Made in India vs Made in China: Two paths towards industrialisation - The Economic Times
Made in India vs Made in China: Two paths towards industrialisation
China wants to jump into areas such as factory automation and build the types of computerised controls needed to make high-precision goods like iPhones or cars. It may sound like another example of rivalry between the world's most populous nations
The Communist Party recently announced a Made in
Chinaprogramme aimed at transforming its manufacturing sector, months after Prime Minister
Narendra Modi unveiled his Make in
India plan, also targeted at manufacturing. Look closer, though, and the signs point to a broad shift that could draw the two Asian giants closer economically in the years ahead.
Made in China 2025 is a 10-year campaign to push the country beyond labour-intensive work into more sophisticated sectors, from robotics to aerospace. Modi's goal is to bring basic manufacturing to an economythat needs more decent-paying jobs. In short, China has set its sights on rivalling Germany or Japan, while India will happily settle for where China is now.
Besides sheer scale, China is years, if not decades, ahead of its neighbour. According to International Monetary Fund and World Bank data, China's gross domestic product per capita is almost five times that of India at $7,600, and its manufacturing sector is 10 times bigger at about $3 trillion. Still, China is losing workers by the millions, similar to what Japan experienced in the late 1990s.
Jet Planes
Among its ambitions, China wants to jump into areas such as factory automation and build the types of computerised controls needed to make high-precision goods like iPhones or cars. The
government is also hoping to challenge Airbus Group NV and Boeing Inc's dominance of the market for jet planes. Also on the wish list: advanced medical devices, energy-saving vehicles, marine engineering and high-end ships for things such as deep-sea exploration and equipment for electric power and agriculture.
Grand Ambitions
Still, the campaign is in its infancy and China doesn't always deliver on its grand ambitions. For example, the government no longer talks about its target to have five million electric vehicles on its roads by 2020 as sales never caught on. That said, China has reason to be pursuing an upgrade. Gone are the days of 10%-plus growth as the world's second-largest economy heads toward its slowest year of expansion since 1990. Labour shortages are driving up wages and squeezing low-end manufacturers such as clothing makers.
Industrial profits in the country are down this year, particularly at state-owned enterprises.
Around 11 per cent of companies surveyed plan to move factories overseas to keep costs down, with Vietnam and Cambodia topping the list of preferred destinations.
More Factories
Vietnam and Cambodia? Not if India's prime minister has his way. Announced in September, Modi's Make in India campaign seeks to bring in foreign investment and raise the share of manufacturing in Asia's thirdlargest economy to 25 per cent by 2022 from the current 18 per cent, a percentage that's largely been unchanged since 1947. Count Foxconn Technology Group among companies getting drawn.
Its FIH Mobile Ltd unit has said it will begin assembling smartphones in the country this year.
But while there are some overlaps with the China campaign, many of the 25 industries in Make in India are sectors that aren't exactly cutting edge, such as textiles, leather and mining."Promoting the manufacturing sector in India starts from a very low base and it's going to be aiming to capture a lot of the low-skilled jobs that are leaving China in the tens of millions," according to Peter Martin, associate director for India at Apco Worldwide.
India's Turn
India may be ripe to take China's place. Manufacturing's share of the economy typically starts surging when a country's average income — in terms of purchasing power parity — crosses $5,000 and will continue to soar until $10,000, according to a McKinsey & Co study. India's per-capita income on that basis is at $5,850 and China's at $11,850, according to the World Bank estimates. Yet, challenges abound. India's notorious bureaucracy contributed to the country ranking 142 of 189 — that's lower than Ethiopia and Sierra Leone, while China ranks 90th — on the World Bank's latest Ease of Doing Business Index. And while it's still early days for the campaigns, history points to China being more successful at getting things done. Three decades ago, both economies were at similar levels. China's economy took off since then and exceeded $10 trillion last year, while India has yet to crack $2 trillion.
