India and China are reckoned to be the global powerhouses of the future. We compare their strengths and weaknesses in a head-to-head contest.
What's going on in China and India is having a huge impact on our lives in Britain -- even the most uninterested observer will have noticed that. For instance, where would we be without twenty-four hour Indian call centres? And we can thank Chinese factories for cheap shoes, bras and T-shirts.
Without question China and India are growing like gangbusters to satisfy the needs of the wealthy West. But some reckon that one day the tables may be turned. Consequently, in future it may be the West that has to kowtow to the two powerhouses of East. But given that both India and China are expanding at the rate of knots, which offers the better investment for long-term investors?
In my view it boils down to a number of things. And here is how India and China measure up.
The Economy
Currently China's economy dwarfs that of India by a factor of three. The Gross Domestic Product or GDP of China is a whopping £1.2 trillion, which is only marginally higher than that of the UK. By comparison, the GDP of India is £430b. What's more, China's economy is growing at a faster pace, too. It is reckoned that its economy is expanding at around 10% a year while India is growing at 8%. So in terms of economic might, I think China wins the contest.
China8/10
India6/10
Population
It is estimated that China's population is a monstrous 1.3 billion compared to India's 1.1 billion. Together they account for over a third of the world's population. But significantly, China has a much older population profile. The average age of its people is 33 years compared to a more sprightly 25 years in India. Additionally, almost 1 in 13 people in China are over sixty-five years of age compared to just one in 20 in India. It's also worth noting that China's one-child policy may increase the strains on its workforce in the future. So I reckon India's potential workforce is marginally better.
China6/10
India8/10
Natural Resources
China's chief minerals include coal, iron ore, mercury and tin. Additionally, it has the potential to be the world's greatest generator of hydroelectric power. Just recently, it completed construction of the world's largest hydroelectric power plant called the Three Gorges Dam. The plant, which can supply a-tenth of China's electricity demand, was completed three years ahead of time. India has vast natural resources, too. Apart from iron ore, manganese and bauxite it also boast the world's fourth largest reserves of coal reserves. Evidently both countries have vast natural resources, so I reckon it's a dead-heat.
China7/10
India7/10
Industries
In terms of its indigenous industries, China does more than just produce cheap clothes, footwear and toys. It also manufactures consumer electronics goods, cars and telecom equipment. Additionally, it is the third largest manufacturer of personal computers in the world following Lenovo's purchase of IBM's PC division in 2004.
India is a major player in high technology, too. Outfits such as Satyam Computer
(NASDAQ: INFY)
and Infosys Technologies
(NASDAQ: INFY)
are big IT hitters not only in India but worldwide too. Meanwhile, India also has a growing pharmaceutical industry that is expanding at around 9% annually. Some of its main players include Ranbaxy, Sun Pharma and Dr Reddy's
(NYSE: RDY)
. So it seems that both countries have notable strengths. Consequently it's honours even.
China8/10
India8/10
So based on my four measures, it's a convenient tie between India and China. Clearly both countries have strengths and weaknesses, and may easily become global powerhouses in the future if they continue to expand at current rates. But there is one more thing to consider, namely ease of investing.
By and large it is considerably easier to invest in China than India. There are numerous Chinese companies listed in the UK and these include China Biodiesel
(LSE: CBI)
, EBT Mobile
(LSE: TES)
and Asia Citrus Holdings
(LSE: ACHL)
. There is also an Exchange Traded Fund, namely iShares FTSE/Xinhua China 25
(LSE: FXC)
that offers a low-cost way to track the performance China's 25 leading companies.
But things are different with India. It has often been noted that India could do much more to deregulate its economy, which might help to attract additional foreign capital. But in the main, its stock market is still largely closed to foreign investors. That said specialist funds such as JP Morgan Fleming Indian Investment Trust
(LSE: JII)
are one option. There are also numerous Indian companies that are listed on the American stock market, if you prefer a more hands on approach.
So there we have it. You can read more about investing in India and China here, here and here.
