Contrasting Styles

Reforms, The Chinese Way

Here’s an article about China needing reforms and here’s an article about India needing reforms. It’s interesting that they come up on the same day in the same way with similar problems.

China first.

Chinese officials did little to dispel some of the more extreme rumours, including that he was seriously ill, or that he was hit in the back with a chair hurled during a meeting that turned violent with a fellow ”princeling” – a term used to describe the close-knit network of sons and daughters of revolutionary heroes increasingly gaining influence and political capital in China. Again, no explanation was proffered.

China’s standing in the world now, combined with the lack of regular access to senior politicians, has meant the increasing horde of China-watchers tend to hang off every public utterance from the likes of Xi, trying to read between the lines, squinting for subtle messages in what is invariably tightly scripted party-speak.

Just this month, Xi’s visit to Shenzhen, in China’s south, drew close attention from state and international media. Shenzhen was a stop on Deng Xiaoping’s landmark southern tour in 1992 – the genesis of the catchcry ”to get rich is glorious” – and where he canvassed support for his platform of economic reform.

There’s a list of challenges this year for China, but basically there’s no guessing how this reform will be accomplished. The leadership and its processes are opaque to the point of obscure. Nobody knows how they will deal with tough issues that involve vested interests. It’s actually a deep mystery how they prioritise their issues.

This is in stark contrast to India:

”The current economic situation is difficult. The continuing crisis in the global economy … combined with some domestic constraints, has meant that our growth has also slowed down,” Dr Singh told the National Development Council, India’s major economic planning body that includes the leaders of all 28 states.

”Our first priority must be to reverse this slowdown. We cannot change the global economy, but we can do something about the domestic constraints which have contributed to the downturn.”

Dr Singh said the world’s largest democracy needed major economic reforms, and rapidly, to lift its poorest citizens from poverty.
An estimated 400 million Indians still live on less than a dollar a day.

”We must remember that we are still a low-income country. We need 20 years of rapid growth to bring it to middle-income level. The journey is long and requires hard work.”

India’s growth rate for the fiscal year ending in March is expected to be 5.7 to 5.9 per cent, the slowest since 2002-03.

There’s a democratically elected leader pointing to the problems with no veiled language that needs to be dissected and decoded. The article then goes on to a discussion about the need for a Goods and Services Tax.

I offer this up as interesting because with China you have an oligarchic state that will do what’s required from the top down without any insight into the debate while with India you have a state that spells out what needs to be done but must build a difficult consensus in order to get those things done.

If I were an investor, I’d be challenged by what is on offer here. On the one hand it’s high growth, multiple and high political risks with China, and relatively lower growth with comparatively lower political risk with India. Not to lowball China’s accomplishments so far, but the lack of transparency in China just scares the hell out of me. Equally, tales of vast inefficiencies, and red tape in India would brown me off from putting money there in a hurry.

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