In the universe today a states economic system plays an of import portion in every facet of its growing and interactions with other states. China and India, the two most thickly settled states in the universe, are besides giants in the universe economic growing. Before 1978, both states had really few economic dealingss with other states and had really small impact on the planetary economic system. However, in 1978 China began an extended economic reformation, which led to turning international investings, addition in imports and exports, fewer bounds on private undertakings, and high rates of domestic economic growing. India ‘s economic reformation towards increased planetary economic engagement began subsequently, in 1991, and has progressed easy but strongly with its extremely qualified population and high engineering division. India ‘s economic system is about three times smaller than China ‘s economic system and its growing rate is about 1.5 times lower.

China and India have had several similarities and differences in their growing experiences in relation to the universe economic system over the last two decennaries. This paper will take a expression at the population and the labour force, imports and exports, gross domestic merchandise, and the foreign direct investing for both China and India over the past two decennaries. In add-on, the paper will besides, discuss some of the challenges posed by these two economically turning states to the universe economic system.


China and India are the two most populated states in the universe with populations of 1.3 billion and 1.1 billion severally ( World Bank. 2009 ) . Harmonizing to the World FactBook, China and India rank 2nd and first severally in their labor force where China ‘s labour force is made up of 467 million, which is near to half of India ‘s 812.7 million ( 2009 ) . Both states have most labors in the agricultural business and the least in the industry business. However, Figure 1 demonstrates that India far exceeds China in its qualified applied scientists and skilled labors.

Figure 1: Shows the difference in skilled Figure 2: Shows the difference in the labor

labors in China and India ( Mund. 2005 ) . Force between China and India ( Mund. 2005 ) .

The World FactBook ranks China ‘s 4.3 % unemployment rate to be less than half of India ‘s 10.7 % ( 2009 ) . Both states, with their outgrowth in the universe economic system, have seen an addition in their employment rates over the past two decennaries. Figure 2 demonstrates the per centum of people, between the ages of 15-64, who are employed as portion of the labour force ( Mund. 2005 ) . It can be seen that over the past two decennaries, China has ever had a higher employment rate than India. Besides this, the World FactBook, notes that merely 2.8 % of China ‘s population is below the poorness line, while 25 % of India ‘s population is below the poorness line.

Imports and Exports

As seen in Figure 3 below, both China and India have experienced a rapid growing in their ware imports and exports over the past two decennaries. Harmonizing to the World FactBook, China ranks 2nd in the universe with exports of 1.194 trillion USD ( 2009 ) while India ranks twenty-second with its exports of 165 billion USD ( 2009 ) . China ‘s export trade goods comprise of electrical machinery, fabrics, and medical equipment. India, on the other manus, exports trade goods such as crude oil merchandises, cherished rocks, chemicals, and vehicles. Some common export trade goods for both states are other machinery, dress, and Fe and steel. United States is a common export spouse with China and India. China ‘s export spouses besides include Hong Kong, Japan, South Korea, and Germany while India ‘s export spouses include the United Arab Emirates, China, and Singapore.

Figure 3: Comparison of Exports and Imports for China and India ( Mund. 2005 ) .

In respects to imports, China ranks 4th in the universe with imports of 921.5 billion USD ( 2009 ) while India ranks 15th with its imports of 253.9 billion USD ( 2009 ) . China ‘s import trade goods comprise of electrical and other machinery, oil and mineral fuels, optical and medical equipment, metal ores, plastics, organic chemicals. India, on the other manus, imports trade goods such as rough oil, cherished rocks, machinery, fertiliser, Fe, steel, and chemicals. United States, apart from being a common export spouse, is besides a common import spouse with China and India. China ‘s import spouses besides include Japan, South Korea, Taiwan, and Germany while India ‘s import spouses include the United Arab Emirates, China, Saudi Arabia, and Iran.

Gross Domestic Product ( GDP )

The economic system of China is the 3rd largest in the universe with a nominal GDP of USD 4.91 trillion, in footings of exchange rate, in comparing to India ‘s nominal economic GDP of USD 1.24 trillion, ranking in 12th topographic point in the universe. China is the 2nd largest in the universe with a GDP of USD 8.8 trillion in buying power para ( PPP ) while India ranks 4th topographic point with a GDP of USD 3.52 trillion. In Figure 4, the nominal GDP and GDP based on PPP can be observed over the past two decennaries.

Figure 4: Comparison of China ‘s and India ‘s GDP ( Mund. 2005 ) .

Over the past two decennaries, China is the fastest turning major economic system in the universe with an mean one-year GDP growing rate of 8.7 % while India has an mean one-year GDP growing rate of 6.7 % . China ‘s GDP per capita is USD 6,500 in footings of PPP and USD 3,742 in nominal footings ( World Bank. 2009 ) . Whereas, India ‘s GDP per capita is USD 2,932 in footings if PPP and USD 1,032 in nominal footings.

Foreign Direct Investment ( FDI )

The currency or exchange rate of a state besides affects its economic system and trade. With both China and India ‘s currency rather lower than the United States, which is the dominant universe exchange rate, helps China and India gain a batch of trade. The Chinese currency the Yuan had a floating exchange rate system with the US dollar up until 2005 when China revalued its currency increasing the exchange rate against the US dollar. The Indian currency is non pegged to any other exchange rate system and there it rises and falls with the economic system.

Figure 5: Comparison of Net FDI Inflows for China and India ( Mund. 2005 ) .

The favorable exchange rate attracts a batch of foreign direct investings ( FDI ) to these states assisting in the growing of their economic system. Over the last two decennaries both China and India have opened their economic systems leting more trade and foreign investing. Figure 5 shows the addition in FDI from a billion dollars in 1990 to more than 50 billion in China and 5 billion in India in 2004. China has gained more assurance from foreign houses as it has inexpensive labor, which benefits the companies and besides increases economic growing in China ( Huang. 2003 ) . On the other manus, India attracts a batch of foreign investing as it has many skilled labors, which draws many houses looking to outsource services like call centres that require skilled English speech production workers.

Challenges posed by India and China in the Global Economy

Since China and India have late entered the universe economic system, the bing universe trading forms and dealingss are faced with several challenges. Three such challenges faced by the planetary economic system with the trade and growing in China and India are: the high demand for resources, the outsourcing of technology-related services to India, and the fabrication services in China.

Demands for resources: With the lifting economic system, there is a quickly turning demand for electricity in both China and India, and local energy resources for bring forthing this needed electricity are limited or really expensive. In add-on, the demand for oil is drastically increasing with the lifting demand for transit and mobility ( Shalizi. Pg.169 ) . If there is no alteration in China ‘s and India ‘s energy attacks so both the local and planetary energy state of affairss are likely to decline radically. Therefore, several developing states worry that the high demands of energy from China and India will take to increasing monetary values on international energy markets, which will in bend hurt their economic growing.

Servicess in India: In the end product of services, India ranks fifteenth in the universe that employs 23 % of the planetary work force and is increasing at a rate of 7.5 % yearly between the old ages of 1991-2000 ( World FactBook ) . The outsourcing of concern and information services from high income industrial economic systems in the universe to India is presenting a diminution in the constructions of these industrial economic systems. Although outsourcing airss some advantages, such as cut downing the monetary values of the information services and accomplishing higher degrees of productiveness at lower costs, it besides poses challenges to the national economic system of the state outsourcing its operations. For illustration, when the United States outsources its services for a call Centre to India, it poses a menace to the economic system. Since India has a big figure of extremely skilled, good English speech production employees, the United States will lose several good paying employment chances to India and will in bend fail to bring forth the high degrees of accomplishments and makings that will run into the demands of domestic concerns. This creates a fright in the planetary economic system of outsourcing all computing machine and information services to developing states, where the services will be supported by a high supply of good English speech production employees.

Manufacturing in China: China has entered the planetary economic system as a maker and exporter of high volumes of consumer goods, disputing the fabrication tendencies and trade forms globally. As it mass produces cheap goods, as a consequence of low-skilled labors with low rewards, it possesses a strong comparative advantage in relation to other states. The quickly turning fabricating industry in China besides poses a menace in planetary trading as several houses decline puting in China for fright of holding their merchandises copied. Furthermore, with technological promotions bought in by other states will break accomplishment and educate the Chinese labor market taking them to finally be independent of other states ( Gerber. 2008 ) . States fear that China will mass-produce a similar merchandise at a minimum cost for enlargement across the national market. Cheaper produced ware will deluge the markets in developing states and finally developed states, impacting foreign companies and their national economic systems growing.


In decision, China and India are two emerging giants in the turning planetary economic system that have joined the universe economic system comparatively late but are come oning and impacting it greatly with several factors, such as the population, labour force, imports and exports, gross domestic merchandise, and the foreign direct investing. In the coming old ages with farther addition in new companies and foreign investing, traveling into China and India it will let these states to slowly go more independent and their labor accomplishment degree to lift bettering the economic system even greater. For the developed states to keep or better their economic conditions they will necessitate cut down their dependance and outsources to China and India, who for their ain economic growing will accept any challenges airss by foreign investings. Even though these states might present challenges to the universe economic system, the net growing in the universe economic system has benefited from the engagement of these states in the planetary economic interactions.