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| Jianwai Soho in Beijing’s Central Business District |
This article is not advocating the Chinese political system for India, but it bemoans our inability to deliver infrastructure and social services on time, with quality and with least waste and leakage. China has big challenges. It cannot afford to slow down growth, must avoid inflation, reduce regional disparities, and stimulate consumption as the opiate that makes masses docile. China’s development continues to hinge on large government infrastructure spending; a threat if that level of spending is not sustained. A rising currency value could derail exports and foreign earnings. Assimilation of new technologies and their development will remain a constant challenge to China.
China’s consistent annual growth versus India’s erratic growth — except in the last six years — is demonstrated by China’s economic and engineering miracles in building infrastructure and industry. It is now the byword for scale and speed, not Texas. Roads, flyovers, railways, metros, high-speed and high-altitude trains, airports, power production, large dams, river course diversion — China has done it all and more, and on a larger scale than any other country.
A dominating central leadership sets the course, and provincial and local party leaderships have considerable autonomy in execution. Parallel power centres in the party and the government, the head of government as national party leader with the party ensuring that central diktats are followed, enable speedy movement of decisions down the line. Absence of human rights and a judiciary to enforce them, no free media to report events, ruthlessness in stopping agitations help fast execution.
Huge trade surpluses and inflows of foreign direct investment have ensured that China is never short of funds. In the early years, economic growth was achieved by extraordinarily low wages given to labour, terrible living conditions and long hours of work. However, the counterfactual today is that consumption is booming in real terms and so wages must have risen. Labour may not be as sweated as before. An undervalued currency pegged to the dollar has helped keep exports high. A docile population meekly accepts razing of their homes to make way for new roads, and farmers acquiesce in surrendering their farms to make way for dams, factories, and roads. There is little organized protest against anything.
The Chinese citizen has no choice of governments or of routes to development. He must accept the central decisions of the party headed by many technocrats, that is careful of its relationship with the army, the largest in the world. The military controls vast industrial complexes which supply the domestic demand and exports, and whose surpluses fund them. Army brass are said to accumulate vast personal fortunes but the military remains disciplined and powerful.
To compensate for the loss of political freedom, people have economic freedom. There is a cornucopia of goods and services at almost all prices that even the poor can afford to buy. With economic growth, poverty levels have dropped though inequalities remain very sharp, much greater than in India. West China is far behind South and East, a difference that is now being tackled. The global recession led to loss of urban production and jobs. It was quickly compensated for by the earliest stimulus package in the world, focused on the interior and rural countryside. Vast infrastructure projects created rural jobs and developed undeveloped parts of China. While growth in India is behind China, private investment is as much a driver of growth as public investment. However, India has high food inflation. So long as China can restrain inflation and sustain growth, people will remain docile.
A more recent opiate is the freedom of worship after 60 years of forbidding religion and its public practice. Now there are new Buddhist temples in cities like Shanghai. Buddhism and Christianity are very popular, while Confucianism also attracts followers. But China lacks the plethora of mosques, temples, churches and other places of worship that dot Indian landscapes, a unique visual feature of a nation of religious people. An innocuous press and television, no posters on walls in cities for entertainment, politics or for consumer products, an apparently extensively used internet but believed to be closely monitored by government agencies, must limit the propagation of ideas.
The striking thing about Chinese industry is the scale of its plant capacities, the openness in seeking and acquiring foreign technology collaborations, and its apparent ability to absorb and develop new technologies. There is a huge investment in education in which foreign collaboration is sought actively. Engineering is the most popular profession (after government). The newly minted engineers with perhaps foreign technologists enable the absorption of newly acquired foreign technologies and their development. In power generation, for example, China not only produces super thermal power plants that make more efficient use of coal, it has also learnt to make ultra super thermal plants. It is now shutting down power plants below 300 megawatts and concentrating on large plants to improve efficiency and reduce carbon emissions per unit of energy. China sought technology to make high-speed trains and now their high-speed trains exceed the maximum speed achieved by Japanese high speed trains. This is happening in many industries.
Scale, relatively low wages, a strong emphasis on increasing productivity, help China to keep its costs below other countries while producing quality equipment and delivering in time. No doubt there are concealed State supports like cheaper electricity, tax breaks, and low interest rates on borrowings. But possibly today, even without these hidden advantages, the Chinese strategy of enormous scale, the most modern technologies, investment in skills and education and sustained efforts to improve productivity, will keep China in the lead as it moves from being a consumer goods exporter into an exporter of high technology equipment and parts. In India, we seek to protect already highly protected manufacturers like BHEL (and now new private parties) in heavy machinery manufacture. Instead, we should have designed time-bound incentive packages to stimulate local production while buying cheap Chinese equipment. The consumer will benefit from low prices and the competition will push local manufacturers to improve on costs.
India discouraged efficiency, scale and foreign technology. Industrialists producing more than licensed capacity were asked to explain instead of being praised. Indira Gandhi’s governments endeavoured to match new capacities to poorly estimated demand, allowing licensees to enjoy quasi-monopoly profits. Mrs Gandhi’s paranoia about “foreign hands” discouraged foreign collaborations. Bureaucrats decided what technology to import, from which countries, and the amount of royalties to be paid. China recognized the need for scale, efficiency and had no paranoia about “foreign hands” for importing technology or education. China now has a high-quality education system and first-rate technical professionals who quickly absorb and develop acquired foreign technologies.
A single language, many dialects, a dominant role for the party supported by the army, all land owned by the State which leases land for 50 to 70 years for all uses, including farming, give China no resistance to projects as India faces — to land acquisition, on environmental or other grounds. The absence of an objective judicial system helps China to ruthlessly proceed with ambitious projects. India must re-examine land laws, ownership of land and all subsoil assets including water, and its procedures for environmental clearances to speed up execution while retaining the rule of law.
The Chinese State actively fosters a sense of pride in China’s achievements, its mega projects — the Olympics and the Shanghai Expo. In India, we did well with the Asian Games. Today’s India has mismanaged the Commonwealth Games apparently because of corruption.
The future is a race between the single-minded pursuit of growth by China and India’s myriad blocks to implementation.
