China and India’s Global Integration in the Process of Economic Development

This chapter briefly reviews and discusses the distinctive features of economic development in China and India, by examining the different characteristics of their global integration into the world economy. First, by adopting a comparative approach the chapter highlights the points of convergence and divergence in the development patterns of the two Asian countries. Then, the analysis, focusing on the last decades, covers trade openness and trade specialisation. The degree of openness is analysed also relating it to economic growth. Specialisation is investigated through the computation of Balassa’s indices. The geographical orientation of exports and imports is also considered. A more specific analysis refers to the changing weight, over time, of internal demand vs external demand, given the new policy strategies (clearer in the case of China) to rebalance aggregate demand in favour of the internal components. The chapter also examines FDI flows, by distinguishing the trends in both inflows and outflows. Finally, we also evaluate the performance of these economies on “ease of doing business” to attract more foreign investors and maximize the potential benefits of global integration. The “business-friendly” environment of these two economies will be assessed by analyzing different variables of business regulations, such as: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts, resolving insolvency and labor market regulations. We show, in particular, the progress achieved by the two countries and relate it to recent economic reform