Monday, December 07, 2009

The 21st Century Belongs to.....? (2)

I knew China in the "dark" ages under Mao and the Gang of 4 and have been a frequent visitor to various parts of China. I just returned from a 6 days visit to Beijing, the capital.

Some conclusions are so obvious but they still need to be made since the media has been singing a somewhat different tune:

1) Anyone who still puts India and China together as in BRIC as if China and India were in the same league (other than population sizes) is not thinking straight.

These two economies are miles and miles apart. India's infrastructure with minor exceptions is still stuck in the early 20th century at best. China is already thinking 21st century. Free high speed Internet connection is available at most coffee shops, even some hole-in-the-wall places you don't expect. Roads are generally better than those in the USA. What used to take hours and hours to go from A to B now take less than an hour. From Beijing to the Great Wall is one example: 45 minutes on superb highway. From Beijing to Tienjin by train is now less than 30 minutes.

2) Traffic trams in Beijing is not due to lack of roads built. The number of cars is growing at a speed the public works folks cannot keep up. The quality of cars is mind boggling for those who still remember the bad old days. Now your lawyers or local high executive types drive BMW's or Mercedes.

3) The quality and quantity of professionals, in finance, law and even in such very local businesses as real estate development, is impressively global in outlook. Many hold degrees from global "brands". I stumbled upon the Xmas gala dinner of Oxford and Cambridge alumni at Grand Hyatt and walked in without an invitation to take a look see. The grand ballroom was filled.

I was invited to a special occasion dinner for 25, all Chinese citizens in their late 30's or early 40's, all successful professionals. Some from families with impeccable Party history.

I counted 1 Harvard College, 2 Harvard PhD's in biochemistry 1 Harvard MA in economics, 1 Boston U Phd also in bio chem with post doc work done at Harvard, 2 Wharton degrees, 1 Chicago, 1 Wellesley, 1 Columbia Law, 1 Rutgers. I didn't get a chance to query the rest. Naturally all speak fluent English.

The long held idea that Indians had an advantage in English proficiency is no longer so relevant. English has become the universal business language and the Chinese are fast catching up overall.

Latest US data indicate a continuing pattern of "surge" in PRC student applications to study in the US. Any cursory walk through the various campuses in the UK could mislead you into thinking the Chinese were taking over.

The relevant fact here is this: more Chinese are getting richer faster than Indians and they are sending their children abroad at a rate faster than India.

In China they are also expanding the capacity of universities faster than India with improving quality and paying salaries that are well above Indian rates to attract overseas talents and to retain domestic ones.

Any economist worth mentioning knows the two principal prerequisites of sustained high economic growth are: human capital (read Education) and public governance.

Both of these conditions are more in place in China than in India.

I should stop here for a pause. More on this subject going forward.

Most people cite Democracy in India as sine qua non in predicting that in the long run will outpace China. Skeptics of Chinese miracle also point to the fact that only democratic economies are rich.

2 caveats. Is Singapore a true democracy? Second, as John Maynard Keynes famously said: "In the long run, we are all dead". The third caveat maybe this: why is getting rich a necessarily morality story linking that to democracy. Don't forget Adolf's 3rd Reich was doing far better economically than its predecessor, the Weimar Republic.

Meanwhile comparing China and India is like comparing a Ferrari to a Soviet Volga.

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