The Comparative Study On Economic Growth Quality Of China And India

It’s been a long time for the discussion of the competition of China and India(the dragon and the elephant). Both of them are Asian developing economies, the economy has been growing quickly on the quantity. There are many similarities and differences between the two countries. China and India are emerging economies, they cooperate much more than before to become more powerful in the world in the post-crisis era, but at the same time, they are also in competition. The superstructure is determined by the economic foundation. The economic strength of China and India can not only influence the political relations between China and India, but also can impact international political and economic relations.The comparison of economic growth between China and India not only illustrates competition of the two countries’ international influence, but also reflects two different development patterns which could be used as reference for other developing economies.Both China and India enforce the reformation and opening policy,they transform from plan economy to market economy. But China and India choose different development patterns for the different institutions and original conditions, those development patterns include market approaches, opening out models and increasing ways. The government of China pays more attention to the development of manufacturing industry and the government of India pays more attention on the service industry. The construction of infrastructure of China is much better than India, while India pay more attention to the free competition of enterprises. The opening policy of China is export- oriented strategy and attracting FDI(foreign direct investment).There is a statement that India may catch up with China, is that true? Economic, social, political and military interact together dynamically which make the world developing. Economic development is on the way with twists and turns, which is not likely to raise too much overnight. The rapid economic growth does not mean economic growth quality increase at the same time. So, the emerging economies need a more comprehensive economic index to measure the economic growth, which can reflect many aspects of the economic growth, especially the cost of economic growth.There is no agreement of the definition of the quality of economic growth, many scholars have different opinions on the definition of economic growth quality. Base on the relevant studies of economic growth quality, this paper considers that the quality of economic growth values the degree of excellence of economic growth, which includes three dimensions, such as the efficiency, the equity and stability, the sustainability of economic growth. Stock market fluctuations are taken into consideration in this paper’s index system to measure the quality of economic growth which many studies have ignored, it would be very helpful to analyze the equity and stability of economic growth.This paper calculates the economic growth quality of China and India from 1978 to 2012 by the method of principal component analysis, and finds out: Firstly, the efficiency index of China rises since 1978, The efficiency index of India also has improved, the efficiency index of China grows much more quickly than India, the efficiency index of China improve significantly faster since the early 90 s of the 20 th century. Secondly, the equity and stability index of China and India fluctuate greatly during the debt crisis, the East Asian financial crisis and the international financial crisis and other international crisis, with the economic integration and the economic reform, international factors influence China and India deeper and deeper. China and India are gradually becoming highly open market economy. Thirdly, the index of sustainability of China fluctuates during the period, while the index of sustainability of India is on a downward trend. The sustainable economic growth of China is better than India as a whole, many areas in India are caught in a vicious circle from poor to the deterioration of the ecological environment to poorer and poorer. Lastly, the economic growth quality of China is better than India on the whole, the essential reason of it is that the Chinese government intervention is more effective than India.Traditional and static analysis framework can’t reveal the dynamic relationship of the quality of economic growth and its factors. This paper uses state space model to analyze the dynamic relationship between government intervention and economic growth quality of China and India, it shows that government expense, import, the growth of labor have a positive effect on the quality of economic growth in China. Government expense, the growth labor resources have also a positive effect on the quality of economic growth in India, but FDI and higher education don’t have a significant effect on the quality of economic growth, which might because the scale of FDI of India is much smaller than China. It’s obvious that government expense has a positive effect for both China and India, and Chinese government is more effective to the quality of economic growth than India, which reflects the fact of that Chinese government is more rationality and effective than India.The export- oriented strategy and the policy of attracting foreign capital of Chinese opening policy is helpful to make good use of external resources, reduce poverty, improve labor productivity, promote the development of manufacturing industry. With the development of manufacturing industry, the industrial chain is extended, new jobs is created and the division of labor is refined. Those strategies are also helpful to enhance the efficiency of economic growth and maintain the equity of China. Economic and trade liberalization of India makes enterprises much more dynamic than Chinese enterprises and India enterprises create a higher profit margin. However, the ownership reform of China is far from complete, the debt-to-asset ratio is very high in many Chinese enterprises, the financing channels for SME’s is mainly relying on bank loans which is the main reason of Financing Difficulty. India government pays more attention on developing service industry for economic growth while Chinese manufacturing industry developing quickly, financial system of India is much better than China, so the Financial Contagion Effect and fluctuation of India economy is smaller than China during crisis. The government of China possesses stronger ability than India, because the government of India is caught in the problems of the caste, religion and other issues. The Chinese government plays a more important role in guiding the economy and resource redistribution function than India. That’s why the implementation of the strategy of sustainable development of China has a better effect, and the economy is more equitable, stable and sustainable than India.The quality of economic growth of China is better than India in general, but there are still several problems needs to solve, such as how to increase the efficiency of economic growth further more, how to protect Chinese economic security, how to ensure the sustainable development of China. Then how to implement “Mass Entrepreneurship and Innovation” is the key of those problems, and select an appropriate effective innovation strategy is very critical too. This paper suggests that clustering innovation and university-industry-government partnerships should play an important role in China. Chinese government should promote the development of division system so as to make good use of SMEs ’ characters(sensitivity, adaptability, easy to transition),and form the cooperative innovation system. To improve the quality of economic growth of China, it’s also important to improve the operation mechanism of transformation for science and technology achievements, reinforce the mechanism of financial industry self-regulation, modify environmental standards and so on..