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China versus India: Not Chindia
India vs. China:
Although India and China often are mentioned together as similar investment opportunities, they have many differences. India presents lower country risk than China. The Economist ranks the banking risk of India BBB and China B. It ranks the Political risk of India BBB and China B. Both countries are ranked BBB in terms of sovereign debt default risk and currency risk. Country risk here does not speak to market risks associated with valuation.
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Stock Markets:
The market capitalization of the 10 largest companies today in China is $1.8 trillion, whereas the market capitalization of the 10 largest companies in India is only $0.5 trillion. Similarly, at year-end 2006 the total stock market capitalization of China was $2.4 trillion versus India where it was only $0.8 trillion.
Direct Investment:
China has received more than 10 times the total foreign direct investment as India ($700 billion versus $68 billion).
China has made direct investments abroad that are more than 3 times that of India ($67 billion versus $21 billion).
GDP:
The Chinese GDP expressed in US dollars is three times the Indian GDP ($2.5 trillion versus $0.8 trillion). On a purchasing power parity basis, the Chinese GDP is two and a half times the Indian GDP ($10.2 trillion versus $4.2 trillion).
Growth in per capital GDP has been quite different
Current Account Balance:
China's current account balance is positive and growing strongly, while India's has meandered and recently gone negative.
Energy
China produces 3 times the electricity of India; more than 4 time s the
oil; and more than 1.5 times the natural gas.
On the consumption side, China consumes more than twice the oil of India
and almost 1.5 times the natural gas.
Other Resource Consumption
China recently accounted for 29% of global zinc consumption compared to
3.8% for India. China accounted for 25% of world aluminum consumption
compared to 2.6% for India. China's share of global oil consumption was
9% versus 3% by India.
Population
Approximately 1/3 of the world's population is either Indian or Chinese,
but the populations of China and India are quite different from each
other.
India's population is smaller than China's, but is growing more rapidly.
In 1995, China had nearly 33% more people. By 2005, China had less than
20% more people. By 2025, their populations will be about equal. After
that, India will have a larger population.
You can see from the chart below that China and India have quite
different population structures.
Source: US Census Beaureau, International database
India has a population that is growing younger and that will continue to
supply young people to the labor force for a long time. China has an
aging population that will show labor supply problems without net inflow
of migrants.
India today has 6 times the number of people migrating out of the
country as China.
China has a 40% lower infant mortality rate than India, and a longer
life expectancy.
Labor and Income Distribution
China and India have roughly equal acreage of arable land, but China has
a much smaller portion of its people in agriculture than India (45%
versus 60%). China has twice the proportion in industrial jobs (24%
versus 12%), and a similar portion in service jobs (31% versus 28%).
China has a lower rate of urban unemployment (4.2% versus 7.8%) and far
fewer below the poverty line (10% versus 25%) - although we don't know
how reliable that may be. Both have about 1/3 of total income in th e
hands of the top 10% of households.
Literacy
Literacy is dramatically different. Only 61% of Indians over the age of
15 can read and write, while nearly 91% of Chinese over 15 can read and
write. The development and therefore economic value of women is higher
in China where 86.5% are literate, whereas in India only 47.8% of women
are literate.
Religion
The religious composition is dissimilar. Hindus account for over 80% of
the Indian population, but are negligibly represented in China. Muslims
account for over 13% of the India population, but are only about 1% to
2% of the China population. Christians are about 2.3% in India and 3% to
4% in China. China does not report religious composition as thoroughly
as India, but China is greatly influenced by Taoism and Confucianism
which have ancient roots there. India and China do not have similar
populations in terms of guiding belief systems.
Languages
India has numerous regional languages with English as the official
government and business language. China has one basic language with
regional variations. Mandarin Chinese is the standard language.
Legal system
India's legal system is based on English common law while China's is
based on civil law derived from the Soviet Union and continental
European legal principles.
India's judiciary reviews legislation, while China's legislature retains
the right to interpret its laws. India accepts compulsory International
Court of Justice jurisdiction, while China does not.
Political System
India is a multi-party democracy. China is a single-party controlled
state.
Land
China has 3 times the land area and 2 times the coast line length of
India. China has a lower percentage of arable land, but the total
acreage of arable land is about the same in both countries.
Natural Resources
India has the fourth largest coal reserves in the world, while China has
the world's largest hydropower potential.
Transportation and Roadways
India and China have roughly equal mileage of paved roads, but with 3
times the land area, the density of roads in China is much less than in
India. The rail density is closer to parity, but India does have higher
rail density than China.
In terms of major airports (those with paved runways over 3,000 meters),
China has 58 and India has only 18.
Telecommunications
India has more than 3 times as many cell phones as China, but China has
7 times as many land lines as India. Combining cell phones and land
lines, India has twice as many phones as China, yet a slightly smaller
population. China has more than 2 times as many internet users as India.
Military
China spends 4.3% of its GDP on its military versus 2.5% by India. In
total US dollars, the Chinese military budget is five times the size of
the Indian military budget.
Author: David Hepworth
Company: Interfund Capital
Email: david@interfundcapital.net
URL:www.indiafund.net
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