India and China

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Chapter 3

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Balance of Payments from a Comparative Perspective: China, India, and Russia under Globalization Akira Uegaki

Introduction
The three regional powers of China, India, and Russia have been actively participating in international trade and international financing recently, although they have large populations, huge territories, and abundant natural resources,1 which would enable them to be independent and autarkic. The globalization movement especially since the ’90s has undoubtedly made their attitudes possible, but on the other hand, the fact that the three regional powers have sailed out on the world market itself has made today’s globalizing trend as a whole stronger and faster. The purpose of this paper is to clarify each country’s similarities and peculiarities in their international financing in a globalizing economic situation by using balance of payments statistics.

Weight of External Economic Transactions in Each Economy
Before analyzing balance of payments statistics, we must examine the size of the external economic transactions of each economy. The simplest way to calculate this is to research the ratio of “openness.”2 According to Fig. 1, the ratio of China and India has been increasing rapidly in the new century, whereas the Russian ratio has stagnated recently after reaching its highest point in 1999. However, we must not exaggerate this contrast because the ratio has always been relatively higher in China and Russia than in India. Table 1 compares the ratio of the three countries with other developed industrial countries. Here, we can see that China and Russia are different from another huge country, the USA, from the viewpoint of “openness.” While the USA is a rather autarchic county, China and Russia are as highly involved in the international economy as Germany. As for India, it is unique in the sense that it has recently been rapidly strengthening its involvement in the world economy.

1

As for natural resources, it is difficult to say whether a certain resource is abundant in a country when considering its population and domestic demand. Abundance depends on the resource and the region. 2 Here, openness means the sum of exports and imports of goods and services divided by the GDP. To calculate the ratio, the author used the data of IFS of the IMF. If we use the data of each country’s SNA data, the ratio would be slightly different; this, however, would not change the general trend.

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Akira Uegaki

Fig. 1 Openness of the Economies [(Exports + Imports) / GDP] (%)

Sources: Calculated by the author using the data of various issues of IFS.

Table 1 Comparison of Openness1 (%)
Sources) China: CSY (2008). India: INNAS (2008) Russia: NSR (2008). Germany: OECD (2007a). Japan: OECD (2007a). USA: OECD (2007b). Notes: 1 = Openness means (exports of goods and services + imports of goods and services) / GDP 2 = Selection of years is depends on avairability of data. 3 = The year beggins in April and ends in March.

China India3 Russia Germany Japan USA

20002 43.22 27.38 68.09 66.40 20.52 26.34

2002 48.11 29.97 59.65 66.89 20.75 23.39

2005 69.80 42.61 56.67 76.24 27.30 23.95

Where lies the difference between China and Russia? Another set of data concerning exports and imports would make this problem clear. Figure 2 shows that exports (in percentage of GDP) have increased hand in hand with imports in China, whereas Russia’s exports have always been much greater than its imports. From the viewpoint of the use side of GDP, Russia’s exports have acted as strong pulling power to raise its GDP,3 while this power has been offset by many imports in China. From the viewpoint of the intra-industrial relations of each economy, however, the degree of economic openness in China seems to be much higher than in Russia, because China’s two lines in Fig. 2 reveal a situation where many imported raw materials and...
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