India versus China

There is much debate over whether India will be able to eclipse China's growth. Having recently visited China I have to say that this may be a stretch in the near term (5 to 10 years). Post this period India may well have its day.

To start with China has far superior foreign currency reserves, infrastructure and a government that will not let anything or any person in its way to stop their meteoric rise. Every policy is aimed at making it the next economic super power and their desire seems to be far more focused and intent than India's. That said there may be blocks to growth in the longer term.

India for all its drawbacks has a few things that make it appealing for the long term. First they have a better demographic due to China's restrictive one child policy. This will serve them well in the long term as their youth of today power India's growth of tomorrow. Just look at how it benefited the USA during the baby boom generation.

Second, being a democratic country has enabled superior levels of competition. China on the other hand has the government's finder prints all over large business operations and it is difficult to see how this will benefit them in the long run or how easily they will be able to extract themselves from these companies to foster competitive growth. At some point they must let these companies survive on their own if they are to become true global players and at present it is difficult to see the Chinese government giving up control.

Finally, India is far safer from an intellectual property stand point. This is why most of the large technology companies prefer to use India as a low cost hub rather than China where copying intellectual property is common place.

It will be interesting to see if over time India can repair its broken infrastructure and bring it up to the international standards required to move it into an economic super power, or whether China will be able to transition to a more open market economy that fosters competition over government intervention while cracking down on the breaches of international intellectual property law.

Personally I will remain more heavily invested in China for the foreseeable future but will continue to be watchful of a sustained Indian growth wave that will create investment opportunities.