What can China teach India in times of economic downturn

The ground realities of India and China are the same on several counts. Both the countries have large population and a large population below the poverty line. Then recently, the Chinese economy took a nosedive. Yet, the print industry in China is doing rather well. There is a lesson for India here, says Manoj Mehta

24 Feb 2016 | By Manoj Mehta

…And suddenly, China’s 1.3 billion people turned out to be its strength. Then the country got people talking about market reforms. Essentially, China started producing everything, yes everything, anything you can think of, and emerged as the ‘factory of the world’.

China’s revolutionary progress in reducing poverty is well known. Since 1978, the country shifted from a centrally planned economy to market-based economy, resulting in rapid economic and social development. Over 500 million citizens were lifted out of poverty, as the country’s poverty rate dropped to 13% in 2008 from the massive 84% in 1981.

Don’t we Indians wish we had achieved such results? Especially since, back in 1978, both the countries were in similar position.

How did China get it right?
One of the most important steps was the partnership with the World Bank in 1980. Starting as a recipient of support from the International Development Association (IDA), the Bank’s fund for the poorest, China graduated from IDA in 1999 and became a contributor in 2007. In just 30 years, the country became the third largest shareholder in the World Bank in 2010. 

This also reflects in the nature of the Bank’s ever-changing activities in China, right from the Bank providing technical assistance to introduce basic economic reforms to modern project management methodologies, and new technologies. In the recent times, the Bank is involved in activities like removing infrastructure bottlenecks and improving urban functions in cities as well as reform and innovation for better rural health services.

Has the Chinese bubble burst?
Despite such overwhelming developments, China remains a developing country. Official statistics reveal that about 98.99 million people in the country live below the national poverty line of RMB 2,300 per annum in 2012. Thus, after India, it is the country with highest number of poor in the world. Poverty remains a fundamental challenge.  

Then, recently, the Chinese stock market plunged after a huge run-up over the past few years. Foreign exchange reserves dropped. Chinese exports trade volumes continue to shrink. Worse of all, Chinese debts have gone up by 250% of GDP.

Has the Chinese bubble burst? Will it be the repeat of the Japanese story, where Japan struck an all-time high in 30 years before plummeting into deflation in 1989?

The Chinese print story
A look at China’s print industry paints a completely different picture.

In 1978, the country’s print industry output value stood at a mere 4.8 billion RMB (6 RMB = USD 1) and by 2011, the number had skyrocketed to 868 billion RMB, making it the second largest printing market in the world, after the US.

Broadly speaking, there are 47,000 packaging units with an output value of 632 billion RMB; 6,800 publication printing houses with an output value of 131.3 RMB; and there are about 48,000 other units focusing on other printing markets, with an output value of 106.4 RMB. In all, there are over 102,000 printing enterprises with more than 3.5 million employees. 

The big turnaround, however, lies in the consumption of its print products. The Chinese industry can no longer look to a Western market to increase its bottom lines. The domestic market is where they must compete. There is an increased domestic demand for almost everything produced in China. 

Also, China is a net importer of print machinery manufactured abroad while its export accounts for less than half in RMB. One of the major reasons is that many Chinese enterprises have not established strong distribution and service networks. Another reason is that the domestic market is very strong. According to government data, the total output value of around 800 manufacturers is about 40 million RMB. Chinese printers demand high quality products, which is currently being filled by foreign manufacturers. However, the emphasis is on developing domestic suppliers or acquiring foreign firms.

The global print fraternity has also noticed the Chinese print industry. For example, 20 years ago, only a handful of Chinese companies exhibited at Drupa. In 2012, the number was 280. Cumulatively, these companies occupied a total show area of 11,000 sq/mt. This made China the second largest country to exhibit at Drupa in 2012, and it was ranked third in stand size. 

To quench its thirst to acquire knowledge, partner and profit, China also organises several print events on regular basis.

Then again, the launch of the Asian Infrastructure Investment Bank (AIIB) on 16 January 2016 in Beijing as a counterweight to its 30-year-old partner, the US-dominated World Bank, is an indication of China’s determination to expand its global financial role.

Despite occasional hiccups, the China story is very much on. Perhaps it is and will develop in most unexpected of segments. The Chinese premier Xi Jinping’s recent visits to the US, Britain and India is a step towards this.