Unit 3 Section B Resources

UNIT 3 SECTION B RESOURCES

SUPERPOWER GEOGRAPHIES:

Emerging China and India

India is an open society, the world’s largest democracy, compared to China the world’s largest communist state. Recent economic growth in China has outpaced that in India.

Economic reforms, opening up the country to outside investment, have gone further in China than India, at least in coastal Free Trade and Export Zones. In annual economic growth terms between 1990-2003 China managed 8.5% and India 4% per annum (Figure 2).

Figure 1: location map

Figure 2: Economic growth

China benefited earlier from a ‘bulge’ in its working age population which India is now experiencing – no country on earth is ageing as fast as China. Working age population in China will be shrinking by the mid 2020s.China has become the 3rd. largest trading nation in the world behind USA and Germany, accounting for 5.7% of global trade in 2003 compared to less than 1% in India. The benefits of economic growth have not been felt equally in the two countries (Figure 3).

Figure 3: Socio-economic change

CHINA / INDIA
Reduction in people living on less than 1$ per day (1980-2000) / 400 million / 69 million
Number of people on less than $1 per day.(2003) / 17% / 35%
HDI score 2003 / 0.745 / 0.595

The engine of growth in China is inward investment from foreign companies; $ 60 billion in 2003 alone compared to only $ 9 billion for India. The attractiveness of the market in China is that some 300 million people have money to spend compared to only 50 million in India. Costs and infrastructure are important. Electricity in China is 40% cheaper than India, and Indian roads, rail and airports are generally viewed as needing huge investment to bring them up to international business standards.

Figure 4: GDP growth compared

India’s education and University system is a positive attraction. The city of Bangalore boasts 150,000 software engineers alone, most earning around $850 a month. This has already attracted Google, GE, Intel and Motorola to set up in the city. The number of well educated, middle class graduates in India is a major pull for certain types of foreign investment. China’s trump card may be its level of consumption and the size of the potential market – this means businesses can not only locate there but also sell there (Figure 5). 600 million people in China drink Coke, which is more than do in the whole of Europe. The potential market is huge.

Figure 5: China’s consumers:

% of global consumption / 1998 / 2003
ÈMobiles / 7.5 / 20.1
¾TVs / 23.6 / 23.2
ÌMicrowaves / 7.9 / 12.1

Figure 6: Services in India and China

Services per 1000 population, 2001 / (
Phone lines / È
Mobiles / ¾
TVs / Í
Internet
India / 40 / 8 / 90 / 10
China / 140 / 125 / 325 / 25
Data sourced from World Resources Institute, IMF, WTO and World Bank

China's vast pool of cheap labour is a major reason for its success. Wages are a fraction of those in the US, and six times cheaper than Mexico - averaging about 60 US cents an hour for a factory worker (Figure 7).

Figure 7: Labour costs in Asia

Hourly Labour costs in Manufacturing in US$
Country / 2001 / 2003 / 2001-2003 increase (%)
India / 0.8 / 1 / 25
China / 0.5 / 0.6 / 20
South Korea / 8.1 / 9.9 / 22
Spain / 10.8 / 13.8 / 28
UK / 15.8 / 19.5 / 23
USA / 19.9 / 21.5 / 8.5
Data from Oxford Economic forecasting

At least 100 million migrant workers from poor rural districts are seeking work in the cities, according to Chinese government figures. There are so many waiting to follow them that economists think upward pressure on wages is likely to be almost non-existent for the foreseeable future.

India has shown the highest average salary increase in the Asia-Pacific region during 2004, beating China, Korea and Japan. Analysts are worried, however, that such high increases in wage costs may result in the exit of business that is sought in this country for the very same reason — low overheads. What is worrying is that the highest rise in wages has occurred in the Information Technology sector where India bids to be the number one player in the world due to a combined advantage of low cost and high quality manpower at its disposal.

Figure 8: Socio-economic characteristics of the population

Source, WRI Earth trends 2003 / INDIA / CHINA
Population 2002 / 1.04 billion / 1.29 billion
Population 2025 / 1.35 billion / 1.47 billion
Urban growth rate (%) / 3 / 3.7
% population in urban areas / 28 / 32
% urban with improved sanitation / 61 / 69
% urban with safe water / 95 / 94
Female literacy rate (%) / 47 / 80
Male literacy rate (%) / 70 / 93
Youth literacy rate / 74 / 98
Adults with AIDS/HIV (%) / 0.8 / 0.1

Figure 9: Doing business in India and China

Country
(rank out of 181 countries) / Ease of Doing Business Rank / Starting a Business / Paying Taxes / Trading Across Borders
United States / 3 / 6 / 46 / 15
United Kingdom / 6 / 8 / 16 / 28
China / 83 / 151 / 132 / 48
India / 122 / 121 / 169 / 90

India and China are quite different places to do business in (Figure 9) and this may partly explain, along with a range of other factors, why FDI into China has exceeded that into India.

Figure 10: FDI compared

China’s growth has generated some concerns. Soaring demand for oil has put pressure on supplies and in 2007-08 Chinese demand contributed to record price hikes, peaking at $147 per barrel. China is heavily dependent on foreign oil (Figure 11) and demand may double by 2025 when China will be importing 80% of its oil.

Figure 11: Chinese oil supply and demand

In terms of economic power China is grown were others have declined (Figure 12), and it has taken on the mantle of the ‘workshop to the world’.

Figure 12: Trends in world manufacturing

China may be able to continue to grow at the pace it has kept up since the early 1990s but there are barriers to its continued success. In 2003 the RAND Corporation identified a number of potential risks:

· Fragility of the financial system and state-owned enterprises

· Economic effects of corruption

· Water resources and pollution

· Possible shrinkage of foreign direct investment

· HIV/AIDS and epidemic diseases

· Unemployment, poverty, and social unrest

· Energy consumption and prices

· Taiwan and other potential conflicts

The Asian region which China and India occupy, and share a common border, is an area of historic tensions. A number of conflicts, sometimes involving the USA and USSR, erupted in the region in the post-war period including the Korean War 1950-53, the Vietnam War 1958-75 and the Cambodian-Vietnamese conflict 1975-1989

There are a number of ongoing sources of tension in the region:

· Civil war in Sri Lanka

· Continued tensions between mainland China and Taiwan.

· Conflict along Pakistan’s western border with Afghanistan, and the unresolved Kashmir dispute with India.

· Continued tensions between North and South Korea

· Bangladesh, Pakistan and Burma have all been politically unstable for periods since 2000.

A key issue is the nuclear arms capabilities of some nations in the region (Figure 13).

Figure 13: Nuclear Asia in 2006

Number of nuclear warheads / Long range ICBMs
India / 45-95 / In development, by 2010
Pakistan / 30-50 / -
China / 420 / Dong Feng missiles with a range of 15000km+

A key concern related to economic growth in India and China is the growing pressure on the environment linked to rapid economic growth. As a culture of consumerism takes hold fuelled by growing wealth, the environment is likely to take a back seat. Much of the region is already operating in ‘eco-debt’ according to the 2005 Living Planet Index as exploitation of resources exceeds biocapacity (Figure 14).

In both countries pollution control is under-developed, although in the run up to the 2008 Beijing Olympics China appears to have begun to take the issue seriously. Air pollution, especially in cities, has worsened as a result of development and has significant impacts on human health compared to other parts of the world (Figure 15).

Figure 14: Biocapacity and Ecological footprints in Asia.

Source: www.panda.org

Figure 15: The health impact of urban air pollution

Views on India and China:

“China and India are the world's next major powers. They also offer competing models of development. It has long been an article of faith that China is on the faster track, and the economic data bear this out. The ‘Hindu rate of growth’,-a pejorative phrase referring to India's inability to match its economic growth with its population growth-may be a thing of the past, but when it comes to GDP figures and other headline numbers, India is still no match for China”

Foreign Policy magazine, 2003

"The jobs that multinational companies destroy in MEDCs outnumber the jobs they create in India, as workers are working harder and longer. The companies create insecure jobs at near-poverty level wages with inhuman working conditions. We want to work with our sisters and brothers in the US and elsewhere to prevent exploitation.

Ashim Roy, the President of several unions in Gujarat, India.

“Make no mistake this is a survival issue. Anybody who believes that firms have a great deal of choice is naïve. Companies know if they don’t do it, somebody else will. If competitors act and they don’t respond they may put their businesses at risk” Mr Jones said countries who believed that they could fight outsourcing through protectionism were living in “cloud cuckoo land”.

Digby Jones, former Director General CBI

“For the most part, China, India, and Russia are not following the Western liberal model for self development but instead are using a different model, “state capitalism” (which) is a loose term to describe a system of economic management that gives a prominent role to the state”

National Intelligence Council, 2008

“Too many companies prefer low paid, low skill, long hours, ‘low road’ jobs that cannot compete in today’s global market economy. The UK will never cut pay, working conditions or employment rights enough to beat India or China. We need to move to a ‘high road’ economy in which innovative businesses with well trained and highly qualified staff provide quality products and services”

Brenda Barber, general secretary, TUC.

“Now hop a plane to India. It is hard to tell this is the world's other emerging superpower. Jolting sights of extreme poverty abound even in the business capitals. A lack of subways and a dearth of expressways result in nightmarish traffic. ”

Business Week, 2005

“Both China and India are still desperately poor countries. Of the total of 2.3 billion people in these two countries, nearly 1.5 billion earn less than US$2 a day, according to World Bank calculations. Of course, the lifting of hundreds of millions of people above poverty in China has been historic.”

Yale Global Online, 2005

Websites for further research:

www.wri.org The World Resources Institute which contains detailed country profiles and statistics.

www.chinadaily.com Website of an English language State controlled newspaper published in China.

www.hindustantimes.com Website of an Indian newspaper published in New Delhi

www.bbc.co.uk A useful UK news site which archives past stories on India and China.

Notes:

This is a sample of pre-release materials that are the Issues Analysis resources for Unit 3 Section B.

They are based on one of the six Unit 3 core topics, in this case Superpower Geographies. They also contain synoptic links to other Units at AS and A2 level.

‘Real’ versions of the resources will be published by Edexcel in the format shown i.e. two columns in Times New Roman 12pt type, with integrated figures and tables. Some tables may have 11 or 10 pt type. The resource booklet will not exceed 5 sides.