China and India would need more of synergies rather than their rivalry for the next level of their growth, according to a leading international investment bank.
NEW DELHI: China and India, the world's two fastest growing economies and often taken as rivals on global arena, would need more of synergies rather than their rivalry for the next level of their growth, according to a leading international investment bank.
The two Asian giants have taken different paths to promote their economic development, but going forward China and India might look to each other's experience for guidance in confronting their respective challenges, JPMorgan said in its latest report on the region.
"China and India are embracing each other's models as they prepare for their next stage of development," JPMorgan's China Equities Chairman and Managing Director Jing Ulrich said.
While India is looking to boost its manufacturing sector, China is aiming to expand its services sector, Ulrich noted.
But both the countries need to generate a large number of jobs as an unprecedented growth in urbanisation is driving up the number of rural migrants.
"India is aiming to boost its manufacturing sector with the formation of more special economic zones, where stringent labour laws that have deterred both foreign and domestic investment might be relaxed," it said.
At the same time, "China, having paid a heavy environmental price for growth aims to expand its services sector and focus on higher value-added manufacturing."
While noting that the phrase 'Chindia' was coined to describe the combined economic clout of two Asian economies, Ulrich said these two emerging nations could not be called twins, as they have adopted different paths for their economic development.
"As the world's fastest growing economies, China and India are often compared and contrasted. In our view, the two country's economic models are so starkly different, they could be two complementary pieces of a puzzle," Ulrich said.
China's large savings pool have funded its massive manufacturing footprint, but its surplus capital has led to overcapacity and weaker returns on investments. In contrast, India has under-invested in infrastructure, still its companies have enjoyed better returns on limited finds, JPMorgan said.
According to JPMorgan, even the population trends in the two countries, the world's only 'demographic billionaires', are set on very different courses and this would have a significant impact on their economic growth.
China is an ageing country, and its labour force would stop growing by 2011. In comparison, India's population would continue to be young and every age-group was expected to increase in the next two decades.
"China's working age population will bear a growing burden to support an increasing number of older dependents, but India's ratio of workers to dependents will remain substantially higher than China's as a result of larger families," Ulrich said.
India would need to improve access to education if the country is to reap the benefits of its demographic dividend, she added.
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