Chinas Business System

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"Chinese and Indian Business Systems: Divergent in the midst of Global Trends "

Associate Professor Richard Grainger Professor Samir Ranjan Chatterjee Curtin Business School

Introduction It is clear that China and India, in terms of geography, population size and regional cultural influence, are currently the most important nations in Asia. Both have experienced consistently high economic growth rates over recent decades, a fact which is made all the more notable by the size of their respective populations. This economic expansion is widely predicted to continue for some years, and it is assumed that these two nations, considered either separately or together, will have an outstandingly significant global and regional impact in the twenty first century.

Despite the influence of apparently convergent global trends, divergent managerial assumptions and business practices in these two nations are emerging. The current paper utilises an adaptation of Redding's (2005) comparative business systems model, adopting the premise that cultures underpin socially embedded economic institutions, and in turn, that institutions underwrite governance models, inter-firm networks and alliances, and approaches to corporate management. Within the considerable constraints of this relatively short document, and following a brief background to the economic potential of China and India, a tentative, summary outline and comparison of the contemporary business systems of these two critically important Asian nations is presented.

1

The Economic Rise of China and India In terms of geographical scale, population numbers and regional cultural and economic influence, in the current era China and India clearly stand out amongst Asian nations. The most obvious aspect of this feature is that China and India, which are the world's two most populous nations (jointly accounting for about forty percent of the world's population), are also the two fastest growing economies in the world ("A Survey of India and China, 2005), and have been so for some considerable time. Both have experienced consistently high economic growth rates since the opening of their economies to global market forces, and this is reflected in growth patterns over recent decades (see Table 1).

Table 1:

China and India: GDP Per Capita (US $), GDP Growth Rates Per Capita: 1996, 2000, 2004 Growth Growth capita 2000 capita 2000 capita 2004 Growth Rate GDP per capita 2004

Developing Asian Economies

GDP per

Rate GDP GDP per Rate GDP per GDP per 1996

capita 1996 per capita

China India

2800 1600

9.7% 6.5%

3600 2200

8.0% 6.0%

5600 3100

9.1% 6.2%

(Source: Economist Intelligence Unit, 2006)

This extraordinary long run economic expansion is predicted to continue (see Table 2). What makes the figures in Table 2 especially notable is the outcome after adjustment of gross domestic product, and gross domestic product per capita, to purchasing power equivalents. For example, after this conversion, China in 2007 is placed second only to the USA in terms of gross domestic product, and India is placed third. Again, on the basis of statistics such as those expressed in Table 2, it 2

is widely assumed that these two nations, considered either separately or together, will have an outstandingly significant global and regional impact in the twenty first century.

Table 2: Selected Countries of the World: Forecast Economic Statistics for 2007

Nation

GDP (US$ billion)

GDP PPP)

GDP per

GDP per capita (US$ @ PPP)

GDP Growth Rate (%)

Population (millions)

(US$ billion @ capita (US$)

China India Brazil USA Germany Japan Malaysia

3001 928 934 13980 3280 5290 162

10670 4720 1770 13980 2630 4350 333

2280 830 4930 46280 39710 41480 5950

8070 4190 9340 46280 31870 34150 12240

9.8 7.4 3.3 2.2 1.4 2.1 5.4

1320 1130 189 302 83 127 27

(Source: Economist Intelligence Unit, 2006)

Even from the preliminary data...
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