Mohan Guruswamy
August 05, 2006

Published in HardNews

Almost inevitably the first question at you after a visit to China is, "Is it true?" It is indeed and the vast gap yawning between India and China spans most parameters. (See the accompanying table) In the recent days there has been much euphoria about the rise of India as a world economic power and there has been some vocal speculation about India not only catching up with China, but also even overtaking it. Some very favorable reporting in prestigious western publications like "Foreign Policy", "The Economist", "Businessweek" and "Time" has fueled this. And of course at the annual jamboree of the fat cats in Davos, this year they shmoozed over how well India was doing. That might even be so, but we are yet some ways away from China.



The first thing I noticed when the aircraft began traversing over Chinese territory is how neat and geometrical the parcels of land were. In 1949 all land was expropriated and became state-owned. This led to the precise patchwork quilt of greens and browns one saw from the air. The experiment with farm communes has been largely abandoned now, after the Communist Party realized what a colossal failure it was. Now the land has been turned over to individual farmers to exploit, even if they don't own it, under a scheme of household responsibility. But the important thing here is that agricultural land is now consolidated into economically viable units, the size depending on the crop planted. In this manner the Chinese Communist Party has managed to combine state ownership of land with private entrepreneurship and sense of responsibility. The denial of ownership, in the sense we know it, has led to plots remaining as economically viable units, rather than the fragmented mosaic we now have in India. The average agricultural plot size in India now is 1.4 ha. The majority of our landholdings fall below the small and marginal category (see table) and this makes them if economically unviable and then marginal at best. For India to catch up with China, the first imperative is to increase annual agricultural growth to over 4%. As landholdings are getting more fragmented each year due to the progressive laws of inheritance, this will become an increasingly tough proposition. In the 1980's India's agriculture grew at 3.1%, as opposed to China's that grew at 5.9%. In the 1990's this became 3.6% and 2.7% respectively.



The next impression was the Shanghai skyline as we descended into Pudong International Airport. The size of the terminal and the number of aircraft tethered to it by sky bridges was mind-boggling. The drive into Pudong, which is the brand new twin to Shanghai, leaves one marveling at the quality and scale of the infrastructure. Pudong simply means east (dong) of the river (pu), the river being the Huangpu. Shanghai is on the west bank of the river and from Pudong one can see the most famous promenade of the east. But even that promenade pales before the nighttime Pudong skyline, which is a sight to behold. There is nothing in India that can compare with this. For that matter there are few urban spectacles anywhere else that can match it.

The continuous soft squishing sound of the cars tyres as it raced us to the CELAP Hotel in Pudong testified to the smoothness of the tarmac and the quality of the construction. This was verily like riding on Hema Malini's cheeks. We of course are well used to Om Puri's cheeks. India today claims more road length than China, but 46% of it is unpaved. While in China over 90% is paved and all road links between the major cities and industrial areas are super highways like the ones you see in the USA. If how the Delhi-Jaipur highway has turned out to be, with privately made crossings and about turns, and unkempt railings and verges, then we have little to look forward to when the ambitious Golden Quadrilateral and other projects are all done. This leads to the second big impression about China. How well things are maintained. There is a very simple reason for this. Responsibilities are clearly assigned and failure to live up to them is swiftly punished. There are very few multiple authorities and so there is little scope for buck passing.

Forget about the Delhi-Jaipur highway and holding some one responsible for cutting open crossings at will, when was the last time somebody was pulled up for not clearing the garbage that piles up on our streets? Huge piles of garbage at street corners, lying strewn about throwing a nauseating stench are now a common feature of our everyday life. Then you have wet patches at preferred spots on the pavement for urination. How many public urinals are there in our cities and towns? The relatively few that are there are gaping exhibitions of unsanitary conditions. Some have even been put to other uses. We read the other day that the public toilets built with Japanese assistance in Delhi's slum areas are now being used to store supplies for the midday meals scheme thereby reversing the end usage. The cleanliness and hygiene in China's urban areas are something we do not see anywhere in India. Unlike Mumbai where the stink of open defecation hits your senses, you have nothing like that in Shanghai. If you want to make Mumbai, another Shanghai, we first need to get the streets clean, put the drainage in order and make shitting a private affair and not an open business.

But this does not explain why the Chinese are so far ahead of us? Very simply four things did it for them. The first and most important one is that by 1976 when Deng Xiaoping launched the reforms program with the cryptic comment that "It's glorious to be rich", China had already accomplished very high indices in terms of health and education. Amartya Sen observed: "China's relative advantage over India is a product of its pre reform (pre 1979) ground work rather than its post reform redirection". Without having a healthy and educated population you cannot get ahead. As President APJ Abdul Kalam put it in a somewhat different context, how can India go ahead leaving Bihar behind? Bihar now is only a term of speech to symbolize poverty and destitution, backwardness and ignorance, and uncared for pain and suffering. We have Bihar's all around us, and that needs to be sorted out first.

The second big lesson from China is to decentralize government. These figures speak for themselves. In 1976 the central government accounted for 47% of the entire State salary expenditure. By 2003 that became 28% By contrast in India that figure still hovers around 39%. As a matter of fact public administration salaries are increasingly the burden of the local government in China. In India they account for only 12% of all government salaries. The central and state governments manage to about equally share the rest. Today the wage burden of the state is an enormous Rs.189, 000 crores amounting to almost 6.7% of the GDP. What is as staggering is that such a small part of it is for the levels of government where the average citizen has the maximum interface. Local government has no say let alone control on essential everyday services such as education, healthcare, water supply, sewage and policing. If the teachers do not regularly show up in a primary school, the redress is in the district headquarters or even more far away state capital. Ditto for the doctors and nurses who are supposed to man the PHC's.

In China on the other hand local government is big. It is there at the centre of your village or town when you need. It is made answerable to the citizen consumer of its services everyday. The plans and responsibilities of the local government are well spelled out and the work done is listed out for the citizen to inspect. I visited a few villages in Baishui County in Shaanxi province. Shaanxi, which has the historic and ancient city of Xian as its capital is one of the poorer provinces in China. And Baishui County is regarded as among those closer to the bottom. Like being Dhule in Maharashtra or Anantapur in AP. Baishui is not without history. It was the home of Tsang Chieh, the Chinese patron of writing who invented the written word. Baishui County is a hilly area with numerous coalmines dotting a harsh countryside and is a big apple growing area. More than half the population lives below the poverty line. In the small village of Bai Phu I saw a scheme to relocate a cluster of homes, some of which were caves cut into the sides of cliffs. The new homes are really homes of three rooms each with all basic amenities and a private courtyard. These are a far cry from the mindless concrete rooms with zinc sheet roofs, which are the mainstay of our relocation schemes. The point here is that the common people are thought of as people who need some material comforts and a life with basic dignity. The local government official told me that the idea of giving them far superior homes than the ones they were required to leave was to compensate them for their losses, both physical and emotional. After all homes are full of memories too!

In Yao Zhuo I saw village government in full flow. Here the village council ensures "community driven development" (CCD) to create a well-off and harmonious society (xiaokang shehui). Under CCD local communities collectively decide what needs to be done to improve local village conditions. More importantly the local communities themselves manage program development funds and manage the implementation of projects to ensure local needs are met. All this is under the full gaze of the entire community. All objectives are prominently displayed and progress charted out scrupulously. What I found totally fascinating was map prominently displayed in the council's office that indicated future land use. I was informed that the per capita income in the village was just 1600 Yuan and that the target was to reach 4000 Yuan by 2112. This meant that more land needed to be irrigated and developed as apple orchards. The village also planned a stone quarry, which would supply crushed rock to the big state highway projects running nearby. The important thing was that it was a plan made by the villagers and being implemented by them. Even without a Right to Information Act, government in China is relatively more open at the level that matters to people.

Not that there is no dipping into the till going on. That evening I had dinner with Du Jian Zhun, Baishui County's anti-corruption boss. Du is an intense man, who tells me not to get taken in by what I saw and think that everything is hunky dory in Baishui. Corruption is a big problem, but he is there to fix it. And in China they fix things going wrong with singular dispatch. When I was in China the Vice Mayor of Beijing was sentenced to be shot for embezzling the equivalent of $1.2 million, the kind of money almost every third Indian bureaucrat pockets these days. The difference is that in China you pay for it if caught. In India you rise to greater heights. Thus each of our states now has a half a dozen Chief Secretaries and Directors General of Police. Like molecules of fat bound together in cream they rise to the top together. As I write this I learn that Du has now become the boss of the road-building program as it was slowing down and getting bogged down in corruption.

A part of the decentralization program the control of most State Owned Enterprises (SOE's) have passed on to the provincial and local governments. As the central government realized that it was unable to either sustain these companies or make investments to make them grow and do better, they were handed over to the provincial and local governments. As the productive utilization became central to their economic development plans, these SOE's were either turned around or shut down or just simply sold. This would be akin to handing over Scooters India Limited, the public sector in Lucknow that has not produced a scooter in decades now to the UP government or to the Lucknow Municipality. But thanks to Atal Behari Vajpayee this company, the jewel of his constituency continues to be afloat with huge annual giveaways from the central government. Why Vajpayee, even Mulayam Singh will not let it be sold. But if it was handed over to his government, he probably will know what needs to be done? Not only SOE's, but also even the historic sights have been handed over to the local governments to develop and exploit their tourist potential. The sight of the excavations of the world famous terracotta warriors is one such place. The local government has turned the findings into a memorable spectacle. Thousands of tourists pour in to visit and the local business thrives. Business now is the main business of China.

The next big lesson to be learnt from China is not to be afraid of foreign investment. Deng Xiaoping dismissed all fears about foreign capital with a pithy remark that "it didn't matter if the cat was black or white as long as it caught the mice!" Try telling that to the ever-scowling Comrade Gurudas Dagupta or the pigtailed astrology believing nuclear physicist, Murli Manohar Joshi. Since 1980 China has received over $540 billion as Foreign Direct Investment compared to India that got a mere $38 billion. The FDI companies in China now account for 52% of its exports. They have realized that the dividend is the smallest outflow from a firm and it is value addition that matters. That is why China's manufacturing value addition represents 51% of its GDP or over $650 billion as opposed to India's 26% making less than a fifth of China's in value terms.

The fourth big lesson to learn from China is to export, for that is what will industrialize us and also create the millions of jobs needed to get people off the land literally by turning farmers and farm workers into industrial workers. Last year China had a trade surplus of over $101 billion and a trade surplus of over $114.2 billion with just the USA. The trade surplus itself accounts for 5.0% of its GDP. By contrast India has been having a string of trade deficit for almost half a century. We had current account surpluses for three years since 2002 due to the huge remittances from the USA and the Middle East. Now we are back again saddled with a current account deficit. We don't seem to realize that one sure way of getting wealthier sooner is to have a trade surplus. For this we need to think global and go global. The Chinese have showed the way. They welcome foreign investment from anywhere and anybody. Few countries are as reviled in China as Japan. But Japan accounts for 14.2% of China's FDI, 15.2% of its exports and 16.8% of its imports.

There is much for us to learn from China. If we had someone like Deng at the helm now instead of a government of clerks, he would have given us the slogan of Xiang Zhung Guo Xuesi or Learn from China!