Business-nov-dec2010

BUSINESS

Sporting Spirit In the next two decades, together India and China will account for a quarter of global output.

The National Stadium or the Nest, Beijing |28| India-China Chronicle  November-December 2010

November-December 2010  India-China Chronicle |29|

BUSINESS

Amir Ullah Khan

T

here are many similarities between China and India. Both have emerged out of a long history of colonialism, with the largest populations in the world. Both have aimed at developing the economy and improving living standards of a vast majority of the population. In the development process, China and India have shared similar experiences, and till recently, their development levels were indeed very close to each other.

However, in the last decade or so, China seems to have surged ahead. In next two decades, together India and China will account for a quarter of global output.

India’s per capita income is upwards of 800 dollars per year while China’s is more than a1000 dollars. China has a mere 3 per cent population below the poverty line compared to India’s 22 per cent. China will receive 100 billion dollars of foreign direct investment this year while India should get more than 60 billion dollars. Indeed, in terms of foreign investment, China has even surpassed the US. Given the backdrop of sporting activities taking centre stage these days, it would be relevant to take a look at the sports sector in both countries.

In terms of sporting ability there is a wide gulf between the two. In the 1988 Olympics China won five gold medals, the same as Britain. In 2004 they won 32 gold medals, just three less than the US. They were fourth in the medal tally in 1996 Olympics, third in the 2000 Olympics, second in 2004 Olympics. Apart from hockey and a few fine performances in athletics, India’s record in the Olympics paints a dismal picture, for a country having a population of over a billion people.

Apart from the five gold medals, one silver medal and two bronzes in hockey, two silver medals in athletics, India has won bronzes for wrestling (Khashaba Dadasaheb Jadhav 1952 Helsinki), shooting (Dr Karni Singh 1964 Tokyo), tennis (Leander Paes 1996 Atlanta) and weightlifting (Karnam Malleswari 2000 Sydney).

In China, domestic sales of sporting goods reached 10 billion yuan ($1.2 billion) in 2001 and were worth over

Jawaharlal Nehru stadium, Delhi

$5b in 2009. Annual growth rate is estimated to be 12 to 15 per cent, slightly faster than the overall growth rate for the Chinese economy as a whole.

China currently has about 20,000 companies engaged in the sporting goods business, many of which are small-sized enterprises. According to a report from the World Sports Goods Association, 60 per cent of the sporting goods worldwide are made in China. National exports of sporting goods totalled US$7 billion last year, more than 15 times its sales income on the domestic market. Nearly 80 per cent of fitness shoes and 65 per cent of lowend sports equipment sold in the world market originate in China. China is the top producer for the US market (and world market) in both footwear and athletic apparel.

In India, the domestic market is worth Rs170 crores and foreign trade comprises roughly Rs 30 crores of imports and a little more than Rs200 crores of exports. The largest component comes from inflatable balls and the growth rate is upwards of 11 per cent. The Indian sports goods industry, exports nearly 60% of its total domestic

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output. The two cities of Jalandhar and Meerut together claim 75 to 80 % of the total domestic production. They have more than 3000 manufacturing units, including around 120 exporters.

Somewhat like China, the sports goods industry in India is largely concentrated in the cottage and small-scale sector.

The total number of persons working in the entire sports goods industry is about 30,000. The countries where Indian sports goods are exported to are the United Kingdom, Australia, the United States of America, Italy, Germany, South Africa, France, New Zealand, Netherlands and several Asian countries. The Indian sports goods industry manufactures 318 items.

China exports nearly seven times what India does and taking the exports of Hong Kong and Macau into account, China’s exports would be 10 times that of India’s. China enjoys an 8 per cent share of world trade, while India is at 1.5 per cent. But if seen closely, the gap does not seem as alarming as it is made out to be. While China is clearly miles ahead by way of infrastructure growth, India’s capital market is clearly more robust and certain. Telecom infrastruc-

ture is comparable in both countries, the education sector is equally strong and technology is leveraged almost at the same levels in each country’s industry. Chinese products are imported for their lower prices while Indian products are popular in Chinese markets. Trade between the two is now close to 20 billion dollars. While the whole world is experiencing economic slowdown, both India and China are growing rapidly. To take this forward, it is important the two countries stick to some basic rules of the game in the international trade context. First, the need to firmly practice the simple principles under the WTO-MFN treatment, the national treatment and compete. Both countries need to extend national treatment to goods and services traded and to investment from the other country.

Second is the issue of mutual benefit.

In the original Panchsheel agreement, one of the important principles was indeed mutual benefit. The anti dumping cases launched recently against each other do take away from this principle, and there is an urgent need for the commerce ministries in each country to sort this out mutually without

escalating the conflicts.

Third is to focus on the comparative advantages enjoyed by each economy.

The goods that are now being imported from China are chemical products, machinery, electronic goods, raw textiles, base metals and plants. China imports from India minerals, textiles, chemicals and jewellery. There is greater scope for complementarities in trade in goods and in services. The boom in the middle class Indian market provides a great opportunity for Chinese electronics and other fast moving consumer goods.

China on the other hand is among the world’s biggest markets for processed food, natural fruits and vegetables, minerals and handicrafts. Technical books and journals constitute another potential area for Indian exporters.

Medicinal plants, herbs and tropical products find a large market in China.

Finally it is also important to take serious note of the large amounts of mutual investment that is increasing rapidly. The tourism sector has also started benefiting from visits to each other’s countries. India’s service sector is well positioned to avail the opportunities in software development and

training work in China. China on the other hand has great expertise in engineering, particularly in the construction sector, that in India is on a never before ascendance and mutual cooperation there would indeed be beneficial.

The Indian capital market, the banking sector and insurance sectors, with their credibility and experience will find it easy to exploit the Chinese markets while the nascent food processing sector in India can well learn from and attract investment from China with its longer history in agricultural development. With both countries sitting on healthy foreign exchange reserves and no balance of payment issues in sight, it is the right time for mutual investments to take off.

Evolving from a rural agricultural society, China has become an urban, industrial one. Its vast size and unprecedented speed of industrialization has led to this. China’s transition from a closed economy to a market economy has also been unique with a combination of experimentation and incremental reforms leading to rapid progress.

The result has been a quadrupling of GDP since the late 1970s. During the last two decades, China’s nominal GDP ranking is sixth in the world. With China’s accelerated global integration by intensifying international linkages in trade, investment and finance, the implications have been tremendous.

Rapid growth in trade has resulted in high economic growth.

In fact, it is predicted that by 2020, China will account for 40 per cent of the increase in developing country imports, hence enhancing world trade.

And foreign investment has encouraged faster specialisation in labourintensive manufacturing and increased employment and incomes, while reducing poverty. 

Amir Ullah is the Dean and Director Research at Bangalore Management Academy

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