Salient to Investors:

Gary Shilling at A. Gary Shilling & Co writes:

Long-term India will emerge as the more significant global economy than China.

About China:

  • Much of its growth before 2008 came from a shift in global manufacturing from Europe and the US, and not by domestic-oriented activity.
  • Its economy remains export-driven – consumers account for only 38 percent of GDP. Confucian society puts high value on providing for one’s family – saving for education, health care and retirement.
  • Higher pay for factory workers is driving low-skilled manufacturing jobs to cheaper countries like Vietnam, Bangladesh and Pakistan.
  • Western companies are increasingly resisting giving technical expertise to Chinese partners as the price of setting up production there. Many believe that much of the success of Chinese manufacturers is due to voluntary technology transfers or theft of intellectual property.
  • Its GDP annual growth target of 7.5 percent is too high given its coming population decline – China’s labor force will peak in 2014.

About India:

  • No effective constraints on population growth, and an age distribution that is better because of China’s one-child policy – the proportion of children and senior citizens to working-age people is expected to continue falling in India and increase in China.
  • A vigorous democracy versus China’s centrally controlled.
  • Relatively easy movement of people and goods unlike China.
  • Has the English language and a better legal system.
  • Has large, globally competitive companies versus China’s government-controlled banks and enterprises.

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