Taking infrastructure construction as the main body to promote interconnection between China and India

China and India are both emerging economies in the world and the world’s two largest developing countries. As two giants in the Asian continent and even in the world, China and India have many similarities in terms of geographical conditions, natural resources, and population conditions, and they have strong comparability. Taken together, China has an overall advantage on the basis of development, but India also has the advantage of differentiation. In the future, China and India will have more room for cooperation in terms of improving trade imbalances, canceling trade protectionism and forming a more reasonable trade complementarity structure.

"One Belt and One Road" Opportunity

The economic and trade relations between China and India are important foundations for strategic cooperation between the two countries. During the 20 years from 1995 to 2015, the trade volume between China and India increased from the initial 1.2 billion U.S. dollars to 71.7 billion U.S. dollars. India currently ranks among China’s top ten trading partners, while China is India’s second largest trading partner. The trade between China and India has certain complementary advantages. China mainly imports primary raw materials from India, including textile raw materials, base metals and their products, jewellery, precious metals, mineral products, etc., while at the same time exporting mechanical and electrical products, chemical products, and metal products to India. Industry products.

However, the trade imbalance between China and India has intensified in recent years. India’s deficit has been increasing year by year. In 2015 India’s exports to China amounted to 13.4 billion U.S. dollars, with imports amounting to 58.3 billion U.S. dollars, and the deficit hit a record of 44.9 billion U.S. dollars. The current trade imbalance between China and India not only has an impact on India's economy, but it is also not conducive to the healthy development of Sino-Indian relations. In the future, China and India will have more room for cooperation in terms of improving trade imbalances, canceling trade protectionism and forming a more reasonable trade complementarity structure.

China's "One Belt and One Road" strategy has entered the stage of full implementation and has also received widespread and profound attention from major countries in the world. As the largest country in the subcontinent of South Asia, India is also a big country in the "Belt and Road." The main components of the “One Belt and One Road” are policy cooperation, interoperability, trade and investment, people-to-people links, and financing development, which will help realize deeper and broader interoperability and complementarities across Asia, and will become a regional cooperation and unity of nations. symbol of. Therefore, the launch of the “One Belt and One Road” is an opportunity for India to enhance its economic strength. The key to the “One Belt and One Road” strategy is “through-through,” which is to promote the interconnection of China and its neighboring countries with infrastructure construction, precisely matching the development needs of India. Therefore, under the premise that the current economic development lacks a solid infrastructure, India’s greatest hope for the “Belt and Road” is to use it as an important opportunity to improve infrastructure construction and stimulate economic development. Although China and India face multifaceted competition on the international stage, on the other hand, China and India still have extensive consensus and common interest needs in many areas of traditional and non-traditional security. China and India, two emerging developing countries, are members of the "BRICS countries." The two countries not only have common interest needs in areas such as climate change, food security and energy security, but also maintain stability and promote the Asia-Pacific region. There are broad consensuses and common efforts on major issues such as the establishment of a reasonable economic order and the democratization of international relations.

Growth factor analysis

As the two most important countries in the emerging markets, China and India have not only maintained relatively rapid growth for many years, but have left the same countries as Russia, Brazil and South Africa as “BRIC countries”. From the perspective of future development, the two countries still With the "potential growth" capability of medium and high speed. However, as a whole, China’s reforms started earlier and faced economic slowdown earlier than India.

From the perspective of population, China’s demographic dividend has basically ended and gradually entered an ageing phase. According to estimates, the 2015 total fertility rate is only around 1.25 (equivalent to an average of 1.25 children per couple), which is far below the replacement level of 2.1. With the increase of aging, the savings rate may decline, which will lead to a decrease in the investment rate. India is not only younger in its age structure, but its total fertility rate is still around 2.2 in 2015, and the demographic dividend will continue for more than a decade. However, with the increase of per capita income, India will also face the poverty-high fertility trap. The process of slipping into the "high-income-low fertility trap" has actually caused the problem of declining total fertility rates over the years (it is estimated that the total fertility rate in India was 3.6 in 1990, much higher than the present). Post-India will have the same ageing issues as China.

From the perspective of capital stock growth, China’s far leading infrastructure has accumulated a much higher stock of productive capital than India, but it will also face a large annual depreciation problem, so it has to be conducted annually at the world’s highest investment rate. Make up, and with the drop of investment rate, the capital stock growth rate has been declining in recent years. India's capital stock and investment rate are both lower than China's. This is India's biggest weakness, but after Mody took office, he actively encourages FDI and expands investment. The future capital stock growth will also bring greater growth momentum to India.

From the viewpoint of total factor productivity, China’s institutional dividends and technological advancement of foreign advanced productive forces since China’s reform and opening up have significantly increased output efficiency and become a huge driving force for development. However, it is estimated that there has been a clear downward trend in recent years. On the one hand, China’s The narrowing of foreign technologies has also shown that the new reform dividend is urgently needed. However, India’s growth in total factor productivity has been erratic over the years. Reform dividends and technology transfer have not been stable. However, under the leadership of Modi, India’s new round of reforms has released a large reform dividend in the past two years, which has resulted in an increase in output efficiency. If the reforms can be maintained in the next few years, it will further boost India’s Economic Growth.

At present, compared to India, China still has a large amount of time, geography, human resources, and advantages. We must give full play to our own advantages, accelerate reforms and promote development, and use the “reform dividend to promote the improvement of total factor productivity” as the main driving force to improve our country’s comprehensiveness. The international competitiveness as a development goal strives to achieve an average annual growth rate of 4% to 5% in the next 35 years, while reducing the gap between developed countries and reducing the possibility of catching up by India. The corresponding main measures are as follows:
1. It is the channel for improving financial supply and clearing funds into the real economy. India has a high degree of financial liberalization. Domestic private banks are more developed. Among the commercial banks, except the National Bank of India, the top three banks in comprehensive strength (Industrial Credit Investment Bank, HDFC Bank and Axis Bank) are private sector banks. China is dominated by indirect financing. The financing system is mainly state-owned banks. Credit funds flow to government departments and state-owned enterprises. SMEs are in a situation of “financing difficulties and expensive financing” and the real economic interest rate remains high. In the future, it is necessary to deepen the reform of the financial system, enhance the innovation capabilities of financial products and services, and promote private capital that meets standards to set up small and medium-sized financial institutions. At the same time, we should also actively guard against and resolve financial risks, promptly contain the signs of “fidelity” in the financial sector, and increase the effectiveness of financial support for the real economy.

2. It is to speed up infrastructure construction and solve the infrastructure problems by promoting the reform of local government investment and financing systems. Although China's infrastructure is superior to India, most infrastructures still have a certain gap compared with developed countries. The future space for infrastructure construction is still very large. In the future, China will be able to relieve the pressure of debt repayment in recent years through local government debt replacement. Second, it should change the past infrastructure investment model, accelerate the reform of the local government investment and financing system, and achieve cooperation between the government and social capital to broaden the financing channels for infrastructure construction. .


3. It is the top-level design that promotes reform and taps a steady stream of "reform dividends." Actively implement the goals set by the Third Plenary Session of the 18th CPC Central Committee, the Fourth Plenary Session, and the Fifth Plenary Session. Continuously adhere to the "reform, opening up, and innovation", especially to promote the structural reforms on the supply side, and accelerate the transformation from factor-driven to efficiency-driven and innovation-driven.

4. It is to optimize the industrial structure and improve the efficiency of output, from "Made in China" to "Made in China". India has focused on building a technology-intensive industry based on science and technology and innovation. Product added value and output efficiency are relatively high, resource consumption is relatively small, and it has driven information technology (mainly software), biomedicine, and financial outsourcing, etc. The rapid development of the industry-based service industry. In response, China should transform traditional industries, formulate preferential policies to encourage enterprises to increase scientific research investment, in order to strengthen their research and innovation capabilities; Second, we should introduce ecological high-tech into traditional industries, vigorously develop green industries such as modern service industries, actively develop new energy sources, and reduce Resource consumption; again, we should pay attention to the training of higher education and high-tech personnel, expand investment in human capital, and implement low-income policies for key universities.


5. Accelerate the reform of state-owned enterprises and create a favorable environment for private enterprises. The competition between China, India, and China is micro-level competition between Chinese and Indian companies. At present, India has a number of competitive private companies. Many old stores (such as the Tata Group and the Birla Group) that have a century of history have excellent company systems, abundant capital accumulation, and rich management experience. In contrast, most of China's top 500 enterprises are mainly state-owned enterprises, and their innovation and competitiveness are insufficient. However, the strength of private enterprises still has huge room for improvement. In the future, state-owned enterprise reform should be used as a breakthrough point, further simplifying government power, and releasing economic vitality; at the same time, vigorously promote the development of private enterprises to create a favorable environment for private enterprises.

Give full play to its advantages and seize the opportunity to win the economic wrangling between China and India. The first is to cooperate with India in the field of infrastructure, and in particular to drive capacity output, standard output, and equipment output. The second is to speed up the "manufacturing 2025" strategy and strive to form a low-end, high-end manufacturing industry chain in China. The third is to open the Indian market as soon as possible and increase investment in India (mainly equity investment rather than simple engineering outsourcing) and increase India’s economic dependence on China. The fourth is to increase research investment and strive to open up gaps with India in the competitions of aerospace, Internet, artificial intelligence, new energy, and marine development. (Source: China Securities Journal - China Securities Network)