india-vs-china_nov201

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Slide 1: 

INDIA vs. CHINA International Business Group members: Iman Alalawi, Viola D’Andrea, Davide Di Labio, Marco Fossati, JiHong He, Harpreet Singh

Outline : 

Outline Part 1 - A picture taken from the top. Part 2 - How are the two giants emerging? Part 3 - Who are the key actors behind their development? Part 4 - From backward to latecomers: different perspectives. Part 5 - Who is the winner?

Slide 3: 

Part 1 A picture taken from the top

Intro : 

India and China, the two former giants Intro

Economic indicators : 

Source: World Development Indicators database, 2008 Economic indicators

Growth trends : 

2002 1998 1994 1990 1986 1982 1978 2006 Source: IIF, 2007 2006 2000 1996 1992 1988 1984 1980 Source: IMF, 2007 | Source: IMF, 2007 Growth trends

The added value : 

Source: Internal elaboration on World Development Indicators database, September 2008 The added value

Slide 8: 

Operating in emerging markets

Slide 9: 

Part 2 How are the two giants emerging?

Slide 10: 

India as back office of the world

Slide 11: 

China as the work shop of the world

Slide 12: 

India vs China remarks

Slide 13: 

Part 3 From backward to latecomers: different perspectives.

Slide 14: 

Development in strategic terms SOME DISADVANTAGES OF BEING BACKWARD COUNTRIES:

Slide 15: 

Development in strategic terms How to overcome disadvantages of being “backward” countries? STRATEGY INSTITUTIONS State Compensatory role New institutions for the harnessing of capital and technology Understanding the character and driving forces behind the industrial dynamics Exploiting latecomer advantages! Assessing existing resources

Slide 16: 

Development in strategic terms How to overcome disadvantages of being “backward” countries? STAGES OF GROWTH Traditional society Quasi-automatic process Transitional stage Take off Drive to maturity High mass consumption STRATEGY

Slide 17: 

Development in strategic terms How to overcome disadvantages of being “backward” countries? FLYING GEESE PATTERN Shifting competitive advantage from one industrial sector to another and from one country to another Industrial upgrading CHINA MNCs, FDI and technological learning as key factors for developing of flying geese latecomer industries

Slide 18: 

Institutional innovations: tools that allow latecomer countries to take short cuts that might include a financial innovation, according to the country’s degree of backwardness. These institutions feed highly essential data to the firms to establish, compete and grow in the competitive market How India and China are exploiting the latecomers advantages

Slide 19: 

Part 4 Who are the key actors behind?

Slide 20: 

Role of the government

Slide 21: 

The National Development and Reform Commission (NDRC) NDRC is a macroeconomic management agency under the Chinese State Council, which has broad administrative and planning control over the Chinese economy. The NDRC's functions are; To study and formulate policies for economic and social development, To maintain the balance of economic development, and To guide restructuring of China's economic system. NDRC (CHINA)

Slide 22: 

Exim Bank (The Export-Import Bank of India) Exim is an Indian government-owned financial institution for the public sector. Managed by a Board of Directors, which has representatives from the Government, Reserve Bank of India, Export Credit Guarantee Corporation of India (ECGC), a financial institution, public sector banks, and the business community. The Bank’s main objective is “…providing financial assistance to exporters and importers, and for functioning as the principal financial institution for coordinating the working of institutions engaged in financing export and import of goods and services with a view to promoting the country’s international trade…” EXIM BANK (INDIA)

Slide 23: 

The Bank's functions are segmented into several operating groups including: Corporate Banking Group - handles financing programs for Export Oriented Units, Importers, and overseas investment by Indian companies. Project Finance / Trade Finance Group - handles the entire range of export credit services such as supplier's credit, pre-shipment credit, buyer's credit, finance for export of projects & consultancy services, guarantees, etc. Lines of Credit Group - handles the financing and export transactions in the agricultural sector. Small and Medium Enterprises Group handles specific financing requirements of export such as credit proposals from SMEs under various lending programs. Export Services Group offers a variety of advisory and value-added information services aimed at investment promotion, it offers assistance to Indian companies, to enable them to establish their products in overseas markets. Support Services groups, which include: Research & Planning, Corporate Finance, Loan Recovery, Internal Audit, Management Information Services, Information Technology, Legal, Human Resources Management and Corporate Affairs. EXIM BANK (INDIA)

Slide 24: 

Part 5 Who is the winner?

Slide 25: 

Who is the winner?

Slide 26: 

Who is the winner?

Slide 27: 

Last year, the Forbes 200, an annual ranking of the world’s best small companies, included 13 Indian firms but just 4 from mainland China. A report issued in 2000 by the Chinese Academy of Social Sciences concluded that, “private and individual enterprises have a lower political status and are discriminated against several policies and regulations. In a recent survey of leading Asian companies by the Far Eastern Economic Review (FEER), India registered a higher average score than any other country in the region, including China. In a World Bank study published last year, only 52 percent of the Indian firms surveyed reported problems obtaining capital, versus 80 percent of the Chinese companies polled. Published studies

Slide 28: 

If India has so clearly surpassed China at the grassroots level, why isn’t India’s superiority reflected in the numbers? Why is the gap in GDP and other benchmarks still so wide? Why? Who is the winner?

Slide 29: 

It’s the history; India’s economic reforms only began in 1991, more than a decade after China. India has had to deal with a national savings rate half that of China’s and 90 percent less FDI. Moreover, India is an extensive, messy democracy driven by ethnic and religious tensions. India has also had a longstanding, volatile dispute with Pakistan over Kashmir. China, on the other hand, has enjoyed two decades of relative tranquility, it has been able to focus almost exclusively on economic development. Why?

Slide 30: 

INDIA Future winner is…

Slide 31: 

Comparing India and China, India is doing a superior job in utilizing their resources and exploiting the institutional advantages. China and India have pursued different development strategies. China used the fastest route to reach economic development which is foreign direct investment (FDI). Indeed, India’s homegrown entrepreneurs may give it a long-term advantage over the Chinese inefficient financial system and capital market. India’s strategy may enable it to catch up with and perhaps even overtake China. Conclusions

Slide 32: 

Huang, Y. and Khanna, T. 2003. “Can India overtake China?” Foreign Policy, (July-Aug): 74-81. Khanna, Tarun and Krishna Palepu 2006. “Emerging giants: Building world-class companies in developing countries”, Harvard Business Review, Oct 2006, 1-10. Lehman Bros 2007. “India: Everything to Play for” (Chaps 2, 3 and 4). Angus Madison , 2005, “The West and the rest in the world economy, 1500-2030” Australian National University, Canberra Angus Madison, 2001, “The World Economy. A millennial perspective” Development Research Center, OECD, Paris Mathews, J.A. 2005. “The intellectual roots of latecomer industrial development”, International Journal of Technology and Globalisation, 1 (3/4): 433-450. Zhongying Pang 2007. “The dragon and the elephant”, The National Interest, 1 May 2007, 1-2. http://www.worldbank.org www.imf.org www.eximbankindia.com www.en.ndrc.gov.cn http://www.gov.cn/english/ http://www.india.gov.in/ Bibliography

Slide 33: 

Any Questions?