries [see: World Bank. World Development Indicators, 2006,2006, p. 20 - 23; Heston, Summers, Aten, 2006].

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Schedule 1

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Calculated by: [World Bank. World Development Indicators, 2004, 2004, p. 182 - 184; World Bank. World Development Indicators, 2006, 2006, p. 194 - 196; World Development Report, 2007,2007, p. 288 - 289, 294 - 295].

Between 2000 and 2005, the share of GDP (MVP) was 26 - 27% and 11 - 12%, respectively. In total, thetwo Asian giants accounted for 37-39% of GDP growth, which is higher than in the group of developed countries as a whole (34-35%, including in the United States-16-17%, see chart 1). An extrapolation of the current, even slightly downward-adjusted economic growth rate shows that in the next five to ten years, China, all other things being equal, can catch up with the United States in terms of GDP measured in PPP, and India, having overtaken Japan in this indicator, will have an economy that makes up from two-fifths to half US gross domestic product. I don't think it makes sense to explain the geo-economic and political significance of such changes in the balance of economic power.

If in China, industrialization became the "engine of growth" (in 1980-2004 / 2005, industrial sectors and construction accounted for 51-52% of the increase in its GDP, while services accounted for 36-37%), then in India, the "servicization" of the economy, which to some extent was due to the intensive development of export-oriented software segments and outsourcing of ICT services. In this country, the secondary sector of the economy provided no more than 31 - 32%, and the service sector - 53 - 54% of GDP growth. All this, of course, does not mean that India has entered the list of post-industrial countries in the world. The contribution of the tertiary sector to its GDP growth is much lower than in economically "advanced" countries, where it exceeds three-quarters. In addition, the indicator under consideration for India is probably somewhat overstated, due to the possible underestimation of deflators in the service sector [see Bosworth, Collins, Virmani, 2006, p. 39-40], as well as the still relatively weak level of development of the manufacturing sectors of the Indian economy.

In contrast to China, where the share of manufacturing in GDP is reported to have increased from 33% in 1990 to 36-37% in 2005, India, on the contrary, has declined from 17% to 16% and is (significantly) less than in other large and medium-sized countries East, South-East and South Asia (and two percentage points lower than the entire group of developing countries). Our calculation of a polynomial trend based on data on per capita GDP and the share of manufacturing in GDP in ten large and medium-sized developing Asian countries shows that at the level of development achieved in India, the share of manufacturing industries in its gross product should have been two-fifths higher.-

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7. We also note that while in China the share of mechanical engineering and transport equipment in the value added of the manufacturing industry increased from 22% in 1980 to 32% in 2002, in India this important structural indicator of the economy decreased-from 25% to 17%, respectively [see: World Bank. World Development Indicators, 1997, p. 150 - 151; 2006, p. 202 - 203].

Despite all that we know about a number of India's achievements in the field of industrialization, including the work of major Russian indologists and specialists in emerging economies, 8 this country lags far behind China in terms of the average level of industrial development due to its higher share of the traditional and semi-traditional (unorganized) sector than in the PRC.9 The latter is about twice as far ahead of India in terms of GDP per capita, and almost five times as far ahead of India in terms of per capita value added created in the manufacturing industry (2.1 times in 1990, 4.7 times in 2002). According to the calculations of UNIDO experts, in 1990, China surpassed India by 2.5 times in terms of exports of finished products per capita, and in 2002 - by 6 times [calculated and compiled by: UNTOO. Industrial Development Report..., 2005, table A2.1; World Bank. World Development Report, 2007, p. 288 - 289,294 - 295]10. So economic

7 Globalizing world economy - the sphere of active interaction of competing economic entities (national economies, TNCs). The success of the rapidly industrializing export-oriented countries of East and South-East Asia and, to a lesser extent, changes in the terms of trade in favor of raw materials industries may well have caused the deindustrialization effect (or a reduction in the share of manufacturing industries in GDP) of a number of other developing countries. In any case, in 1990-2004 / 2015, the indicator under consideration showed a downward trend in the whole developing world (excluding China): from 19-20 to 15-16%, including in Tropical Africa-from 17 to 15%, in South Asia - from 17 to 16%, in Latin America - from 22 to 16% [calculated and compiled by: World Development Indicators, 2004, p. 182-183; World Development Indicators, 2006, p. 194-195, 198-200; Asian Development Bank. Key Indicators..., 2006, p. 113; Asia Rising..., 2006, p. 6; Reading the Tea Leaves, 2007]. For the sake of justice, we note that the data of Chinese statistics have recently been revised both in the PRC and by international organizations. The above figures for the share of manufacturing in China's GDP, derived from the World Bank and the Asian Development Bank, are several percentage points lower according to UNIDO [see: UNIDO. Industrial Development Report, 2005, 2005, table A2.1].

8 See the works of E. A. Bragina, A. E. Granovsky, S. V. Zhukov, V. A. Krasilytsikov, S. I. Lunev, O. V. Malyarov, A. I. Medovoy, V. G. Rastiannikov, L. I. Reisner, A. A. Rogozhin, V. N. Ulyakhin, L. A. Fridman, V. L. Sheinis, G. K. Shirokov, A. Ya. Elyanova, V. A. Yashkina and others.

9 This can be judged to a certain extent by the following data. In terms of per capita electricity consumption, India lagged twice behind China in 1980, and more than two and a half times behind China in 2003/2004. At the beginning of the current decade, just over two - fifths of the population in India had access to electricity, and almost 100% of the population in China, and the share of the informal sector in the Indian economy was one and a half to two times higher than in China [see: World Development Indicators, 2003, p. 152-153; World Development Indicators, 2004, p. 148-149; World Development Indicators, 2006, p. 162-163; Economy Characteristics; Asian Development Bank. Key Indicators..., 2006, p. 182, 205].

10 India's lag behind China is also observed in the agricultural sector. Due to limited space, we will only mention the following. Over the past two or three decades, some progress has been made in the agricultural sector of each of the two countries. According to the World Bank, India has significantly caught up with China in terms of the share of irrigated land, surpassed it in terms of relative tractor utilization, and the area of cultivated land per capita is about two-fifths higher than in China. But it is still almost two and a half times behind the latter in terms of fertilizer use. Although, like China, India has managed to take advantage of some of the benefits of the green revolution, it is, in our opinion, experiencing more acute problems than China related to the preservation of backward forms of land use, lack of electricity and basic infrastructure, and widespread illiteracy among the rural population. As a result, the share of people employed in India's agricultural sector is not much lower than three-fifths of the economically active population and is almost one and a half times higher than in China, where this figure is almost two-fifths of the total employed population.

India is twice inferior to China in terms of grain yield: its values in 1979 - 1981 were 13 - 14 and 29 - 30 centners/ha, respectively, in 1993 - 1995 21 and 45 - 46 centners / ha, in 2003-2005-24 and 50 - 51 centners/ha and [World Development Indicators, 1997, p. 142-143; World Development Indicators, 2004, p. 124-125; World Development Indicators, 2006, p. 138 - 139]. Judging by a number of available calculations (including our own), in 1980-2005 the average annual growth rate of labor productivity in China's agriculture was 3 - 3.5 times higher than in India, as a result of which in the latter its level by the middle of the current decade was about a quarter to a third lower than in China [calculated and compiled from: World Development Report, 2007, p. 282, 294; World Development Indicators, 2004, p. 120 - 121, 124 - 125, 183; World Development Indicators, 2006, p. 134 - 135, 138 - 139, 195; Asian Development Bank. Key Indicators. .., 2006, p. 204; Мельянцев, 2006(2),с. 15 - 17; Bosworth, Collins, 2006, p. 25, 27; Maddison, 1998, p. 71, 172].

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The upswing in each of the two largest Asian countries was not the same in scale and based on far from identical growth patterns. Each of them has its own characteristics, pros and cons.

A number of Russian and foreign studies show that the inflow of foreign capital is one of the most important factors in the economic recovery of (semi -) peripheral countries. In this case, can the success of Asian giants also be linked to the influx of FDI into their economies?

In 2006, China ranked fourth in the world in terms of absolute FDI inflows after the United States, Great Britain and France. As for India, although FDI inflows to its economy have increased over the past two or three years, it has received 8-10 times less foreign investment than China.11 Let us emphasize that in 2006, China's share in global FDI inflows was 5.6%, which is, of course, quite a lot, but still many times less than its share in the IMP (14-15%) and in the global population (20%). Similar figures for India (0.8%, 6-7% and 17%) indicate that it is less effective in attracting FDI than China. The share of net FDI inflows in GDP, measured in PPP terms, in China does not exceed 1%, and in India this indicator is three to four times less.

What do these figures show? Foreign capital, with all possible caveats12, in general, as a rule, has a positive (including" catalyzing " and demonstration) impact on the countries receiving FDI, contributes to improving the level of technological equipment of the countries under consideration, and activates their foreign trade relations. In China, where foreign capital controlled no more than one-tenth of its exports in the late 1980s, and now controls from half to three - fifths [see Melyantsev, 2006(1), p.150], the export potential has been significantly strengthened in the last two or three decades. Therefore, the PRC and, especially, India, which has a shortage of foreign investment, seek to expand its participation in the development of their countries (of course, sometimes implementing soft, and in some cases - more decisive regulation). In general, we emphasize that China and India are very large economies in which internal factors seem to play a much more important role than external ones.

Over the past decade and a half or two, the two Asian giants have become increasingly involved in the international exchange of goods and services, although to varying degrees, and already have a noticeable impact on the economic development of other countries. At the same time, however, while India's share of world exports of goods and services grew from only 0.5% in 1980 to 1.2% in 200513, the corresponding indicator for China, which is pursuing a more intensive policy of stimulating exports (including by undervaluing the yuan), increased massively - from 0.9% in 2009. It is characteristic that in 2001-2005 India's contribution to the growth of world exports still did not exceed 1.3 - 1.4% (!), while for China this indicator was almost an order of magnitude higher (11-12%).. It was almost 3-4 times higher than in the USA or Japan-

11 Net FDI inflows to the PRC economy increased from $ 53.5 billion in 2003 to $ 60.6 billion. in 2004, 72.4 billion in 2005; in 2006, the figure fell, according to preliminary data, to $ 70 billion. In India, the indicator under consideration grew from $ 4.6 billion to $ 5.5 billion, $ 6.6 billion, and $ 9.5 billion, respectively [see: UNCTAD. World Investment Report, 2006, 2006, p. 292, 301; Foreign Direct Investment..., 2007].

12 Studies often emphasize that TNCs transfer new, but not always the latest technologies, do not care much about the state of the environment and solving the problem of employment, and are not always closely integrated into the national economy.

13 In 2005, India's share of global exports of goods and services was still lower than in Malaysia and Austria (1.3%), Sweden and Switzerland (1.4 - 1.5%), Taiwan (1.8%) and a number of other small and medium-sized countries [calculated from: WTO. International Trade Statistics..., 2006, p. 21].

14 In terms of the share of world exports in 2005, China already surpassed Japan (5.3%), but still lagged behind Germany (8.8%) and the United States (9.9%) [calculated from: WTO. International Trade Statistics..., 2006, p. 21].

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the research institute, however, was almost the same number of times less than the contribution to the growth of world exports of the European Union15.

We emphasize that the effectiveness of China's foreign trade policy is significantly higher than that of India. 16 China is characterized by a growing surplus, while India is characterized by a trade deficit. In 2005, China's exports of goods and services already exceeded its imports by about one-sixth 17 (and as a result, the country's foreign exchange reserves now exceed a trillion dollars)18. In India, the situation was reversed: exports of goods and services were one-fifth less than their imports.19
In both countries, the share of finished products in commodity exports has significantly increased. According to the World Bank, this indicator increased in India from 58-59% in 1980 to 73% in 2004, exceeding its value for the entire group of developing countries (69-70%). In China, it rose from 47-48% to 91%, respectively, five to six percentage points higher than the average for the group of developed countries. At the same time, the share of high-tech products in the export of finished industrial goods to China (30% in 2004) was 6 times higher than in India (5%) and on average almost twice as much as in advanced countries [see: World Development Indicators..., 1997, p. 158-159; World Development Report..., 1983, p. 166; World Development Report..., 2007, p. 296] 20.

While China's share of services in its total exports fell from 12% in 1980 to 9% in 2005, India's share increased from 25% to 32%, respectively, exceeding the global average by two-thirds. In both countries, the role of information and communication services (ICS) exports has significantly increased since the early 1990s. However, in China, in 2005, its share in GDP calculated in PPP terms barely reached

15 Calculated from: [UNCTAD. Handbook of Statistics..., 2004, p. 2, 4, 6, 200, 202, 204; WTO. International Trade Statistics..., 2005, p. 32; WTO. International Trade Statistics..., 2006, p. 16, 17, 21; WTO. World Trade Report. .., 2006, p. 6, 11, 12]. Data for the EU - taking into account their mutual trade. Data on the actual size of Chinese exports is a subject of discussion [see Melyantsev, 2006(1), pp. 150, 163]

16 It is interesting to note that China and India, which in recent decades have implemented certain reforms aimed at increasing the degree of economic openness and some deregulation of their economic systems, nevertheless still belong, according to one of the classifications, to the number of "mostly economically unfree countries" [see: The Heritage Foundation..., 2006, p. XXXIII, 143 - 145, 217 - 218]. Classifications, as you know, are quite conditional. However, it is obvious that the deconservation of semi-autarkic, especially giant economies, could already have a significant effect at the initial stages in terms of increasing the pace of their foreign trade exchange.

17 China's trade surplus increased from $ 102 billion in 2005 to $ 187 billion in 2006. It is almost twice the size of India's trade exports (Bremmer, 2007).

18 China's foreign exchange reserves, which have increased at least fivefold since the end of 2000, now account for about one-fifth of the world's reserves. According to one of the available estimates, they can be used to buy almost all real estate in London [Eye on China..., 2007].

19 However, in India, this indicator showed a downward trend. Imports of goods and services exceeded their exports by more than half in 1980, and by less than a third in 1990. At the same time, another equally important indicator of the effectiveness of foreign trade is the trade deficit attributed to GDP calculated on the basis of exchange rates, which has been declining for two decades (from 2.7% in 1980 to 2.1% in 1990 and 1.8% in 2001). according to available data, it increased to 4.3% (the commodity deficit excluding the balance of services reached, according to various sources, 4.8 - 5.3% of Indian GDP). [calculated and compiled by: WTO. International Trade Statistics..., 2006, p. 21; World Development Indicators..., 1997, p. 97, 135; World Development Indicators..., 2006, p. 199, 251; World Development Report..., 2007, p. 294, 296; McGregor, 2007(1)].

20 According to UNIDO experts who sought to "separate" high-and medium-tech products, China's superiority over India is not so impressive [see: UNIDO. Industrial Development Report..., 2005, table A2.1]. We would like to emphasize, however, that the situation on export markets is changing rapidly. In the past two or three years, the appreciation of the yuan and rising labor and land costs have encouraged Chinese and foreign firms operating in the PRC to undertake a significant improvement in the structure of its exports [see: McGregor, 2007 (2)].

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0.3%, then in India it was about 1% of GDP. Export revenues of Indian companies specializing in outsourcing ICS have grown by an average of 20-30% annually since the late 1990s and exceeded $ 30 billion in 2006. This factor accounts for about a third of the growth in Indian exports [calculated and compiled by: World Bank. World Development Indicators..., 1997, p. 158 - 159, 166 - 167; World Bank. World Development Indicators..., 2006, p. 206 - 207, 214 - 215, 227; WTO. International Trade Statistics..., 2006, p. 195, 198, 203, 205; Virtual Champions, 2006; Leahy, 2007].

Indian outsourcing of business services is highly competitive on a global level. It is estimated that Indian firms accounted for 7% of the global volume of contracts in the field of outsourcing of ICU in 2005-2006 [Leahy, 2007]. Companies such as Tata Consultancy, Infosys and Wipro are not only working for Western clients, but also expanding their presence in China.

According to some experts, the Chinese in outsourcing may be five to ten years behind the Indians. However, it is possible that this estimate is overestimated. Outsourcing services in 2006 were about 8 times cheaper in India and 10 times cheaper in China than in the United States. Salaries of Indian engineers and programmers, whose demand, despite the high rate of their training, outstrips supply, are growing rapidly. Indians have a high labor turnover rate, reaching 30 to 40% in some companies. Although the Chinese are now even weaker than the Indians in English and possibly math, and the quality of their exported business services is not yet as high by world standards, they are generally more disciplined and patient than the Indians. China, like India, annually graduates hundreds of thousands of engineering and technical specialists (including in computer science), purposefully and actively "grows" technology parks. In addition, with better infrastructure than the Indians and more state support, the Chinese are now intensively outsourcing companies to provinces where wages and rent costs are almost half as low as, for example, in Beijing and Shanghai (Watch Out, India, 2006).

Let us first try to estimate the role played by the factor of deepening foreign trade integration in the economic growth of the two Asian giants. The contribution of export expansion to their GDP growth is naturally less than in small and medium-sized countries: according to our calculations, in 1990-2004 / 2015, this indicator, calculated using the export quota determined on the basis of PPP, was 14-16% in China, while in India it was almost three times less - 5 - 7%21. In other words,

21 Calculated by the formula: d = a*0.5(b1 +b2): c, where dis the contribution of physical exports of goods and services to GDP growth, a and c are the average annual growth rates of physical exports and GDP, respectively, b1b2 are export quotas at the beginning and end of the period under consideration [see: Melyantsev, 1996, p. 154].

You can also double-check the result using another formula, which estimates the contribution of increased domestic demand, export expansion, and import substitution effects to GDP growth in 1990-2005 (data with a minus sign indicates import expansion).: ΔY = ΔS + ΔX +(-) , where ΔY is GDP growth, S1S2 are the domestic supply of resources (Y - X + M) at the beginning and end of the period, and and are the shares of domestic production (Y - X + M), respectively.X) at the beginning and end of the period in the internal resource offer -(Y - X)/(Y-X + M).

Calculations showed that in China, the share of domestic demand in GDP growth was, as expected, the largest - 95.2%, export expansion-13.1%, which was, however, partially offset by import expansion - ( - ) 8.3%. In India, where the foreign trade quota is lower than in China and the trade balance is reduced to a deficit, the contribution of export expansion, which was only 5.9%, was in absolute value less than the effect of import expansion (- ) 6.4%. From these data, it is not difficult to conclude that according to this model, GDP growth in India is even more determined by an increase in domestic demand than in China [calculated from: World Development Indicators..., 2006, p. 206 - 207, 214 - 215, 222 - 223, 226 - 227; World Development Report... , 2007, p. 288-289, 294-295; WTO. International Trade Statistics... ,2006, 2006, p. 21].

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external factors have a significant stimulating and catalyzing effect on the economy of the countries under consideration. However, the globalization of the two Asian giants, which are large and active subjects of it, is largely a process associated not only with interregional and intraregional, but also with intra-country integration, with the increasingly intensive development of their internal markets [for a clarification of the role of internal and external growth factors, see Switching Engines, 2007]. a significant degree of emancipation as a result of liberal economic reforms.

CAPITAL ACCUMULATION AND AGGREGATE PRODUCTIVITY

According to our approximate calculations based on a statistical and economic model based on the materials of 25 large and medium-sized developing countries, their economic growth at the end of the last and beginning of this century was determined by export dynamics by about a quarter, price stability by a third, and the rate of gross investment in physical and" human " capital by two fifths [Melyantsev, 2006(2), p. 23].

The role of exports in the economic growth of the two Asian giants was discussed earlier.

Prices, as you know, perform a variety of functions in society, among which one of the main ones is signaling and stimulating, including for capital accumulation. Price stability is not only a significant indicator, but also the most important, perhaps still underestimated, tool for effective economic policy. Research shows that it is very effective in countries that are implementing deep economic reforms. China and India, which have achieved unprecedented success in economic development over the past two or three decades, had, perhaps naturally, lower average annual rates of price/GDP deflator growth (5.1% and 6.7%, respectively, in 1980-2005) than a number of other large and medium-sized developing countries (11% in Indonesia - 12%, Pakistan-8-9, Egypt-9-10, Nigeria-19-20, Turkey-48-49, Mexico-33-34 and Brazil-131-132%) 22.

The key factor of economic development is the pace, scale and proportionality of investment. China, as is well known, is characterized by an excessively active increase in capital accumulation, with its structure not fully balanced. This is the subject of a special study. Here it is advisable to note the following. In China, the share of gross investment in physical capital in GDP increased from approximately 26% in the 1950s - 1980s to 38% in 1981-2005 (40-45% in 2000-2005)23. At the same time, the relative size of investment in the "human factor" (for education, healthcare, and R & D At the beginning of the XXI century, the share of GDP was no more than 9-10% of GDP. In India, over the past two decades, these figures have reached 23-24% (in 1950 - 1980 - 16%, in 2004/2005 - 30%, in 2006/2007, according to estimates, 32 - 33%) and 10 - 10.5% of GDP, respectively, in South Korea and Taiwan-28-30% (in 2005, 29-30% and 20-22%, respectively)

22 During this period, price growth rates showed a downward trend in most of the listed countries. At the same time, in China and India, their dynamics as a whole are noticeably closer to developed countries. Describing price stability, we emphasize that the standard deviation coefficients of consumer price growth rates in India and China (0.7 and 1.6 percentage points, respectively, in 1999-2006) were significantly lower than in Pakistan (2.4 points), Egypt (3.6), Brazil (3.2), Mexico (4.4), and Nigeria (4.5), Indonesia (5.2) and Turkey (23.1 percentage points) [calculated from: IMF. World Economic Outlook, 2006, p. 203 - 206; World Development Indicators.. .,2004, p. 234 - 236; World Development Indicators..., 2006, p. 246 - 248; World Development Report..., 2007, p. 294 - 295].

23 Our calculations take into account a number of recent adjustments made by the Statistical Service of the People's Republic of China concerning the scale and proportions of the distribution of Chinese GDP (in particular, the underestimation of the service sector in its volume). We believe that previous estimates indicating that the capital investment rate reached about 45-47% (or even more) in 2004-2006 are overestimated, perhaps by 3 to 5 percentage points [see fig. about this: Xie, 2006; Can Pigs Fly, 2007].

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and 14-15% of GDP. If in developed countries "human capital" accounts for from half to two-thirds of all their development expenditures, in Taiwan-about two-fifths, in South Korea-about a third, in India-over a quarter, then in China, where the predominant emphasis in capital accumulation is placed on its material components, this proportion is almost equal to In a number of less developed countries, this figure is approximately one-fifth [calculated from Melyantsev, 2004, tab. 3; ond., 1998, pp. 15-16; Roach, 2006; IMF. People's Republic of China..., 2006, p. 31; Dim Sums, 2006; Mahapatra, 2007].

Although growing, but generally lower than in China, the rate of physical capital investment in India is due to a number of reasons [see Melyantsev, 2006(1), pp. 152-154], including the exorbitant budget deficit 24, relatively high tax rates," Indian " bureaucratic red tape 25, and an acute shortage of basic infrastructure 26.

Describing the development of the "human factor" in the two countries under consideration, we note that, as in per capita GDP, India remains significantly behind China as a whole, increasing in some components and decreasing in others. For example, in terms of the average life expectancy from birth, the gap began to shrink. If in 1980 its values were 54 and 67 years, respectively,then in 2005 it was already 64 and 72 years. The indicator for India is still slightly lower, and for China it is already significantly higher than the average for developing countries (in 2005, 65-66 years, see Table 1).

24 The central government budget deficit in China has narrowed from 2.8% of GDP in 1990 to 1.1% in 2005 (which is also acceptable for developed countries). In India, this indicator also decreased-from 7.8% to 4.1% of GDP, respectively. But it is three to four times higher than in China. As for the expanded government deficit, this indicator in India is still huge - according to available data, 8-9% of GDP in 2004-2005. However, it should be clarified that the acceleration of industrial and general economic growth rates observed in recent years (up to an average of 8% per year) may, according to Indian economists, lead to a decrease in the expanded government's deficit in 2006-2007 to at least 6-7% of GDP. This result, of course, can be welcomed, but it is still far from ideal [see: Asian Development Bank. Key Indicators..., 2006, p. 182, 205 - 206; Wolf, 2005; Finance India, 2006, p. 1148; India Likely..., 2007].

25 To register a property in India, you need to spend 5 to 6 times more time than in the United States, and twice as much time as in China. Unit costs for starting a business in China are 4 to 5 times less than in India. The rate of inflexibility in the hiring and firing system in India is twice as high as in China. In 2006, India, although to a lesser extent than China, improved the overall rating that characterizes the state of the business climate. China ranks 93rd and India 134th out of 175 places. At the same time, although the latter is ranked 33rd in the investor Protection index, it is ranked 158th in terms of tax payment, and 173rd in terms of contract enforcement [compiled and calculated by: Measuring the Investment Climate, 2005, p. 248-249; World Development Indicators..., 2006, p. 274-275; World Bank. Doing Business in South Asia..., 2007, p. 5 - 6, 29, 58, 94].

26 As noted above, per capita electricity consumption in India is at least two and a half times lower than in China. At the same time, in the latter case, losses during its transmission amounted to only 6% in 2003, and in India-27% of all electricity generated. While in China one-fifth of roads are unpaved, in India this indicator is twice as high. India lags behind China by about an order of magnitude (8-10 times) in the economic use of railways, seaports and air fleets. Although in China in 2004 the relative level of coverage of the population with conventional and mobile phones was twice or three times lower than in developed countries, it is almost six times higher than in India. In 2004, China was 8-10 times inferior to developed countries in terms of computerization and internetization of the population, but it surpassed India in this dimension by about two and a half times [compiled and calculated by: World Development Indicators..., 2006, p. 294 - 295, 298 - 300, 302 - 304]. The poor quality of infrastructure, on which India spends much less (4% of GDP) than China (9% of GDP), hinders the flow of labor to non-agricultural sectors, and is a factor in increasing costs and losses in industry and services. Typically, Bangalore, the center of Indian IT, receives only 3 hours of water a day, compared to 20 hours in the early 1980s (India on Fire, 2007).

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Table 1

Dynamics of the regular and extended development index in China, India and a number of other countries of the world

A country

1950

1980

2005

A

B

C

D1

A

B

C

D

A

B

C

D

T2

N3

G4

H5

China

690

35

1.7

9

1510

67

4.7

19

6600

72

8.4

39

11

18

14

26

India

930

35

1.4

9

1330

54

3.4

16

3500

64

6.7

28

6

36

15

22

Brazil

2060

44

2.1

14

6420

63

4.5

30

8200

72

9.2

44

14

40

24

34

Russia

3230

55

5.4

25

7980

67

10.0

43

10600

66

12.9

52

18

14

16

32

Yu. Korea

1000

47

3.4

13

5330

67

8.7

36

21850

77

15.8

74

78

73

75

75

Taiwan

1190

54

3.6

15

7580

72

9.3

43

24200

77

16.2

77

68

79

73

75

Germany

5410

67

10.4

39

19680

73

12.0

64

29200

79

15.7

82

78

106

91

85

Japan

2720

63

9.1

29

19010

76

13.1

66

31400

81

16.6

87

95

92

93

90

USA

12390

68

11.3

53

24000

74

15.8

76

42000

78

19.9

100

100

100

100

100

-----

Notes:

1. The usual development index (D) is calculated by the formula:

Dij = {(Aij/Ax) * (Bij/Bx) * (Cij/Cх)} 1/3 * 100,%, where aij, bij, cij for each (i) country and for each (j) year, respectively, means the per capita GDP in PPP 2005, dollars, the average life expectancy from birth and the average number of years of adult education, adjusted for quality. A x, B x, C x - similar figures for the United States in 2005.;

2. T is an indicator of the level of technological development. It is roughly estimated as the unweighted average of two indicators (population internetization and per capita R & D spending) assigned to the US level;

3. N is the quality index of institutions calculated as the arithmetic mean of six components (see the initial data of D. Kaufman, A. Cray, M. Mastruzi), including indicators of political stability, the degree of compliance with the rule of law, the effectiveness of the state, the quality of regulation, control over corruption, and state accountability to society;

4. Cij = {(Tij/Tx) * (Nij/Nx)}0.5;

5. The modified development index is calculated using the formula

H ij = {(A ij/A x) * (B ij/B x) * (C ij/C x) * (T ij/T x) * (N ij/N x)} 0.2 * 100,%. Ax... Nxare the corresponding indicators for the United States for 2005

Calculated from: IMF. World Economic Outlook, 2006, p. 190, 197, 198; World Bank. World Development Indicators..., 2004, 2006; World Development Report..., 2007, p. 288 - 289; UNDP. Human Development Report..., 1991 - 2006; Maddison, 2003, p. 62 - 65, 134, 144; Meliantsev, 2004, p. 64; Heston, Summers, Aten, 2006; Kaufmann, Kraay, Mastrazzi, 2006, p. 90 - 107; National Statistics. Republic of China (Taiwan).

The adult literacy rate in China (68-69% in 1980, 78-79% in 1990, and 90-91% in 2004) is significantly higher than in India (35-37%, 49-50%, and 60-61%, respectively) and in the whole group developing countries (55-57%, 68-69% and 78-79%). In India, more than half (51-53% in 2004) of adult women cannot read or write. In China, the female literacy rate (86-87%) is already almost twice as high [see: World Development Report..., 1983, p. 196-197; UNDP. Human Development Report..., 2006, p, 324 - 326, 364 - 365].

Secondary school enrolment rates increased in India from 30-31% in 1980 to 43-45% in 1990 to 52-54% in 2004/2005, while in China they increased from 34-35% to 48-49% and 72-74%, respectively. After lagging behind India for a long time in terms of enrollment in higher education, China then caught up with it and overtook it by a "large margin" (the corresponding indicators increased from 2% to 3 and 17-18% and from 5% to 6 and 11-12%).

As in the previous case, the data for India is lower and for China higher than the average for the South (respectively, for secondary schools in 2004/2005, 63-65% and higher education in the South).-

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neck school - 15-17%)27 Without denying the success of the two Asian giants (by the way, the average number of reduced years of study of the adult population in them almost doubled in 1980-2005), we note, however, that they are still far from NIS. Higher education coverage in South Korea and Taiwan is now about 90%. At the same time, China ranked first in terms of the number of students, while the United States and India share the second and third places in the world [compiled and calculated from sources to Table 1, as well as: World Development Report..., 1983, p. 196-197; UNDP. Human Development Report..., 2006, p. 324 - 326, 364 - 365; UNESCO. Statistical Tables, 2006; Asian Development Bank..., 2006, p. 99].

With a relatively moderate share of R & D spending in GDP (0.8 - 0.9% in India and 1.3-1.5% in China), China (along with Japan) ranks second or third in the world in absolute spending on science after the United States, while India and South Korea, having overtaken Russia and Italy, entered the second-third place in the world in terms of absolute spending on science. This rating is ranked among the top seven or eight countries in the world [compiled and calculated from data and sources: Dyer, 2006; Lombardi, 2006; Melyantsev, 2006(2), pp. 27, 46].

Starting with extremely low information technology development indicators, the two Asian giants are growing at a relatively fast pace in this dimension. The absolute and relative growth in the number of Internet users, mobile phone owners, and success in conquering international ICU markets (especially India) can be astounding. However, if we take into account the average per capita indicators, it turns out that in terms of the level of technological development, which we roughly estimate as an unweighted average indicator of population internetization and per capita R & D expenditures, China is almost 9-10 times behind the United States, 6 - 8 times behind the Asian NIS and Germany, and India is two-It is three times behind Brazil and Russia (see Table 1)

Assessing the effectiveness of using the increased investment, educational and scientific potential of the two countries under consideration, we note the following. According to our calculations, the marginal capital intensity ratio (the ratio of the rate of investment in physical capital to the average annual GDP growth rate) in China decreased from 5.7 in 1950 - 1980 to 5.2 in 1981 - 2005, and in India even more-from 4.7 to 4. Thus, if we characterize long-term trends, we can say It should be noted that in contrast to the vast majority of other developing and developed countries of the world, the efficiency of investment in China and India as a whole has grown over the past two or three decades and on average has almost doubled the corresponding indicators for the countries of the West, Japan, Latin America, Tropical Africa and the Middle East, which in general lower indicators of macroeconomic dynamics [see: Melyantsev, 2006 (1), Table 2].

If we take into account the latest trends, for example, over the past 5-7 years, during which, as noted above, there was a significant increase in the investment rate in each of the two countries studied (while the Chinese indicator is one and a half times higher than the Indian one), the real economic growth rate accelerated slightly only in India [see: Finance India, 2006, p. 1147]. As a result, the efficiency of capital investment in China decreased by a quarter compared to the period of the 1980s and 1990s [see: Farrell and Lund, 2006] and was a third lower than in India and about half as low as in Taiwan and South Korea during the period of high rates of development.

27 Comparative assessment of the quality of education received is the subject of a special study. It is also useful to recall that Chinese and Indians make up a significant proportion of international students in developed countries. Indians in the United States account for about a sixth of foreign students, and a significant proportion of employees of IBM, Microsoft, and other companies [see: Rogozhin, 2004, p. 81; Can India Fly?, 2006].

28 Their number is reported to have increased in China from 334 million in 2004 to 443 million in 2006, and in India from 48 million. up to 142 million [see: Bremmer, 2007(2)].

29 In the field of ICT, due to its extremely rapid development, ratings are changing rapidly.

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Table 2

Sources of economic growth in China, India, and several other Asian countries1

A country

Years

GDP, growth rate, %

Contribution of factors to GDP growth, percentage points

TFP contribution GDP growth, %

labor market

capital formation

labor productivity

capital return

SFP

NKR

1952 - 1978

4.4

1.6

2.7

1.1

-1.0

0.1

2 - 3

1978 - 2005

7.3

1.0

4.2

3.0

-0.9

2.1

28 - 29

1978 - 20052

7.3

1.0

4.7

2.7

-1.0

1.7

23 - 24

India

1957 - 1980

3.7

1.1

1.9

1.3

-0.6

0.7

18 - 20

1980 - 2005

5.9

1.3

2.3

2.5

-0.2

2.3

38 - 40

South Korea 3

1960 - 1980

8.2

2.4

4.7

2.5

-1.4

1.1

13 - 14

1980 - 2005

6.9

1.0

2.5

3.4

0.0

3.4

48 - 50

Taiwan 3

1952 - 1980

9.1

2.1

3.3

3.3

0.4

3.7

40 - 41

1980 - 2005

5.8

1.0

2.2

2.8

-0.2

2.6

44 - 46

Notes:

1. Calculations are performed using the formulas:

y = α * l + (1-α) * k + α * (y -1) + (1-α) * (y- k); r = α * (y-1) + (1-α) * (y-k); u = r/y * 100, % where y, l, k, (y - l), (y-k), r, u are, respectively, the average annual growth rates of GDP, employment, fixed capital, labor productivity, capital productivity, total factor productivity (TFP), as well as the contribution of TFP to GDP growth. According to experts ' calculations and our estimates, the average elasticity of GDP change in terms of labor force (α) and fixed capital (1 - α) was 0.6 and 0.4 in China in 1952-1978, 0.55 and 0.45 in 1978-2005, 0.65 and 0.35 in India (1957-2005), and 0.35 in India (1957-2005). South Korea and Taiwan in 1950-1980 0.6 and 0.4 and in 1981-2005 0.65 and 0.35;

2. For the PRC, which achieved a record high rate of capital investment in 1978-2005, an invariant calculation was made with labor and capital elasticity coefficients equal to 0.5 each.

3. For South Korea and Taiwan, the dynamics of time worked was taken into account.

Calculated from: [Melyantsev, 2006(2), Table 3, and also: Asian Development Bank. Key Indicators..., 2005, 2006].

As many experts emphasize, the PRC is clearly suffering from overaccumulation of physical capital, which, we emphasize, is not built up everywhere on the basis of the latest technologies [see: Lardy, 2006]. The unprecedented high rate of capital investment in China (a quarter higher than in Japan in the 1960s and Asian NIS in the 1970s and 1980s) is due not only to the high rate of savings of the population, which is largely deprived of social security and forced to save a significant part of its income for education, old age, and medical expenses, 30 but also very often economically irrational loans from state-owned banks, large-scale investments in infrastructure development 31.

The growth of labor productivity in China, which reached an average of 5% annually in 1978-2005, is phenomenal, but it is difficult to maintain it in the future. According to our calculations and

30 Chinese families save about a quarter of their disposable income (see Farrell and Lund, 2006).

31 As India will have to invest heavily in infrastructure development in the coming years if it wants to maintain its high growth rate, marginal capital intensity is likely to increase.

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according to estimates by 32, it was determined by about one-sixth of the effect of the relocation of the labor force from agricultural to non-agricultural sectors (the contribution of this factor tends to decrease)33; by three-fifths - by the extremely high dynamics of the capital-to-labor ratio, which has been maintained for almost three decades (as far as I know, for a comparable period of time (no country in the world, including Japan, Taiwan, and South Korea)34; another quarter - a relatively rapid increase in the average number of years of adult education in the post-reform period (but, as in all countries I know, after a certain peak, its dynamics began to fade)35.

In India, where in 1980-2005 the average annual growth rate of labor productivity was also high (about 3.9%, but almost a third less than in China), it was much more determined (by 43-45%) by the growth of labor quality. More moderate contributions were made by the increase in the armament of labor with physical capital (about two-fifths) and the movement of labor resources (about one-tenth). In this country, there are reserves for increasing labor productivity by increasing the rate of investment and increasing investment in active and, which is no less important for India, passive elements of fixed capital, significantly improving the level of education of the population, and reducing excess/underemployment in agriculture [see: Johnson, 2007].

32 Factor analysis of labor productivity dynamics is performed using the following formula: (y-l) = α[(h-l) + z] + (1-α) (k-l) + g,

where y, k, h, and l are the average annual growth rates of GDP, physical and "human" capital (the average number of years of adult education), and employment, respectively; g is the unallocated balance of growth; α and (1-α ) are the elasticity of GDP changes in labor and physical capital, and z is the contribution of the relocation effect labor force from industries with low to industries with higher labor productivity. This contribution can be estimated by the following formula:

where Y/L, Y i/L i, Y i 0/L i 0 - labor productivity, including in the i-th industry and in the base period;

L i/L, L i 0/L 0 - the share of the i-th industry in total employment, including in the base period. The first component is the effect of total labor productivity growth across economic sectors, the second component is the effect of intersectoral labor movement, and the third component is the combined effect of productivity and labor movement. Calculations were made based on the data and sources of the table. 1 and 2.

33 is the net contribution adjusted for labor's share of GDP. According to our calculations and estimates, due to the intensive relocation of the labor force, the gross contribution of the effect under consideration in 1978-2005 could reach 28-30% of the increase in labor productivity (it was noted above that the share of people employed in agriculture in the PRC decreased from about three - fifths to about two - fifths). According to the World Bank experts ' calculations, the contribution of intersectoral movement of labor resources to the country's economic growth in China in the current decade will decrease threefold compared to the 1980s and 1990s [see: World Bank. China 2020..., 1997, p. 113 - 114). For a significant role of the inter-industry movement of labor in the Asian economic recovery, see [Asia's Rising..., 2006, ch. 3].

34 The growth of labor productivity due to an unbalanced increase in the capital investment rate is most likely exhausted. To be fair, and to ensure the adequacy of international comparisons, it is useful to emphasize that in China, as in many other underdeveloped countries, the rate of investment measured in national prices is statistically overestimated. The fact is that capital goods, unlike consumer goods and labor, are valued higher there and their prices are growing faster. In reality, the rate of capital investment in the PRC, measured in terms of investment PPP and constant prices, has increased, but only slightly - from 31-32% of GDP in 1978 to 33-34% in 2004. For comparison, this indicator in the same measurement system in 2004 was, for example, 24% in the United States, 25% in France, and almost 29% in Japan (see Heston, Summers, and Aten, 2006).

35 Calculated from the data and sources to Table 1.

page 125

Using a different model (see Table). 2), it can be found that in comparison with the 1950s and 1970s, in the post - reform period (1978-2005), the average annual growth rate of aggregate factor productivity (TFP) increased significantly more than in India and a number of other countries, and reached an average of 1.7-2.1% (see Table. 2). However, in absolute terms, they were lower than in the Asian NIS and India (in 1980-2005, South Korea-3.4%, Taiwan-2.6%, Thailand and India-2.3-2.4%), and in terms of the share of SFP in total GDP growth, China (23-29%) was one and a half to two times lower than the above-mentioned countries (in India and Thailand-38-40%, in Taiwan-44-46%, in South Korea-48-50%) [see also: Bosworth, Collins, and Virmani, 2006, p. 51; Melyantsev, 2006(2), Table 2].

In contrast to a number of other dynamic Asian countries, the contribution of capital to economic growth in China was two to three times higher than the contribution of SFP, and falling capital productivity (about 2% per year) "ate up" the effect of labor productivity growth by about a third (see Table 2). In addition, according to the data of the American researcher N. Lardy, almost since the mid-1990s, China has seen a significant reduction in the growth rate of SFP, which, according to the calculations of OECD experts, decreased to 1.3%, and according to the estimates of Hu Angang, director of the Center for Chinese Specifics at Tsinghua University, China, may have decreased to 0.6 - 1.0% per year [Lardy, 2006, p. 3; Hu, 2005, pp. 38-42, 51; Srinivasan,, 2006, p. 8, 13-14; Lindbeck, 2006, p. 33; Zheng, 2005, p. VII, 2, 5] 36.

Slow efficiency growth is associated with a number of factors, including: intensive infrastructure construction, the need to maintain low-profit and even completely unprofitable state-owned enterprises in order to maintain employment, management defects, and excessive corruption (in 1992 - 2002, the volume of large bribes doubled) [Pei Minxin, 2006, p. 37]. According to the World Bank, up to a third of investment decisions made in China, particularly in the 1990s, were wrong [Pei Minxin, 2006, p. 37]. It is estimated that private companies in China produce more than half (according to updated estimates, about two-thirds). They are also twice as productive as the state-owned ones, but they receive little more than a quarter of all loans (and the securities market remains undeveloped). [Farrell, 2006; Chine, les fragilites..., 2006, p. 14; Lindbeck, 2006, p. 11]. A fifth of all industrial enterprises, including a third of state-owned ones, continue to lose money [Profits and Prophecies, 2006]. Although, according to official data, the share of so-called bad debt in China has decreased, 37 according to a number of foreign economists, the situation looks different. This indicator in China, by the way, is significantly higher than in India.38
(The ending follows)

36 An alternative, i.e. more optimistic, view of the current economic growth of the PRC is shared by American economists B. Bosworth and S. Collins, who, in my opinion, strongly trust official Chinese statistics [Bosworth and Collins, 2006, p. 21].

37 From 13% at the end of 2004 to 8.5% at the end of 2005 [IMF. People s Republic of China..., 2006, p. 22; World Bank. An East Asian Renaissance, 2006, p. 176].

38 In 2004-2005, the share of non - performing loans in the total volume in China was 20-22%, and in India, at least three times less - 7-8 (or even 2 - 3)%. At the same time, the return on invested capital in Chinese companies is at least twice as low as in Indian ones [China and India..., 2005; Lakshman, 2006; Pei Minxin, 2006, p. 34; Das Gurcharan, 2006, p. 6]. According to other estimates, the cost of non-performing loans in China is equivalent to 30-40% of GDP, and in India-about 3-4% of its GDP [Sharma Shalendu, 2006, p. 170-175]. According to Moody's calculations, in 2006, to recapitalize the Chinese banking system, it was necessary to spend funds equivalent to at least a quarter of China's GDP. This figure is approximately equal to the volume of gross profits of industrial enterprises of the People's Republic of China, received, according to official statistics, for the period 1999-2005 [Shan Weijian, 2006].

page 126

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