What China did to become the World's second-largest economy?

We Indians envy China's economic rise,but console ourselves with the fact that it is not a democracy.China today does not seem to think about India at all.Chinese investment flows are negligible.There are no direct flights between Delhi and Beijing. Since its founding 60 years ago, the People's Republic of China has been transformed from a centrally planned economy to a market economy.Extreme poverty necessitated a change for Chinese people 30 years ago in the 1980's,led by Ding Xiaoping and Li Xiannian.Today China is one of the best examples of state capitalism-lifting millions out of poverty and becoming a world leader in industrial output.Three fundamental elements of a market economy -- property rights, an open market and private enterprise --were absent in the earlier Chinese economy. System reform in developing a market system while maintaining the system of public ownership and a planned economy led the Chinese to a complete transformation to a market economy and the end results have been property rights reforms,an open market and encouragement to private enterprise and together with reforms of the political system,China has managed to acheive an average growth rate of close to 10 percent per year for the past 30 years. The rapid pace of development has allowed China to become the world's third-largest economy. A better life for the Chinese people today has been ascribed to the government's focus on increasing affordable housing, lowering taxes on real estate sales and commodities, pumping more public investment into infrastructure development,such as the rail network, roads and ports.

What it means for India:

Chinese investment in India is an idea whose time has come.In 2006,our Prime Minister Manmohan Singh heaped praise on the Beijing Consensus approach to economic development arguing India needs to learn from China in terms of rebuilding and rediscovering itself. A big question to be asked about the Indian economy is what our private entrepreneurs are doing with their capital.A sad fact in the Indian economy is that while our outward investment has more than doubled,investment in

India by Indians has nose-dived.In the present 5-Year Plan of the $ 500 billion spent on infastructural development,only 17% has come from the private sector. This is where we need to learn from China.Public-private partnership helped to resolve the strong demand for public infastructure and shortage of public funding in the early days.China's 1994 tax reform forced local governments to seek private investment for the development of public infrastructure and what we have today is one of the best examples of public-private partnership.Improved public accountabilty and appropiate legal institutions proved to be the icing on the cake. The most vibrant economic sectors are dominated by domestic private firms that can compete with the best in the world in economic terms and this is where we beat China.Indian companies like Tata,Reliance and Infosys are now recognized as the best in the world and with this,the Tiger can surely hope to catch up with the Dragon. References:1)Indias economic growth and market potential:benchmarked against China by GK Kalyanaram,GK Associates,New York. 2)Chinas economy:60 years of progress by Wu Jiglian. 3)Asian Development Bank Public-Private Partnership Handbook.

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By:Sushman Das Economics (H) 1'st Year SRCC Ph.no:-8376886023