Challenges

The challenges that India faces mirror those of China. Both need to progress from low-cost, low-value manufacturing and service provision to higher-value activities, but while China is striving to move up the value chain in manufacturing first and services next, India is doing the opposite.

Recent growth recovery in China has mainly been driven by a huge policy stimulus of US$586 billion and financed by aggressive bank lending, helping to offset the negative impact of falling exports last year. Despite excess capacity in specific industries like steel and cement, China still has great potential for growth, with many new opportunities on the horizon.

The current crisis offers a unique opportunity to reduce over-capacity in many low-cost manufacturing industries.

During this crisis, it's interesting to see how China and India invest in the economic, business and social structures that characterize more mature and advanced economies.

In the meantime, visitors from around the world can get a preview of just how far China has already come during the Shanghai Expo.

The author is deputy director of IMD's World Competitiveness Center. Shanghai Daily condensed the article.