· Vol 1, Issue 4, December 2012 Editor-in-ChiEf Mohammed Saqib Editor Prashun Bhaumik Editorial...

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Vol 1, Issue 4, December 2012

Editor-in-ChiEfMohammed Saqib

EditorPrashun Bhaumik

Editorial BoardAbid Hussain

Mani Shankar AiyarP.S. DeodharDilip Cherian

Amir Ullah KhanChen Si (China)

Editorial tEamAnchit GoelIrfan AlamManju Hara

Sumelika BhattacharyyaShawahiq Siddiqui

Dushyanth Damodaran

dEsignManoj Raikwar

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Chengdu – China’s Silicon ValleyEighty percent of global iPads are made in Chengdu and one out of five of the

world’s computers are also made in the city. Global OEM giants like Foxconn, Compal and Wistron all gather in Chengdu... The prosperous scene appearing in the US Silicon Valley a few years ago now recurs in Western China’s “Silicon Valley” – Chengdu.

While the footsteps of the 2013 Fortune Global Forum are getting closer, people begin to summarize the achievements of Sichuan Province’s electronic information industry in the past decade and are surprised to find that following the Yangtze River Delta, the Pearl River Delta and the Bohai Rim, Chengdu is emerging as the fourth pole of China’s IT industry.

Ten years ago, it was difficult to find Chengdu on the map of the world’s IT industry. After ten years of rapid development, Chengdu has now become a non-negligible pole of the global electronic information industry. Since Intel invested in Chengdu in 2003, other global IT giants subsequently came to Chengdu, making Chengdu become a true “IT giant club”. As a rising fourth IT pole, what attractions does Chengdu have?

Intel’s story in Chengdu: On February 5, 2001, two mysterious ladies ap-peared in the Chengdu High-tech Zone. They were two executives of Intel China Ltd. Their visit to Chengdu was to study the feasibility of Intel investing in Western China. After dozens of negotiations and investigations, Intel finally chose Chengdu as its investment destination in Western China from more than 10 western Chinese cities. On August 27, 2003, Intel’s fifth chip assembly plant in the world settled in Chengdu. According to public reports, since it invested to build the chip assembly plant in Chengdu in 2003, Intel has made three addition-al investments in the city, and its total investment in the region now amounts to US$600 million. In 2012, Intel’s 10th chip got off the assembly line in Chengdu. Now, the Chengdu plant has become one of Intel’s largest chip assembly and test-ing bases in the world, and half of Intel’s global mobile device microprocessors come from the Chengdu plant.

Intel is the world’s largest chip manufacturer. Its huge investment in Cheng-du has produced strong agglomeration effects in Western China, prompting a large number of upstream and downstream chip-related enterprises at home and abroad to set up factories in Chengdu, including IC design and R&D compa-nies as well as chip assembly, testing and manufacturing enterprises. Texas In-struments, Unisem, Motorola, Ericsson (microblog), Microsoft, Lenovo, SMIC, Phoenix, ZETEX, Monolithic Power Systems (MPS), Diodes, Agilent Technol-ogies, Nokia, Alcatel, Huawei (microblog), Fujitsu and many other giants from Chinese and foreign electronic information industries followed Intel’s footsteps to come to Chengdu one after another. As a result, Chengdu’s IC industry has formed a complete industrial chain.

While Chengdu is making leaps and bounds in the hardware industry, it should also actively facilitate its software development. In May 2005, Chengdu officially put forward that the city would regard the software industry as one of its basic, pilot and strategic industries and would try its best to support and devel-op the software industry. In the strategic planning and layout made by the city for its software industry, the Chengdu Hi-tech Zone becomes the core carrier of the city’s software industry. Since then, IBM (microblog), SAP, NOKIA, Accenture, DHL, Amazon, Perfect World, Symantec, Huawei and other software and ser-vice outsourcing giants have set up their outsourcing centers, shared service cen-ters as well as development and operations centers in Chengdu. Now, Chengdu is becoming a new hub of the global software and service outsourcing industry.

The information contained in this magazine has been reviewed for

accuracy and is deemed reliable but is not necessarily complete or

guaranteed by the Editor. The views expressed in this digest are solely that of the writers and do not necessarily

reflect the views of the magazine.

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December 2012 India-China Chronicle |3|

CHIna’S RURal CapITalISTS

33 The TVEs miracle behind the China boom

Chinese capitalism is an overwhelmingly rural affair.

CHIna’S REgIOnal pOlICY

42 Needs to be fair, to fare well

In pursuit of more balanced regional development, China should base its regional policy during the period of the 12th Five-Year Plan on the principle of fairness and tailor it to the specific characteristics of needy areas and development priority zones. The country’s master plan of developing the western region, revitalizing the northeast, supporting the rise of central China, and upgrading the east should continue.

nEED TO COllabORaTE On SkIll DEvElOpmEnT

48 Sharp Skills As nations whose futures are

inextricably linked with each other, the time has possibly come to look at collaboration opportunities between India and China on skill development.

InTERvIEw

52 People are our real heroes Xi Jinping is the leader of China’s

ruling Communist Party and is expected to become the country’s President in 2013. Xi, who had been vice president, was elevated to general secretary of the party at the end of its 18th National Congress in Beijing in November 2012, a meeting that culminated in its second orderly hand-over of power in more than six decades of rule. Xi became the leader of the new Politburo Standing Committee, the elite, seven-member group that makes crucial decisions on the economy, foreign policy and other major issues.

InvESTmEnT gUIDE TO wESTERn CHIna anD SICHUan pROvInCE

54 Convenient Chengdu Chengdu has been named the

most popular foreign investment destination in western China. Not without reason.

ICEC RECEnT EvEnTS

60 Asian Model of Education India China Management Education

Conference at the Education Forum for Asia 2012

60 Learning Experience Study Tour to China

61 Outsourcing Business Delegation from the

Zhejiang Department of Commerce

62 Exhibition & Trade Show

In India & In China

64 Economic Indicators India-China economics

comparison

|2| India-China Chronicle December 2012

CONTENTSCONTENTS

With 1.33 billion people, China today remains the world’s most populous country. In a little more than a decade, however, it will for the first time in its long history give up this title, to India. For China to feed itself is a major undertaking. It has to feed 21 percent of world’s people with 7 percent of the world’s arable land. This means that China’s entire population of 1.3 billion people China (four times as many people as in the United States) must be fed on arable land that covers less territory than the state of Texas. Food security challenges—from volatile food prices and urban-rural disparities to land and water constraints and climate change—call into question how China will manage to feed its people. But it’s still doing far better than India. 10

4 Feedback

FOOD SECURITY

6 How to innovate and feed the world

From the Green Revolution of the 1960s to today’s GPS-based planting, from better environmental practices to new forms of seed – agriculture is innovation. With the global population predicted to reach 9 billion by 2050, farmers worldwide will continue to face an even greater challenge to feed their families and their communities.

RURal ExODUS aFFECTIng FaRmIng

18 Feeding a Populous Country

A shortage of labour and land holds back Chinese agriculture.

HOw TO RaISE agRICUlTURal pRODUCTIvITY In InDIa

22 Let it grow There is need for a holistic approach

to India’s agriculture sector with particular focus on the small and marginal farmer to increase our food productivity.

mORE TRanSpaREnCY nEEDED

28 Visa main obstacle for Chinese cos to enter India

The Chinese Ambassador to India, His Excellency Zhang Yan, spoke with India-China Chronicle on a range of issues that concern the two countries.

COvER STORY

GROWING CONCERNS


Karnataka KeelThe interview with the president

of the Federation of Karnataka Cham-bers of Commerce and Industry, Mr. JR Bangera gave important insights into matters related to Indo-China trade. The most favoured nation trade agree-ment signed between the two countries was a significant move towards tapping

f e e d b a c k

the trade potential between the two countries. Exchange of busi-ness and cultural delegations and conducting trade fairs and semi-nars are other important measures to promote trade between the two countries. It was interesting to find that there is scope for col-laboration between Karnataka and China in sectors like steel, engineering, agriculture, auto-motive, electronics etc. Sign-ing a FTA with China would also help in enhancing trade relations between the two eco-nomic giants.

Niti Kukreja, Research Associate, BRIEF

Road from Nathu-LaReading about the Nathu-

La pass brought back memo-ries of my Kailash-Mansaro-var Yatra which transverse through one of the other im-

portant passes between India and China namely the Lipulekh Pass (in Pithoragarh district, Uttarakhand). This pass was the first Indian border post to be opened for trade with China in 1992. Due to the non tariff barrier between the two countries, the trade through these passes is restricted only to agricultural produce. Further strength-ening of bilateral trade between the two nations specifically through these pass-

es will give a fillip to the nearby border regions in both sides.

In Pithoragarh district, there is abundance of fruits and vegetables but due to infrastructure bottlenecks, it is not able to find avenues for processing and packaging. There is a huge scope for expansion of agro-processing units in Pithoragarh district. Easing up of the above mentioned barriers will expand the market for these goods.

Apart from that, investment in other infrastructure like tele-communication and steel across the border would help in mitigating the investment gap that currently exists.

Deepak Aswal, MA Economics, Delhi School of Economics

Silver TigerThe article, titled “Tiger, Tiger

burning bright” by Amir Ullah Khan, presents various facts comparing India and China. It seems that in the com-ing years India will surpass China. The GDP growth has taken India among the top economies in the world. And in terms of development both India and China share similar experiences and are really close to each other. This article updated my knowledge on Indo-China relations with fresh insights.

“Silver bullets in the cloud”, was an interesting article on cloud comput-ing systems. How cloud computing has touched every aspect, with great benefits and effective in cost reduction. Apart from this, sharing knowledge on computing and software systems has been made easy. And it is good to know that companies are coming up with such solutions on a large platform. This is definitely taking technology to a whole new level.

Mohd. Rashaad Nomani, Net Scout Systems


Marcos Fava Neves

Huge discussion is going on about the future of the planet, the scarcity of resources, lifestyles,

consumption, the availability of food and land, carbon prices, inflation, water, obesity and a few other things that have made us a lot more sensitive to the fundamental changes taking place around us.

Global consumption of wheat is growing (three years average) 10 mil-lion tonnes a year, corn almost 30 mil-lion tonnes a year and soya 20 million tonnes a year. The consumption of meat grew almost 20 percent in nine years. In essence, we have access to food but production is not responding the way it should. Last year alone we had a deficit of 50 million tonnes of grain.

By far Asia is leading this process, by creating a huge middle-class income population, with a possibility of almost 1 billion people moving toward being middle class. All forecasts done 10 years ago on production, exports and imports in China were incomplete, and some were plain wrong. In 1995 China pro-duced and consumed 14 million tonnes of soybeans. Last year it produced 14 million tonnes and imported 70 million tonnes, and these figures exceed what was projected for 2030.

It is not only in China that food markets are growing at incredible rates. The food market in India will grow from $155 billion in 2010 to $260 billion in 2015. In the same period, Thailand’s food market will grow 50 percent and Indonesia’s from $65 billion to $100 billion. Imagine what is happening in Middle East and Northern Africa countries, in Africa as a whole and in South America, with the booming economies of Brazil and Argentina representing almost 250 million people.

So if we don’t come with innovative solutions in the food chains producing process, society will face problems in the future. Just remembering, a food chain is a complex organization, coming from the input suppliers to farmers, food processing industry, retail and distribution and finally, reaching the final consumers of the

products produced.

Innovation is a key word in order to face this consumption pattern. This article has the objective to raise several innovation points at the food chain, with the purpose of becoming an agen-da for discussing possible sources of innovation. We will start with inputs, than moving to plant and animal pro-duction, then the food industry, retail and consumer.

We must realize that inputs play a key role on food chain. When properly produced and used, they help farmers reach good yields, high quality products, and larger revenues, and help consumers to have safer, tastier and cheaper food on their tables. In the other hand, inappropriate production and use management may lead to resource over exploitation, negative margins to farmers, and more expensive or unhealthy food to families around the world.

Therefore, input management is one of the biggest challenges when it comes to food security. In order to overcome such problems, researchers from com-panies, universities and governments around the world have been seeking in-

novation on input production and ap-plication. Among them, we can list the use of renewable sources and product reuse and recycling, higher machin-ery efficiency, natural/biological pest controls, renewable production inputs that replace not-renewable ones, such as today’s fertilizers; innovation that allow the reuse of resources and the use of byproducts in order to reduce pol-lution that reduces costs, such as new planting technology.

We also need better grain to pro-tein (animal) and sun to energy (plant) yields and biotechnology and natural control in order to use less chemical products and finally, innovation that reduce losses on transport and applica-tion of inputs at the farm level.

When moving to animal and plant production we need to increase land productivity; shorten plant produc-tion cycles; increase efficiency in land operation and management; search for lower environmental impact technolo-gies (recycle, synergies among food chains, energy savings technology); have more efficient and conservative soil operations; have localized and


INFOCUS | INDIA-CHINA | FOOD SECURITY

From the Green Revolution of the 1960s to today’s GPS-based planting, from better environmental practices to new forms of seed – agriculture is innovation. With the global population predicted to reach 9 billion by 2050, farmers worldwide will continue to face an even greater challenge to feed their families and their communities.

How to innovate and feed the world



Marcos Fava Neves is a professor at the School of Business, University of São Paulo, Brazil. He has authored

25 books published in 8 different countries.

faster pace. One the most evident change is the demand for healthier food products. We look for products that promise to let us look prettier or let us live longer, for instance. We also don’t have much time for our meals any more, so we look for food on the go. In the other hand, if you choose to take your time to eat, you’ll leave the fast food aside and engage on the slow food movement. Consumers are also valuing companies that attend the social con-cerns by promoting inclusion, wealth distribution and fair trade. Consum-ers are also innovating in the way they communicate and obey companies to respect environment and other causes.

In terms of waste management, we should develop more tools to analyze all the food losses within chain partici-pants (at home/cooking, supermarkets and restaurants, industry, farm, stor-age, transport); effective portion sizes (avoiding waste); develop processes for re-cycling and utilization of by-prod-ucts and manure, particularly by-prod-ucts of growing biofuels production.

Another efficiency gain may come from Government, searching for in-novation and efficiency in public man-agement systems; harmonization of worldwide regulatory systems to im-

prove efficiency and reduce transaction costs; the formalization of illegal and informal chains, that in some markets still represent 50% of market share; promote and facilitate financial flows and investments to agriculture; build innovative financial support systems for emerging nations and integration of regulatory groups with the private sector. This innovative management behaviour may allow reductions, con-tributing to food accessibility.

Efficiency will come from diffusion and knowledge transfer, establishing a global online network to generate new technology and development to reduce response time (including all chain par-ticipants); social media to market and communicate innovation (web trans-fer); better communication with con-sumers about biotechnology; improve the image of agriculture and food pro-duction; use retail outlets and other points of sales as points of communi-cation about new trends; guide about products/markets/trends in overall production chain (get closer to cus-tomer); extend technologies to back-ward parts of the chain (farmers spread all over) with extension systems; build bridges with developed and emerging economies to spread technology trans-

fer and develop suitable practices for different markets and levels of develop-ment, with localized solutions.

Finally, in storage and movement, we should optimize logistics within the entire supply chain, more efficien-cy in emerging countries with poor infrastructure; better storage capaci-ties and use renewable fuel sources for transport, reducing carbon footprint, among others.

To make all this happen, we need a research and innovation architec-ture that considers building alliances with banks, universities, competitors, raw materials suppliers. We are enter-ing the era of public and private sector partnerships, building cooperatives for innovation; working together with the regulators and university and focus-ing on solution driven management of research and development.

A World Food Security meeting in October 2012



adapted solutions and use renewable energy sources (produced locally) for fueling the high energy demanding agricultural activities.

The agenda shows to the develop-ment of technologies to release more of the potential of the grains contents (en-ergy, protein); precision plant nutrition avoiding losses in the process; plants more efficient to use and transform the resources into production (water, sun, nutrients) and plants much more re-sistant to adverse conditions (diseases, droughts and other damages).

Particularly in animal production, we should research for better under-standing of the nutritional require-ments for all species; technologies to increase productivity of raw materials

as feed; thinking in productivity per hectare (protein per hectare); alterna-tive programmes for disease control and the need to better understand microbial processes (pathogens, mi-cro-bios) and the environmental and health consequences; added value via nutraceuticals, natural medicine and health joined with nutrition; search for alternative proteins like algae; identify cost-efficient alternatives to antibiot-ics; micro-encapsulation for controlled release of nutrition; animal welfare management and genetic development for sex selection (example: only female layer chicks would reduce cost and improve animal welfare), among oth-ers, are topics to be pursued at animal production.

After plant and animal production, we flow to the agro-industry. Due to its close contact to consumers’ needs and desires, this might be the compo-nent of the food chains where most innovation is taking place. Feeling the pressure for more environmental friendly, healthier, and distinguished products, the agro-industry has in-vested on ecological packing, products with different or better flavour, prod-ucts that not only satisfy ones appetite but also work as medicine or cosmetic – the nutraceutics and nutria-cosmet-ics. They invest not only in product innovation, but also in process inno-vation that allow, among other things, lower water use.

Their agenda also addresses to de-velop recyclable and biodegradable packaging materials, innovation re-garding conservation, for instance, in order to increase shelf-life, flavour im-provement, storage and the reduction of transportation costs.

As well as at the farm level, agro-industry must develop processes that require less water usage. It’s necessary to reduce losses and wastes. One way of doing it is through promoting the use of byproducts. A new attitude towards business-to-business relationships and innovative contractual arrangements that benefit the chain as a whole and consequently the consumers is taking place. Companies are also searching for new technologies that deliver in-dustrial optimization and to develop new channel opportunities.

The food retail innovation brings us to supermarkets promoting new buying experiences, such as tasting ar-eas, new ways to offer the products, offering complete solutions, increasing benefits for consumers, supermarkets becoming a place of knowledge trans-fer, where the consumers learn about the products they eat, becoming a place where the industry communicates with its final consumers. Supermarkets are trying to regain some market share that they have been losing to foodser-vice, such as restaurants adding each time more the home meal replacement strategies.

When moving to consumers’ needs and desires, we must understand that these have been changing in an even


PD Kaushik

Adviser - Legal Affairs, ICEC

Poverty Line at US$ 1.25 per capita per day (PPP)2008 37.41 9.242009 35.40 6.622010 33.29 4.97

Source: ADB (2011)

In other words, there were almost 66.55 mil-lion in China and 389.49 million in India, who were surviving on a daily earning of US$ 1.25. Undoubtedly, China had significantly reduced the level of poverty between 1981 and 2010. Compared to China, India’s record in reducing poverty has been dismal. The incidence of pov-erty in India in the year 1980 based on the norm of $1.25 per day per person in come was much lower than China (59.8%) but in the next 25 years India’s poverty level turned out to be much higher than China.

Social protection in the two countries re-mains highly fragmented. In China, the Mini-mum Living Subsidy Scheme (also known as Di Bao) was introduced in 1997 to support the urban unemployed poor who had been af-fected by market-based structural reforms. The programme remained limited, as it excluded the unregistered poor. These were mainly migrant rural workers who move to the city in search of livelihood. In the mid 2000s, the Di Bao pro-gramme was gradually extended to rural areas to cover nearly 42 million rural people, but the size of the transfers were unlikely to reduce the incentives to migrate to the cities. The rural Di Bao, together with the urban Di Bao, covered nearly 150 million people, which represented the second-largest social protection programme worldwide in terms of scale and coverage, just behind India’s National Rural Employment Guarantee Scheme (NREGS).

The NREGS provides a guarantee of 100

According to FAO, food security exists when all people, at all times, have physical, social, and economic access to sufficient safe and nutritious food that meets their dietary need and food preferences for an active and healthy life. Thus, ensuring food security requires a coordinated and comprehensive effort.

Undoubtedly, India houses the most num-ber of poor and hungry in the world. The num-ber of deprived and poor may be relatively small for China but nevertheless around 150 million Chinese still live below the World Bank’s USD 1.25 poverty line and suffer from food insecu-rity and malnutrition. Widening regional gaps, lopsided development and poor infrastructure have always remained the Achilles’ heel for In-dia, but China too has begun to experience the same in recent times.

PovertyIt is an irony that nobody has come out with

a universally acceptable definition of poverty. However, the general understanding of poverty is that it is a manifestation of deprivations, often related to economic condition. Since time im-memorial, food, shelter and clothing were rec-ognised as basic needs of human beings and any kind of deprivation of these needs were regarded as poverty. Hunger is a physical condition. Till life exists, the living body requires food. Ani-mals and humans alike, both look for food and shelter. To be a part of society, one needs clothes. Thus, most people regard poverty as deprivation of basic needs. However, food security is essen-tially aimed at hunger.

In 2011, the Chinese government lifted the country’s rural poverty line from 1,274 Yuan per year in 2010 to 2,300 Yuan, an increase of over 80 percent. This, once adjusted by the purchas-ing power parity of 2005, is equivalent to ap-proximately US$1.80 per day, a threshold well above the US$1.25 used by the World Bank for international poverty comparisons. On the other hand, the Planning Commission of In-dia announced a new poverty line based on the Tendulkar Committee recommendations at Rs 8,074.80 (Rural) and Rs 10,321.20 (Urban) per capita per annum. In other words, the poverty line in India was set at even less than USD 1 per capita per day. Therefore, the official head count ratio varies significantly.

Poverty Line at US$1 per capita per day (PPP)

India (%)

China (%)

1981 59.8 84.02005 41.6 15.9


INFOCUS | INDIA-CHINA | FOOD SECURITY | COVER

India and China together comprise almost half the population of world. However, Chi-na is almost three times larger in size than In-

dia. In terms of agriculture, India is the second largest nation in terms of farm output. China produces, 18 per cent of world’s cereal, 29 per cent of world’s meat, and 50 per cent of world’s vegetables. Although, China has attained a high degree of grain sufficiency (about 95 per cent) and remains a net food exporter, there are seri-ous signs of food insecurities emerging in the last decade.

Food security is a complex issue with multi-farious dimensions. Over time, its definition has also evolved, especially in terms of food avail-ability, access to food, utilisation of food and vulnerability to food insecurity due to politi-cal, economic or social reasons. Both India and China exhibit vulnerability on all four counts.

With 1.33 billion people, China today remains the world’s most populous country. In a little more than a decade, however, it will for the first time in its long history give up this title, to India. For China to feed itself is a major undertaking. It has to feed 21 percent of world’s people with 7 percent of the world’s arable land. This means that China’s entire population of 1.3 billion people China (four times as many people as in the United States) must be fed on arable land that covers less territory than the state of Texas. Food security challenges—from volatile food prices and urban-rural disparities to land and water constraints and climate change—call into question how China will manage to feed its people. But it’s still doing far better than India.

RIGHT TO FOOD

GROWING CONCERNS



decline in grain acreage in China is on account of lower domestic demand for grains as China has become wealthier and shifted to higher val-ue-added crops such as corn. In the 60s and early 70s, India’s wheat yield was higher than China’s. But after the mid-70s, China’s yield started to outpace India’s and the disparity is the highest in the most recent decade.

One of the possible reasons for India’s low productivity is the small size of individual farm holdings. The 2001 census found that 80 per cent of farm holdings were less than 2 hectares in size, with 62 per cent averaging less than half a hectare. Just 1 per cent of the holdings was clas-sified as large (over 10 hectares) and averaged 17.1 hectares.

Land Ownership Pattern in Rural IndiaOwnership of Land (in ha)

% of households

% of land owned

No land 31.0 Nil< 1 49.1 22.91-2 10.8 21.32-5 7.0 30.0>5 2.1 26.5Total 100 100

Source: NC Saxena Committee Report, 2009

A more recent government report noted that small farms have gotten even smaller, and that 85 percent of farmers lack access to farm in-puts and credit. This is not surprising as the ru-ral population has grown but the available farm acreage has not. However, the average Chinese farm holdings are even smaller, averaging just 0.6 hectares.

Both in China and India, small farm sizes inhibit mechanization. But fertilizer usage is much higher in China than India. In addition, China invests significantly more in agricultural research and development compared to India to produce high-yield and quicker-growing crop varieties. This, along with better irrigation and more intensive cultivation of the land by double or even triple cropping are the primary reasons for China’s superior yields.

India-China Comparative Indicators: Farm Size, Productivity &

Agriculture GrowthParticulars India China

Average Farm Size (2010), (ha) 1.21 0.6Productivity (ha.kg) (2008)Paddy 3370 6556Wheat 2802 4762

Maize 2324 5556Groundnut 1071 3102Sugarcane 68877 73114Soya bean 1042 1703Average Annual Agriculture Growth (%)1990-99 3.2 4.12000-09 2.9 4.4

Source: Chand R. et al (2011) EPW: Vol. XLVI (26), June 25, 2011

In India, total grain production, which in-cludes coarse grains like millet and barley as well as gram and pulses, has increased over the past decade but has barely kept up with population growth. Per capita net availability of food grains, which factors in production, wastage, exports and imports and change in stocks, averaged 174 kilograms per capita from 1990-1999 compared with 163 kg per capita from 2000-2009. On the other side, China supports 21 per cent of the world population with 9 per cent of arable land. China’s grain output steadily increased to 500 million tonnes per annum during 1996-99, but registering a decline to 430.7 million tonnes per annum in 2003. It recovered once again to 501.6 million tonnes in 2007 and the net per capita availability of food grains per annum hov-ered around 250 kilograms per capita. However, China’s animal product output rose sharply, registering a sharp rise of 49.8 per cent in meat products output alone during 1996-2007.

Hunger & Food SecurityIt is difficult to guess how many people suffer

from hunger in India and China. Based on com-mon sense, one would expect hunger to decline as a country’s wealth increases. The Global Hun-



days of waged employment per year to unem-ployed unskilled workers, currently covering nearly 48 million households, or about 240 million people in rural India. But this social protection programme completely ignores the urban poor. In fact, India’s social protection sys-tem is complex but incomplete. It spans from categorical and means-tested age and disability pensions, and income transfers for schooling and healthcare accessibility, to unemployment schemes such as the NREGS that rely on self-se-lection for the identification of beneficiaries and therefore exclude all those unable to participate in the scheme due to disability, illness or age.

MalnutritionLack of nutritious food limits survival,

growth, development, health and slows national progress towards development. Most child-hood deaths in India are mainly attributed to malnutrition. Long term malnutrition leads to stunting (height-for-age), wasting (weight-for-height) and under-weight which also increases morbidity, mortality and reduced physical work output. People living in backward and drought-prone rural areas and urban slums and belong-ing to socially backward groups like scheduled castes and tribal communities are highly sus-ceptible to malnutrition. Similarly, landless unskilled labourers, destitute and vulnerable people are also at a higher risk. According to UNICEF, one in every four persons is malnour-ished and one in every three malnourished chil-dren in the world lives in India. Malnutrition is substantially higher in rural areas than in urban areas. Research has revealed that there is more likelihood of undernourished children from malnourished mothers. One-third adult women are underweight and anaemic.

In both India and China, the IFPRI study revealed that the incidence of stunting among children aged 0–3 years was notably higher in India than in China (47 versus 32 percent), and underweight was three times more prevalent

(52 versus 17 percent, respectively).In India, the share of underweight children declined by a few percentage points initially but remained virtually unchanged from 1998/99 to 2005/06. In China, the decline in child underweight and stunting was quite dramatic, a reduction of about half, thus meaning that China reached its Millennium Development Goal (MDG) by 2002, more than a decade ahead of the target year 2015. On the other hand, India is likely to miss its MDG by a substantial margin.

Macro-level studies based on cross-country or cross-state observations, per capita real income (poverty) and indicators of female (mothers’) status usually correlate. Most studies in the epidemiological tradition found that mothers’ nutritional status, low birth weight (LBW), feeding practices, fertility, and access to professional health care are the main determinants of child malnutrition. The first proximal determinant, mothers’ own nutritional status as measured by the share of women with a BMI of less than 18.5, is widely acknowledged as the chief reason behind LBW (the second indicator). LBW, in turn, is the most powerful predictor of child malnutrition in infancy and early childhood. On these two indicators alone, India scores extremely poorly in comparison with China.

AgricultureIndia has the second largest arable land after

the US. Although the total land area of the country is only slightly more than one third of China’s, India’s arable land is marginally bigger than China’s. Yet in terms of production, China outpaces India due to its low productivity. For instance, India is the second largest producer of rice and wheat after China, with China producing about 40 per cent more rice and wheat than India. India is also the second largest producer of fruits and vegetables in the world after China, but China’s fruit production is three times India’s production.

According to the Wall Street Journal, al-though the overall numbers are impressive, the productivity of Indian agriculture is low. On av-erage, the acreage devoted to paddy cultivation declined by 6 million hectares during 1970-79 and 2000-09 in China, while it increased by 4.6 million hectares over the same period in India. In fact, India has had more land under paddy cultivation than China every year since 1960. Yet, China out-produces India by a wide margin. In the case of wheat, China had more acreage harvested than India between 1960 and 2000. Over the last 10 years, however, the situ-ation has reversed. An important reason for the

one in every four persons is malnourished and one in every three malnourished children in the world lives in india. malnutrition is substantially higher in rural areas than in urban areas


poverty rates were reduced significantly in the late 2000s, the pace of poverty reduction was slowed by rising food prices. In the last decade, food price inflation has been higher than that of non-food prices, and food prices have also been more volatile. This was especially true during the 2007–2008 global food crises when prices of rice, wheat, and maize spiked to record highs. This volatility reflects an underlying instability in the global food supply chain, with long-term trends (increasing demand and reduced avail-ability of resources) interacting with transitory shocks (extreme weather events and other ca-lamities). Thus, the issue of food security is more important for the poor as they are more vulner-able to food shortages and volatile food prices.

Food SecurityThe FAO defines food security as …All

people, at all times, have physical, social and economic access to sufficient, safe and nutritious food that meets their dietary needs and food preferences for active and healthy life. In other words, food security is ensuring all citizens access to nutritious food at all times. The four integral elements of food security are (1) Availability, (2) Accessibility, (3) Utilisation, and (4) Stability.

For almost five decades, both countries fo-cussed on availability. In other words, the entire concentration was on increasing the farm out-put to meet the demand for food. The Green Revolution in India was targeted to meet this objective. China, on the other hand, initiated its first phase of reforms from agriculture in 1970’s.

However, lately the focus of the govern-ment shifted to the other three elements. Access meant efficient distribution network to deliver the food to the beneficiary. Food in FCI go-downs is meaningless for the population unless it covers the last mile to the consumer. Likewise, the utilisation was focussed on meeting the di-etary requirements of the population and their preferences. It is not just enough to have only 2000 kcal, a body requires proteins, minerals,

and other nutrients too, along with carbohy-drates. Stability in the supply of food is essential for human beings. A household may put off in-vestment in education if it feels vulnerable to fu-ture food needs. In all, the four elements togeth-er constitute food security, and food security is an integral part of poverty reduction. Without which, poverty becomes a vicious cycle.

Both India and China need to draw their ac-tion plan, more in case of India because of the magnitude of the problem. Current literature suggests five basic policy strategies that can ably combat hunger and poverty in both countries, i.e., (a) providing food-based safety nets and re-lated social protection programmes, (b) enhanc-ing productivity of agriculture (c) promoting rural development, (d) supporting agricultural research, and (e) investing in human capital and upgrade basic infrastructure.

Food-based Safety Nets & Social Protection Programmes

Safety nets offer immediate relief to the poor during times of crisis. Such programmes should be built into the system as a part of automatic

Impact of Food Price Rise on Poverty for India & China Change in percentage of poor

(in percentage points) with an increase in food prices by

Change in number of poor (in millions) with an increase in food

prices by 10% 20% 30% 10% 20% 30%China, People's Republic of –Rural

2.2 4.3 6.5 16.47 32.95 49.42

China, People's Republic of-Urban

0.2 0.5 0.7 1.31 2.62 3.93

India- Rural 2.9 5.8 8.8 22.82 45.64 68.45India-Urban 2.1 4.3 6.4 6.68 13.36 20.04

Source: At USD 1.25 Poverty Line, ADB (2011)



ger Index-2012 puts India behind China and Pakistan. However, in emerging countries like China and India, hunger and income appear to be positively correlated. Both countries are lead-ing producers in farm output, but still there are millions who are undernourished or hungry. For instance, half the population in Beijing is over-weight, but 39 per cent of all children in Hainan are underweight. A similar situation exists in India too. Inequitable distribution of wealth in India and China has widened the gap between the rich and poor.

Poverty is the principal cause of hunger. The causes of poverty include poor people’s lack of re-sources, an extremely unequal income distribu-tion in the world and within specific countries, conflict, and hunger itself. Remarkable progress in poverty reduction has occurred in China, but India has still a long way to go. Restrictive eco-nomic systems are the principal cause of poverty and hunger. The principal underlying cause of poverty and hunger is essentially the control over resources and income that typically ends up in the hands of a minority, who live well, while those at the bottom barely survive, if they do. Conflict is also a cause of hunger and poverty. It is quite evident that hunger exists especially in those regions in India and China, where there is instability. For instance, the incidence of pov-erty is high in red corridor areas in India and backward disturbed western counties of China.

Climate change adversely impacts hunger and poverty. It is increasingly viewed to be the current and future causes of hunger and poverty. Increasing drought, flooding, and changing climatic patterns requiring a shift in

crops and farming practices may not be easily accomplished.

In 2007–2008, as world cereal prices peaked, rising by almost 87 per cent, the global food stocks plummeted to levels not seen in the last two decades. Coupled with the global eco-nomic slowdown, surging food prices pushed an estimated 100 million people into hunger, rais-ing the total number of undernourished peo-ple globally to over 1 billion. The ADB report “Global Food Price Inflation and Developing Asia” showed that global food prices hit a new peak in February 2011. The ADB predicted that the subsequent 10 per cent rise in domestic food price inflation in developing Asia could cause 64 million more Asians, especially India and Chi-na, to sink into poverty. These unprecedented global food price surges expose vulnerabilities to food and nutrition insecurity not only of the region’s households but also of its governments.

Both the rural and urban poor spend more than half their income on food. Recurrent food price spikes are a setback for attaining the Mil-lennium Development Goals (MDGs), espe-cially those related to poverty and hunger reduc-tion. China is one of very few countries in the world that will have fulfilled the Millennium Development Goal of halving the incidence of hunger by 2015.

Although rising food prices affect everyone, the impact is disproportionately large among the poor, who incur almost 60-70 per cent of their consumption expenditure on food. Although

food security exists when all people, at all times, have physical, social, and economic access to sufficient safe and nutritious food that meets their dietary need and food preferences for an active and healthy life


as people shift dietary preferences from cereal grains to meat and vegetables.

It is evident that both countries have in-creased their agriculture research and develop-ment spending over time. However, it is also a fact that a large majority of investment in ag-riculture R&D in both countries come from government sources. In both countries, private investment in agriculture research is miniscule. With the challenge looming before both India and China, this phenomenon needs to experi-ence a paradigm shift by ensuring an increased share of private spending on agriculture research and development.

Investment in Human Capital & Basic Infrastructure

Human capital investments, such as in health and education, and investments in ba-sic infrastructure, such as water and sanitation play a critical role in food security, because these are essential components of poverty allevia-tion. While sustained income growth leads to poverty reduction and food security, the link between economic growth and food security may be weakened by the poor’s limited access to human capital formation and basic infrastruc-ture. Current research reveals that countries that prioritise social development, i.e., boosting access to basic schooling, health, and nutrition results in not only enhanced individual welfare but also achieve higher average incomes over the long term. Thus, prioritising development of hu-man capital improves food security by providing much needed education on health and nutri-tion, understanding the importance of food se-curity and enabling farmers to adopt new farm technologies. India and China have to accept it as a challenge, more so India, to combat poverty and food security for their population.

Thus, both countries have realized the urgency of food security and accordingly initiated strategic policy initiatives in recent times. China has maintained a grain self-sufficiency rate above 95 per cent, contributing greatly to national food security. It has also made brilliant achievements in poverty reduction and in meeting the basic needs of the poor. Despite its achievements, there are some areas and population vulnerable to food insecurities

due to existing rural-urban disparities. China has identified 592 poor counties as its focus for poverty alleviation. The government clustered 271 poor counties together accounting for 7.3 per cent of total counties. Poverty in these counties was on account of rough and mountainous terrain, mainly characterised by adverse natural conditions.

Likewise, India is on the verge of initiating the world’s largest social security scheme – the National Food Security – thus ensuring subsidised food to almost 70 per cent of the population and granting legally enforceable right to food to poor and not so poor. To combat malnutrition among children and women, the social security programmes like mid-day meal scheme and ICDS programme have also been put under the new law for nutritional supplements. This programme alone entails a food subsidy burden of Rs. 94,973 crores for providing food relief to almost 780 million people. Both countries have put concerted efforts on ensuring food security to citizens; China has successfully ensured food security, but India still has a long way to go. Perhaps, India can learn from the Chinese experience on how to combat the scourge of poverty.

Agriculture Research and R&D Spending in India and ChinaCountry Total Researchers R & D Spending (million US$)

1991 1996 2002 1991 1996 2002China 60,114 53,083 50,198 1,174 1,531 2,574India 14,968 16,675 16737 746 861 1,355

Source: IFPRI (2008)



stabilisers. For instances, food price inflations strongly impact food security and government subsidies keep food prices artificially low. But such blanket subsidies are a drain on the budget and cannot be viable in the long run. Food-based safety nets and related social protection is a better option. For instance, well-targeted cash transfers are more effective than subsidies. However, such schemes should be well targeted to yield maximum results. India has already un-dertaken steps in this regard by introducing a bill, the National Food Security Bill, for enact-ment. Besides, the Old-Age Pension scheme is already operational and benefitting the desti-tute elderly population. The Minimum Living Standard Programme (MLSGS) in China pro-vides cash assistance for households with per capita incomes falling below local poverty lines. The programme stipulates that urban residents with non-agricultural permanent residence and low per capita income receive basic subsistence assistance from the local government. There is

also the Five Guarantees (1956 with reforms in 1978, 1994 and 2003), from which the elderly benefit the most.

Enhancing Agricultural Productivity

Improving agricultural productivity is es-sential for ensuring long term food security and promoting poverty alleviation. Adequate food supply is a fundamental prerequisite for food security, especially in line with the population growth rate. Agriculture in India and China are predominantly rural phenomenon. Transferring modern farm technologies to increase efficien-cy and productivity can improve farm yields. Smaller land holdings remain dependent on an-tiquated farm technologies. The focus should be shifted increase farm yields in small land hold-ings. Besides, reducing the amount of food wast-ed due to poor storage and efficient processing could significantly boost food availability situ-ation in both countries. In this regard, China is way ahead than India. For instance, innovation and adoption of new farm technologies have helped improve agricultural productivity in rural China. The waste-to-energy technologies are slowly gaining grounds in rural China in the face of rising fuel prices.

Promoting Rural DevelopmentPromoting rural development can contribute

substantially to poverty reduction and food secu-rity. A majority of population in both countries live in rural areas and this often poses a dilemma for policy makers when drafting policies to sta-bilise food prices and protect the agricultural sector. Rural economic growth and stable food prices should be intrinsic components of any food security strategy. India’s experience with the Green Revolution in the 70’s was fruitful. Now the second generation Green Revolution is the key to the future. The focus should shift to support for agriculture, increasing rural income and strengthening rural markets. China has so far been able to tackle this problem but still there are almost 592 counties which are identified for targetted rural development action.

Supporting Agricultural ResearchAgricultural research is an essential factor

in improving agricultural productivity. For in-stance, advancement in food technologies could significantly boost farm production. Advances in biotechnology can allow the production of crops that are not only resistant to pests and weather events, but also have higher nutritional content. More research and better technologies are needed in livestock production and fisheries,


Yin Pumin

China’s grain imports in 2011 surpassed 61 million tonnes, indicating that its overall self-

sufficiency rate in grain was less than 90 percent.

For the past few years, China has insisted that, to ensure national food security, 95 percent is the bottom line of the country’s grain self-sufficiency requirement.

“But now the volume of imported grain has reached 10.7 percent of the domestic grain output. I am afraid this will affect grain security if the im-ported amount keeps increasing,” said Chen Xiwen, Director of the Office for the Communist Party of China (CPC) Central Committee’s Leading Group on Rural Work, in March.

The supply of other major agricul-tural produce in China also depends increasingly on the international market. According to Customs statis-tics, China imported about 4 million tonnes of corn from the United States and 52.6 million tonnes of soyabeans from overseas markets in 2011.

To avoid becoming too reliant on imports, Chen suggested that the country increase its grain output by protecting arable land and further im-proving agriculture through science and technology.

Preserving farmlandDespite the country’s enormous de-

mand for grain, farmland in China has shrunk over the past decade. According to the Ministry of Land and Resources (MLR), China’s farmland has shrunk by more than 8 million hectares since 1997. In August last year, China had less than 121.7 million hectares of ar-able land, MLR figures showed.

To ensure grain security, China has set a “redline” to guarantee its arable land never falls below 120 million hectares. Land use sanctioned by local governments to construct projects such as golf courses, railways and industrial parks, is an obstacle to the nation’s farmland preservation, according to the ministry.

“Local governments’ reliance on land transfer as a major revenue source

poses a threat to the country’s grain se-curity,” Chen said. He pointed out that some local governments are using the name “land reform” to expropriate ar-able land, causing the amount of avail-able arable land to decrease in quantity and quality.

According to MLR, the area of land use projects that violate state farmland preservation policies surged 11 percent year on year to 16,400 hectares in the first nine months of 2011.

Environmental pollution from the excessive use of agricultural chemicals and the inappropriate disposal of heavy metal has also taken its toll. Heavy metal pollution has so far damaged approximately 10 percent of the coun-try’s farmland and caused the loss of 12 million tonnes of grain every year, ac-cording to research by the Institute of Geographic Sciences and Natural Re-sources Research of the Chinese Acad-emy of Sciences (CAS).

In 2011, China restored a total of 300,000 hectares of farmland and developed 4 million hectares of high-quality farmland, according to MLR data. The ministry plans to add 27 mil-lion hectares of high-quality farmland throughout the country by the end of 2015. “The Central Government has attached great importance to preserv-ing farmland and local governments have also enhanced their efforts to pro-tect farmland in recent years,” Xu said.

Li Qiang, Dean of the School of Humanities and Social Sciences at Tsinghua University, said that the out-flow of young labour, including those with technological abilities from rural areas has also become a main obstacle to China’s agricultural development.

In recent years, with continuous price hikes, the cost of farming has ris-en. The rising cost of labour, land and agricultural materials such as pesticides and fertilizers has squeezed the profits

of farmers and greatly affected their willingness to plant crops, although the Central Government has taken measures since 2006 to lower taxation on the farming sector, increase farm-ers’ income and support construction of agricultural infrastructure.

“Since farming is less profitable these days, more and more young farm-ers have left home seeking jobs in cit-ies,” said Zheng Fengtian, a professor at the School of Agricultural Economics and Rural Development of the Ren-min University of China in Beijing.

Statistics from the National Bu-reau of Statistics (NBS) showed that China’s urban population exceeded its rural population for the first time at the end of 2011, accounting for 51.27 percent of the country’s total.

Official figures show that China now has about 150 million migrant workers, 60 percent of who are aged 30 or under. This group of labourers, born in the 1980s and 1990s, are better edu-cated than their parental generation.

However, a survey conducted by Beijing Normal University last year showed that only 7.7 percent of young migrant workers and 13.3 percent of older workers want to return to the countryside. The proportion of the population engaged in agriculture dropped to 38.1 percent in 2011, according to NBS figures.

“A large amount of arable land is being farmed by women and the elder-ly left behind in rural areas,” said Tang Rennin, Deputy Director of the Of-fice for the CPC Central Committee’s Leading Group on Rural Work.

With capable farmers moving to cities, more and more rural farmland is being left uncultivated. An MLR survey showed that about 2 million hectares of arable land in China are in disuse each year.

On March 26, the Institute of Geo-graphic Sciences and Natural Resourc-es Research of the CAS released a re-port on rural development, urging the country to make full use of rural land and infrastructure abandoned by farm-ers who move to cities to find work.

“The untended land and infrastruc-ture is becoming a major obstacle for the coordinated development of urban and rural areas,” the report said. The

To ensure grain securiTy, china has seT a “redline” To guaranTee iTs arable land

never falls below 120 million hecTares


INFOCUS | CHINA | AGRICULTURE

A shortage of labour and land holds back Chinese agriculture.

Feeding a Populous Country

RuRal exodus affecting faRming


said in his Government Work Report to the session of the National People’s Congress, that the Central Govern-ment will allocate 1.2 trillion Yuan ($190 billion) this year to develop the agricultural industry and the country’s rural areas, an increase of 186.8 billion Yuan ($30 billion) from last year.

The Premier said that China would continue to raise the average minimum purchase price of wheat and rice by 148 Yuan ($23.46) and 320 Yuan ($50.72) per tonne this year. In addition, he pledged that the government would continue to increase agricultural sub-sidies and special subsidies would be given to farmers if fuel prices rose, as fuel has become indispensable for me-chanical farming.

According to the Ministry of Ag-riculture, in the first two months of this year, the Central Government earmarked 132.5 billion Yuan ($21 bil-lion) for various agricultural subsidies.

Zheng also calls on the government to introduce farming studies as part of compulsory education and provide agricultural training to the young

rural generation after school. “In major grain producing areas such as Henan Province in central China, less than 20 percent of local high school graduates go to college. It’s essential to offer farming skill training that meets local conditions while nurturing young people’s interest in agricultural production,” he said.

Tang with the Office of the CPC Central Committee’s Leading Group on Rural Work said that the country will train more professional farmers and lure others back from urban areas to contribute to agricultural produc-tion and the rural economy.

He said that a series of preferential policies, such as credit and tax sup-ports, would be given to the young generation of farmers to lure them back to rural areas to develop modern farming or even set up private farms with advanced technologies.

In its first policy document this year, which was issued on February 1,

the Chinese Government pledged to provide more training on science and technology in rural areas to produce professionals in the agricultural sector to facilitate growth.

During his March visit to Henan, Premier Wen said that guidance offered by agricultural experts, as well as farmers’ hard work, is the key to a good harvest.

In Huoqiu, a county in east China’s Anhui Province, 32 professional crop-protection teams have been set up with training in agriculture to help farmers in their fields and offer advice. Many provinces are now attempting to learn from the experience.

With adequate techniques and marketing expertise, farmers can make significant revenue. In north Beijing’s Changping District, strawberry plant-ing has become a prosperous business under the guidance of professionals and has brought wealth to local farm-ers. According to local authorities, farmers can earn 15,000 Yuan ($2,377) from a greenhouse each year.

Zhang Taolin, Vice Minister of Agriculture, had said in March that in order to guarantee the cultivation of new, hi-tech-minded farmers the government will increase its spending on agricultural education and train-ing. “The future of farming depends on well-educated professionals who have a good grasp of agriculture and market-ing techniques,” Zheng said.

The growing exodus of rural residenTs has noT

only led To more and more farmland being lefT

unaTTended, buT iT has also caused a brain drain in

The counTryside.


INFOCUS | CHINA | AGRICULTURE

institute’s surveys showed that a huge amount of rural land that was original-ly taken over for housing building now lies idle, and the use of land in many areas is highly inefficient.

The report estimated that 7.6 mil-lion hectares of land can be released for reuse if the country improves its rural construction land management and re-leases untended areas for farming and forestry. “Up to one third of the land in traditional agricultural regions is not in use, being occupied by empty houses and abandoned farmland,” said Liu Yansui, author of the report.

The number of rural residents could fall to 280 million by 2020, from 300 million now, according to the report.

The report urged the government to incorporate the management of “hollow villages” and optimized dis-tribution of rural land into its general strategy to protect farmland and im-prove people’s livelihoods.

According to the report, 16.5 mil-lion hectares of land have been allocat-ed to farmers as residential land, which can be used by farmers to build houses, but they are not allowed to transfer it to others if they move.

“Most villagers would return the land if they could receive compensa-tion,” said Liu Weidong, a researcher with the institute.

Survey results in east China’s Shan-dong Province show that about 90 percent of villagers think abandoned residential land is a waste of resourc-es, while nearly 60 percent said they would be willing to return the land if

they were adequately compensated.In a pilot project being carried out

in southwest China’s Chongqing, vil-lagers can trade their residential land after reclamation.

However, Li Maosong, Director of the Agriculture Information Office of the Chinese Academy of Agricultural Sciences, believes it is very likely that most of the idle land in rural areas, especially those that are not far from cities, will be developed for construction of residential housing and shopping centres, instead of being used as farmland.

“More and more rural residents are shunning agricultural life and heading for cities. Therefore, it is impossible to develop much of the idle land for agri-cultural production,” he said.

The growing exodus of rural resi-dents has not only led to more and more farmland being left unattended, but it has also caused a brain drain in the countryside.

In March, 15 academicians with the CAS and the Chinese Academy of Engineering submitted a joint let-

ter to state leaders, warning that China would face a dearth of farmers unless some strategic measures are taken to stop the new rural generation aban-doning agricultural work.

“The most significant measure is to reduce the income gap between farmers and non-agricultural workers,” Zheng said.

China has strict price controls on grain. “In a country with nearly one fifth of the world’s population, grain price control is vital to social stabil-ity. But the policy today has become a hindrance to people sticking to farm work,” Zheng said.

Zheng suggested that the govern-ment should increase subsidies to farm-ers in order to encourage them to work the land. Currently the subsidies given to grain farmers are about 1,200 Yuan ($190) per hectare. “The subsidy is too low,” Zheng said. “For those farmers, who have a large area of farmland, the subsidies might be meaningful but in China, most rural residents are small-scale farmers.”

In early March, Premier Wen Jiabao

in 2011, china resTored a ToTal of 300,000 hecTares of

farmland and developed 4 million hecTares of

high-qualiTy farmland, according To mlr daTa.

The minisTry plans To add 27 million hecTares of

high-qualiTy farmland ThroughouT The counTry

by The end of 2015.


There is need for a holistic approach to India’s agriculture sector with particular focus on the small and marginal farmer to increase our food productivity.

S Mahendra Dev

There are three goals of agricultur-al development: (a) achieve 4% growth in agriculture and raise

incomes by increasing productivity (land, labour), diversification to high value agriculture and rural non-farm by maintaining food security; (b) sharing growth (equity) by focusing on small and marginal farmers, lagging regions, women etc.; (c) to maintain sustain-ability of agriculture by focusing on environmental concerns.

What are the policies needed to achieve these goals? There are basically seven factors which need focused re-forms in the short and medium terms: (a) price policy; (b) subisidies and in-vestments; (c) land issues; (d) irrigation and water management (e) research and extension; (f ) credit; (g) domes-tic market reforms and diversification. Institutions have to be developed in all these aspects.

Price Policy The major underlying objective of

the Indian government’s price policy is to protect both producers and consumers. Currently, food security system and price policy basically consists of three instruments: procurement prices/minimum support prices, buffer stocks and public distribution system (PDS). There is a need to provide remunerative prices for farmers in order to maintain food security and increase incomes of farmers. There has been a debate on price vs. non-price factors. In our view both price and non-price factors are important in raising agricultural production.

One criticism of procurement policy is that it is limited to few crops and few states. Our field visits to different states reveal the following farmers’ perceptions about agricultural prices. The cost of cultivation is increasing due

to increase in input prices. Particularly agricultural wages have increased due to National Rural Employment Guarantee Scheme (NREGS) in several states. They want to resort to mechanization due to labour shortages in peak season. Farmers respond to prices as shown by increase in yields of wheat in Punjab and other states with significant increase in MSP. Farmers have to undergo distress sales due to lack of procurement in states like Bihar, parts of UP, MP and Orissa. If rice production is to be shifted to the eastern region, rural infrastructure including procurement centres has to be improved. Pulses production can be enhanced in several states with higher MSP and procurement. Provision of electricity has to be raised in order to exploit ground water in Eastern region.

In the context of globalization, tariff policy becomes important for agricultural commodities. In other words, it is important to monitor exports, imports, global supply and demand and fix tariffs accordingly. There is a need to balance between producer prices and consumer prices by careful calibration of minimum support prices and tariff policy (import duties).

There is need for reforms in buffer stock operations and targetted public distribution system (TPDS). Buffer stock operations are becoming expen-sive. As FCI gets full reimbursement for its procurement, handling and stor-age costs, the scope for its efficiency improvement through reduction in operating costs need to be examined. Similarly, there are significant leak-ages in PDS. There can be better ways of more efficient food management practices in procurement, buffer stock and PDS. Policy reforms are needed here. Private sector can be involved in storage and some other activities with regulations.


INFOCUS | INDIA | AGRICULTURE

How to raise agricultural productivity in india

Let it grow



the land owner to resume land after the period of contract is over.” We have to ensure land leasing, create conditions including credit, whereby the poor can access land from those who wish to leave agriculture. There are some emerging land issues such as increase in demand for land for non-agricultural purposes including special economic zones, displacement of farmers, tribals and others due to development pro-jects. There is a need for careful land acquisition. Land alienation is a serious problem in tribal areas.

Irrigation and Water Management

Water is the leading input in ag-riculture. Development of irrigation and water management are crucial for raising levels of living in rural areas. Major areas of concern in irrigation are: decline in real investment, thin spread of investment, low recovery of costs, decline in water table, wastages and inefficiencies in water use and, non-involvement of users. Both invest-ment and efficiency in use of water are

last few years. Ground water can be exploited in a big way in the eastern region. Watershed development and water conservation by the community are needed to be brought under water management. The implementation has to be stepped up in order to obtain benefits in rainfed areas. National Rainfed Area Authority has big responsibility in matters relating to water conservation and watershed development. Assets created under NREGS can help in improving land and water management.

needed. Major areas of reforms needed in irrigation are: stepping up and pri-oritizing public investment, raising profitability of groundwater exploita-tion and augmenting ground water resources, rational pricing of irrigation water and electricity, involvement of farmers in the management of irriga-tion systems and, making groundwater markets equitable.

A recent study indicated that the impact of the drought of 2009 was less severe than the drought of 2002 due to ground water recharge in the



Subsidies and Investments One major reform needed in agri-

culture sector relates to reduction in subsidies and increase in investments. Agricultural subsidies are fiscally un-sustainable and encourage misuse of resources, leading to environmentally malignant developments. There is trade-off between subsidies and in-vestments. Public investment declined from 3.4% of agriculture GDP in the early 1980s to 1.9% in 2001-03. At the same time subsidies increased from 2.9% to 7.4% of agri.GDP (GOI, 2007). Rise in public and private in-vestment is crucial for enhancing ag-ricultural growth. Fortunately, gross capital formation in agriculture has increased from 12% of agricultural GDP in 2004-05 to 14.2% of GDP in 2007-08. Public sector investment has increased significantly during this peri-od. However, we need 16% agricultural GDP as investment in order to get 4% growth in agriculture. In this context, the announcement of the Bharat Nirman programme

in 2005 by the Government of India in order to improve agriculture and rural infrastructure is in the right direction. However, the pace of this programme has to be improved.

Land IssuesSome argue that small farm size

is responsible for low profitability of agriculture. Chinese and the experience of other East Asian countries show that it is not a

constraint. On land market, the Report of the Steering Committee

recommended the following. “Small farmers should be as-sisted to buy land through the

provision of institutional credit, on a long term basis, at a low rate of interest and by reducing stamp duty. At the same time, they should be enabled to enlarge their opera-tional holdings by liberalizing the land lease market. The two major elements of such a reform are: secu-rity of tenure for tenants during the period of contract; and the right of

One majOr refOrm needed in agriculture sectOr relates tO reductiOn in subsidies and increase in investments. agricultural subsidies are fiscally unsustainable and encOurage misuse Of resOurces, leading tO envirOnmentally malignant develOpments. there is trade-Off between subsidies and investments.


agro processing and the APMC Act. Several state governments have already amended their APMC Acts allowing varying degrees of flexibility. However several states are yet to notify the relevant rules that would make the amendment fully operational. These steps should be speedily completed to provide a boost to promotion of direct marketing, contract farming, and setting up of markets in private and co-operative sectors.

The most important problem for farmers is the output price fluctuations. There is a big gap between producer prices and consumer prices. There are different models for marketing collec-tively by small and marginal farmers: self help group model, co-operative model, small producer co-operatives and contract farming. Apni Mandi in Punjab, Rytu Bazars in Andhra Pradesh, dairy co-operatives are some of the successful cases in marketing. The real challenge lies in organising the small and marginal farmers for marketing and linking them to high value agriculture. Thus, group approach is needed for getting benefits from marketing.

Emerging Challenge: Climate Change

Climate change is a reality. India has reasons to be concerned about cli-mate change. Vast majority of popula-tion depends on climatic sensitive sec-

tors like agriculture, forestry and fish-ery for livelihood in the country. The adverse impact of climate change in the form of declining rainfall and ris-ing temperatures and thus increased se-verity of drought and flooding, would threaten food security and livelihood in the economy. For example, rise in temperature would affect wheat yields.

India has prepared a document – the National Action Plan on Climate Change. It provides direction for changes at the national level in policy, planning and public-private partnerships and lays out a global vision for modifying longer time trends for sustainable development. Successful adaptation coupled with mitigation holds the key to food security and livelihoods for the 21st century and beyond in India.

Equity in Agriculture Regional Disparities: Growth rates

in agriculture were high for many states during the period 1984/85 to 1995/96. However, growth decelerated in all states except Bihar during the period 1995/96 to 2004/05. The deceleration was the highest in the states with greater proportion of rain-fed areas (Gujarat, Rajasthan, MP, Karnataka and Maharashtra). Recent experience, however, shows that Gujarat recorded the highest growth of around 9 per cent during 2000/01 to 2007/08. During this period, six states viz.,

Gujarat, Rajasthan, Himachal Pradesh, Andhra Pradesh, Chhattisgarh and Bihar recorded more than 4% growth per annum. Public investment in infrastructure like irrigation, power, roads, watersheds, check dams, technology like BT cotton and diversification in agriculture played crucial roles in raising agricultural growth in Gujarat. Other states can learn from the experience of Gujarat. There is a need to shift rice cultivation to eastern region from Punjab and Haryana for growth, equity and environment reasons. In order to encourage the states to invest more towards agriculture and allied sectors and to achieve 4% growth in agriculture, the government launched the Rashtriya Krishi Vikas Yojana (RKVY) in 2007-08 with an outlay of Rs 25,000 crores for the 11th Five Year Plan. The scheme requires the states to prepare district agriculture plans and provides adequate flexibility and autonomy to state governments. The states should make use of this scheme to improve the agriculture sector.

Small and Marginal Farmers: It is known that more than 80% of India’s farmers belong to the category of small and marginal farmers with an area share of more than 40%. The support systems and policy changes have to support in raising productivity and incomes of the small and marginal farmers. National Commission on Enterprises for Unorganized Sector suggests special programmes for small and marginal farmers. Principal activities proposed under this include promotion of marginal-small farmers’ groups, enabling greater access to institutional credit, training and capacity building, support for strengthening and non-farm activities, gender-focussed activities and planning for development of marginal and small farmers.

S Mahendra Dev is the Director and Vice Chancellor of IGIDR, Mumbai



Research, Extension, Technology Fatigue

The yield for many crops declined in the 1990s. Technology plays an im-portant role in improving yields. The National Commission on Farmers indicates that there is a large knowl-edge gap between the yields in research stations and actual yields in farm-ers’ fields; the yield gaps given by the Planning Commission range from 5% to 300% depending on the crop and the state.

The National Food Security Mission (NFSM) was launched in 2007 to increase 20 million tonnes of foodgrains (10 mt for rice, 8 mt for wheat and 2 mt for pulses) during the 11th Plan period. It has shown some results by increasing yields in different regions.

The issue of technology fatigue in agriculture is well known. There is a need to shift away from individual crop-oriented research focused es-sentially on irrigated areas towards re-search on crops and cropping systems in the dry lands, hills, tribal and other marginal areas. In view of high variability in agro-climatic condi-tions in such unfavourable areas, research has to become increas-ingly location-specific with greater participation or interaction with farmers. Private sector participa-tion in agricultural research, exten-sion and marketing is becoming increasingly important especially with the advent of biotechnology and protection being given to in-tellectual property.

However, private sector partic-ipation tends to be limited to prof-itable crops and enterprises under-taken by resource rich farmers in well endowed regions. Therefore, public sector research has to in-creasingly address the problems facing resource-poor farmers in less endowed regions. The new ag-ricultural technologies in the ho-rizon are largely biotechnologies. There has been a revolution in cot-ton production due to the success of BT cotton in this decade. Simi-larly, there is a need to strengthen extension. The ATMA (Agricul-tural Technology Management

Agency) scheme was launched in 2005 to support the state governments’ ef-forts to revitalize the extension. This scheme gives an opportunity to im-prove the extension system. The re-turns to investment on research and extension will be much higher on ag-ricultural growth as compared to other investments.

CreditAccording to the expert group on

Financial Inclusion, only 27% of farm-ers have access to institutional credit. It is true that there have been some im-provements in flow of farm credit in recent years. However, the government has to be sensitive to the four distri-butional aspects of agricultural credit. These are: (a) not much improvement in the share of small and marginal farmers; (b) decline in credit-deposit (CD) ratios of rural and semi-urban branches; (c) increase in the share of indirect credit in total agricultural credit and; (d) significant regional inequalities in credit.

Diversification to Hi-value Agriculture and Marketing

There has been diversification of Indian diets away from foodgrains to high value products like milk and meat products and vegetables and fruits. Since risk is high for diversification, necessary support in infrastructure and marketing are needed. Price policy should also encourage diversification. The government wants to have a sec-ond Green Revolution by diversifying agriculture in crop sector and allied activities. To promote holistic growth of the horticulture sector through area based regionally differentiated strategies, the National Horticulture Mission (NHM) was launched in the country during the 10th Plan. The im-pact has to be strengthened further to improve productivity in the horticul-ture sector.

The true benefit of diversification will come if more emphasis is given to allied activities like animal husbandry and fisheries. The livestock sector con-tributes 5.4% to GDP and 22.7% to total output from agriculture sector.

Ownership of livestock is more eq-uitable than that of land and wom-en play significant role in animal husbandry.

For small and marginal farmers, marketing of their products is the main problem apart from credit and extension. In recent years, there has been some form of con-tract arrangements in several ag-ricultural crops such as tomatoes, potatoes, chillies, gherkin, baby corn, rose, onions, cotton, wheat, basmati rice, groundnut, flowers, and medicinal plants. There is a silent revolution in institutions regarding non-cereal foods. New production – market linkages in the food supply chain are: spot or open market transactions, agricul-tural co-operatives and contract farming. Contract farming in India is neither backed up by law nor by an efficient legal system. This has to be strengthened as legal system is the single most constraint to widespread use of contract farming in India.

There is need to revamp some of the legal hurdles for


It is clear that two decades of eco-nomic reform has turned India into an attractive investment destination. Despite the global financial crisis, FDI (excluding FII inflows) has kept flow-ing in and the annual FDI inflows since 2007 has exceeded USD30 billion.

The Chinese government encour-ages enterprises to “go global” and make outward investment. India is an attractive market which could never be neglected, given its political stability, sound economic growth, huge market potential, well-developed service in-dustry, and relatively low-cost and well-educated workforce. India offers huge opportunities to foreign investors.

I think India’s prospects of attract-

statistics, China-India trade volume reached USD73.9 billion in 2011, 25 times larger than that of 10 years ago. China has become one of the major trading partners of India, and India is China’s largest trading partner in South Asia. Currently, China mainly exports steel, fertilizers, telecommuni-cation and power equipment, chemical products and furniture to India; while India mainly exports iron ore, cotton, plastics, auto parts, gems and precious metals to China.

Given the magnitude of popula-tion, the size of the market and abun-dance in human resources, great poten-tials exist for the two economies to co-operate. Impacted by global financial

crisis, our bilateral trade volume fell to USD39.5 billion in the first seven months of this year, down by 4.9% on year-on-year basis. However, I firmly believe that with efforts by both sides, the target of increasing bilateral trade volume to USD 100 billion by 2015, set by the two sides during Chinese Premier Wen Jiabao’s visit to India in December 2010, could be reached.

How do you see India as an invest-ment centre?


INFOCUS | CHINA | INTERVIEW

ICC: What has been your experience of India so far?

Zhang Yan: It has been five years since I was posted as Chinese Ambas-sador to India in 2007. After five years of working and living in India, I deeply feel that India is an ancient but young country with ancient civilization and vitality, a nation with great diversity in political, economic, cultural, religious, and other fields, and an emerging pow-er enjoying rapid economic growth. The Indian people are hospitable and have friendly feelings towards China. During my stay here, I have made many friends, visited quite a few places, and most importantly, got a better under-standing of India and its people.

China and India are close neigh-bours with a long history of friendship. I was pleased to witness the fast devel-opment of bilateral relations in recent years. In January 2008, Indian Prime Minister Manmohan Singh visited China. The two sides signed A Shared Vision for the 21st Century of China and India and agreed to promote the building of a harmonious world of durable peace and common prosper-ity through further advancing China-India strategic and cooperative part-nership. In 2010, Premier Wen Jiabao and the then Indian President Pratibha Patil exchanged visits. The two sides reaffirmed their commitment to the further development of bilateral rela-tions and cooperation. Early this year,

The Chinese Ambassador to India, His Excellency Zhang Yan, spoke with India-China Chronicle on a range of issues that concern the two countries.

Visa main obstacle for Chinese cos to enter India

MORE TRANSPARENCY NEEDED

during the BRICS Summit, Chinese President Hu Jintao and Indian Prime Minister Manmohan Singh held talks which brought our bilateral relations to a new height. The active high-level interactions have visibly enhanced our mutual understanding and trust. Un-der this positive atmosphere, China-India economic and trade cooperation has maintained a robust growth and people-to-people exchanges have also been greatly boosted. I am so pleased and proud to be one of those who have made contributions to the develop-ment of friendship and cooperation between our two countries.

What’s your take on India’s progress in the time that you have spent here?

My tenure almost coincides with the 11th Five Year Plan of India. The progress in India’s economic and social development is impressive, especially against the backdrop of the global fi-nancial crisis. I noted that the growth rate of India in 2008-2009 declined to 6.7%, but rebounded to 7.4% in 2009-2010, which shows the vitality of the Indian economy. Infrastructure is also improving steadily. For example, it now takes merely three hours from Delhi to Agra via the newly completed express way, two hours faster than before.

China and India are both facing similar historical tasks of improving the livelihood of people, restructuring economy, ensuring a stable and sustain-

able economic and social development. I think both China and India should draw upon each other’s achievements and experience, and further expand ex-change and cooperation.

India has enjoyed a GDP growth of 8% for the last decade. Do you see India as a rising economic power?

There is no doubt that India has become one of the world’s fast growing economies. India boasted an economic growth rate higher than 6% after 1992, which reached 8.8% between 2003 and 2007. Since the global financial crisis, India has maintained sound develop-ment momentum and made great con-tribution to the world economic re-covery. It proves that India’s economic reform is on the right track and brings about benefits to its people.

As emerging economies, both Chi-na and India share extensive common interests. We are partners rather than competitors. There is enough space for the development of both China and India. The people from both coun-tries should have faith in creating a win-win situation.

How do you see the future of India-China trade relations?

Thanks to the joint efforts of gov-ernments, business communities and the people of the two countries, bilat-eral trade has been expanding in recent years. According to China’s customs


two countries’ development models and economic structures. It is a result of market force, rather than interven-tion by governments.

The Chinese side attaches great im-portance to this issue and has taken a series of measures to promote import from India, which includes organiz-ing three consecutive sessions of South Asian Countries Trade Fair, sending purchasing teams to India, providing facilities and preferential measures to Indian companies to take part in the exhibitions held in China, etc. For ex-ample, on August 27of this year, the China-India Entrepreneurs’ Meeting was held in New Delhi, which was sponsored by the Chinese Ministry of Commerce and Indian Ministry of Commerce and Industry. At the meet-ing, enterprises from both sides signed commodity purchasing agreements. It is also hoped that Indian enterprises can make full use of all marketing platforms to promote products from China in Indian domestic market and expand export of Indian commodities to China.

I believe that with continuous and dynamic growth and improvement in infrastructure and manufacturing sector there will be more and more Indian manufactured and value-added products exported to China.

China has a comparative advantage in manufacturing and India has a comparative advantage in the services sector. Do you think, the trading in services sector between India and China can compensate the deficit in goods trading?

It is a good idea to expand trade in services between China and India. As you have mentioned, China and India are two diversified economies and can complement each other in many ways. China is regarded as “world factory” for its strong manufacturing and infrastruc-ture sectors; while India is renowned as the “world office” for its competi-tiveness in information technology, outsourcing service, banking and bio-technology. We should make an ef-fort to diversify our trade by exploring new varieties of products, developing service trade including transportation, telecommunication, banking, finance

and tourism, with an aim to achieving a better trade structure and gradually minimize the trade imbalance.

How do you see India-China coop-eration in the international arena?

China and India are two major emerging economies. Mutually ben-eficial cooperation and common devel-opment will not only serve the funda-mental interests of both countries and peoples, but also contribute to peace, stability and prosperity of Asia and the world at large.

China and India jointly initiated the famous Five Principles of Peace-ful Co-existence in the 1950s, which have become the guiding principles of international relations. Contemporar-ily, with profound change taking place in the world political and economic structure, the two countries are work-

ing together to address the issues re-lated to food and energy security, the Doha Round of trade negotiations, cli-mate change, sustainable and green de-velopment, Millennium Development Goals, and call for more say and bet-ter representation in the IMF, World Bank and other international financial institutions to make them better reflect the reality of the changing world, and defend the interests of all developing countries. The similar status of the two countries in the current world order defines common interest in interna-tional arenas. In this sense, China and India are partners by nature.

It has been noticed that there are still many non-tariff barriers hampering the growth of India-China trade. Do you see a way out?

China and India should jointly oppose all kinds of trade protection-ism. We give great importance to the

quality of products and environmen-tal protection, but this should not be used as disguise of trade protectionism. In addition, both sides should refrain from using trade remedies, such as anti-dumping, anti-subsidy and safe-guard, to create unfair trade barriers. Trade protectionism can only harm the interests of consumers and weaken the competitiveness of industries. As we all know there is no winner in a tit-for-tat trade war.

China and India are both developing countries, sharing lots of common interests. The Chinese Ministry of Commerce will work with the Indian Ministry of Commerce and Industry to strengthen communication, enhance coordination, and expand cooperation through bilateral and multilateral mechanisms. Besides, the exchanges between the industrial and commercial communities of the two countries should be encouraged, in order to facilitate cooperation between companies of the two countries.

There have been a number of reports (personally reported to the ICEC) as well as in the public print media which give us to understand that a few Chinese companies have been in-volved in unfair trade practices in In-dia. Have there been any steps taken to prevent such cases in the future?

My office sometimes also receives complaints from both Chinese and Indian companies against their trade counterparts. I regret that. Although the proportion of unfair trade is small in the total China-India bilateral trade volume, it ruins the trade order and undermines mutual trust between the peoples of the two countries. Compe-tent departments of both governments should strengthen communication and jointly set up a mechanism to help en-terprises defend their legitimate inter-ests through legal means.

The regional outreach of the Chinese Embassy in India is inadequate, un-like the British or American. How do you think it can be improved? Do you have any plans?

The Chinese Embassy in India is committed to working with Indian friends from all walks of life who cher-

As emerging economies, both chinA And indiA shAre

extensive common interests. We Are pArtners rAther thAn competitors. there is enough spAce for the development of

both chinA And indiA



ing FDI in the years ahead are very good if it continues to promote a dy-namic economy, pursue investment-friendly policies and create a favorable macro-economic environment.

Despite India’s high economic growth, Chinese companies are not looking at it for long-term invest-ment. Why?

Since the reform and opening-up, Chinese enterprises have enjoyed con-tinuous development through their own efforts as well as international co-operation. More and more enterprises are now investing overseas. The deci-sion to invest overseas is made by enter-prises themselves based on their own strategies. The Chinese government will continue to support enterprises to “go global.”

The mutual investment between China and India is growing steadily. According to statistics by the Minis-try of Commerce of China, up to June 2012, China has made USD 591 mil-lion non-financial investment in India, while India invested USD 469 million in China. In addition, up to March 2012, Chinese enterprises have com-pleted infrastructural projects with a

total value of more than USD 28 bil-lion in India. Some Chinese top-notch companies, such as Huawei, ZTE, Si-nosteel, Sany heavy Industry and Liu-gong, have invested and operated in India. Those investments have not only helped upgrade the economic struc-ture of India, but also created a lot of job opportunities for local people and promoted social welfares and econom-ic development for the local society.

I am sure, with a better understand-ing of Indian market and the improv-ing investment environment, more and more Chinese companies will choose India as their investment destination. We also welcome Indian government, industrial and commercial communi-ties, and trade organizations to hold Indian investment promotion events in China.

What are the challenges/hurdles faced by Chinese companies in India?

The investment and business envi-ronment in India is getting better and better with the support and effort of the Indian government and business society. However, there is still room for improvement, especially to further promote the policy of transparency.

Besides, visa issue remains to be the main obstacle for Chinese companies to enter India.

Cultural difference is another challenge. Chinese companies should find a way to comprehensively inte-grate into the local environment, and try their best to learn Indian culture and customs.

What are your views on FTA or the bilateral investment treaty between India and China?

China and India, as the two larg-est developing countries, have built important cooperative relationship in trade and investment. Against the global financial crisis, to further coop-eration between China and India will be beneficial to both sides as well as the world at large.

FTA is a useful instrument to fa-cilitate and boost bilateral trade in a bigger way. Bilateral investment treaty provides fundamental trade principles such as non-discrimination among partners to investment. They are effec-tive means to promote bilateral trade and investment and help upgrade in-dustry structures of both countries. The idea of China-India FTA was pro-posed by both countries 10 years ago. And the related studies are still under way. The Agreement for the Promotion and Protection of Investment (with Protocol) between China and India was signed in 2006, which laid a basic foundation to further discuss invest-ment treaty. With increasing mutual trust, China-India economic coopera-tion could be brought to a new height.

As you are aware that India’s trade deficit with China in 2011-2012 touched almost $40 billion, what steps do you think should be taken to reduce this trade deficit?

According to statistics from the Chinese Customs, China’s trade surplus with India in 2011 was about USD27 billion, which is different from the fig-ure you mentioned. The difference may arise from statistical time period, statis-tical method and re-export factors.

In spite of this, with the fast grow-ing of bilateral trade, the trade imbal-ance does exist. The imbalance is main-ly due to the difference between the


Shawahiq Siddiqui

China today earns its significant portion of revenue from what were earlier known as Township

and Village Enterprises (TVEs). TVEs began as commune and brigade enter-prises that were based on the concept that people working on common lands (that belong to the government) will have a share in the produce if it was more than the specified government quota. This motivated tillers and farm-ers to put more effort for producing ex-tra and consequently led them to take all necessary steps that helped them to increase their productivity. India too has an abundance of common lands. Can such a model be experimented with in India?

Rural industrialization means planned shifting of small scale industri-al units from urban areas to rural areas, without disturbing the urban indus-trial structure. Rural Industrialization may assume different meaning in a dif-ferent country or local context. It aims at overall development of an area as well as people living in such areas by al-leviating them from rural poverty and creating employment opportunities in rural sphere.

At present, in India, there is no cen-

Chinese capitalism is an overwhelmingly rural affair.

The TVEs miracle behind the

China boom

China’s rural Capitalists



ish and support the healthy develop-ment of China-India relationship so as to push for closer communication and cooperation between China and all regions in India. There are Chi-nese Consulate-Generals in Mumbai and Kolkata which are also actively engaged in promoting China-India relations, especially the economic and trade relations in Eastern and Western regions of India. With the help of modern communication and transportation, Chinese diplomats could respond promptly to any case across India. In addition, the Chinese Embassy increasingly attaches im-portance to the diversified demand for economic and cultural coopera-tion from different regions in India and facilitates provincial-state level exchanges between China and India.

Despite the strong and ever grow-ing economic ties between India and China, there is very little knowledge about our people, culture and society in the two countries. Generally peo-ple on both sides get limited, selective and biased information about each other. What do you think can be the right medium to address the issue and further our civilization links?

The peoples of China and India en-joy a long history of friendly exchanges. It is my belief that as long as we keep an open mind, the bias will be eliminated with growing knowledge of each other. First of all, people-to-people exchange should be encouraged. Nowadays, over 40 direct flights shuttle between Chi-nese and Indian cities every week. In 2011, the number of Indian visitors to mainland China increased by 10.4% over 2010, exceeding 600,000 and hit-ting a record in China-India tourism exchange. At the same time, the num-ber of first-stop visitors from China to India during 2011 was around 118,000, a 19.1% growth over that of 2010, and scored a marked increase. In addition, since 2005, the two sides have exchanged visits of youth del-egations regularly. Last September, a 500-member Indian youth delegation led by the honorable Minister of Youth Affairs and Sports Shri Ajay Maken visited China; and in February of this year, a 500-member Chinese youth del-

egation paid a successful visit to Mum-bai, Bangalore, Kolkata and Rajasthan. Besides, the Chinese government or-ganizes seminars and training courses on economic development and pover-ty relief every year. Indian friends who are interested in these programmes are welcomed to contact the commercial office of the Chinese Embassy.

Second, artsthe is a good way to showcase culture. For example, the performance by the Xinjiang Muqam Art Troupe in New Delhi and Bangalore this year was well received by Indian friends. I also hope the media in both countries could bring an objective, comprehensive and updated picture of the other country to their audience and readers.

There are no magazines/journals in India or China with a dedicated fo-cus on India-China issues. (India-China Chronicle is the only one of its kind).

I appreciate the efforts made by the ICEC and India-China Chroni-cle to enhance economic and cultural cooperation between the peoples of China and India. As I always believe, media is a good channel to promote mutual understanding and serves as a platform for exchange of commer-cial information and opportunities. And the success of such a specialized magazine depends on the accumula-tion of mutual understanding and the desire to gain further knowledge of each other. This is an interactive process, which calls for our persis-tent endeavour.

What is the way forward for enhanc-ing trade and cooperation between the two countries and what role do you see of non-governmental organi-zations like the ICEC?

The total population of China and India is about 2.5 billion and the total GDP nearly USD 10 trillion, but the volume of China-India bilateral trade accounts for only 2.03 percent of China’s total foreign trade and the mutual investment is not compatible with the size of economy of the two countries. Therefore, our economic and trade cooperation still has great potential.

The Chinese Government always attaches great importance to promot-ing China-India economic and trade cooperation. We are ready to work with the Indian side to support our companies to cooperate with each oth-er and contribute more to a sustained and rapid economic development of both countries.

We should continue to deepen mu-tual understanding and trust. Apart from the exchange of visits at high level, we should also try to strengthen communication, increase the interac-tion between business communities, including the ICEC, so as to promote mutual understanding and create a fa-vourable environment for trade and economic cooperation between the two countries.

indiA is An AttrActive mArket Which could never be

neglected, given its politicAl stAbility, sound economic

groWth, huge mArket potentiAl, Well-developed

service industry, And relAtively loW-cost And Well-

educAted Workforce. indiA offers huge opportunities to

foreign investors


Among these, TVEs represent a remarkable growth trend and exam-ple where one finds that by the mid 1990s the industrial output share of state owned enterprises (SOEs) and collectives dropped, while that of the more dynamic TVEs and local private and foreign enterprises grew rapidly. Studies also suggest that while in 1980 SOEs employed more people than all other forms of enterprises combined, by the mid 1990s TVEs had become the single largest source of employment for industrial workers. TVE employ-ment more than quadrupled between 1980 and 1995, fostering a new form of rural industrial revolution, growth and development in China. It is this segment of non state sector in China (TVEs) that has bought tremendous change in rural industrialization and creation of skill based employment in rural China.

TVEsTVE refers to a (typically indus-

trial) business unit that belongs to all residents of a rural community where it is located. A rural community can be either a township (about 3,500 house-holds) or a village (about 200 house-holds), with each community usually having a number of such enterprises. TVEs are neither SOEs (which are na-tional public firms owned by the cen-tral government), cooperatives (such as labour-managed firms in Yugosla-via and workers cooperatives in Mon-dragon, Spain), nor private enterprises. Thus TVEs are best characterized as community enterprises with a govern-ance structure in which the commu-nity government has control. There is no formal definition of TVE. How-ever, the law of the People’s Republic

Non state Sector in

China

Township and Village Enterprises

(TVEs)

Urban Collectives Private and Individual

enterprises

Joint ventures and wholly

foreign owned enterprises

(FFEs)

of China (PRC) on TVEs defines it as “various types of enterprises set up with investment mainly from rural collective economic organizations or peasants at township and towns (in-cluding villages) and is responsible for supporting agriculture.”

The central government in China had issued nationwide regulations re-garding TVEs that were intended to delineate distributions of control rights and benefits among township and vil-lage enterprises, community residents, and community governments. One of the most comprehensive legal regula-tions to date is the Regulation on Town-ship and Village Collective Enterprises of the People’s Republic of China, issued in 1990. This regulation spells out, among

other things, ownership rights of TVE’s assets, allocation of control rights, and rules concerning distribution of after-tax profits. First, the regulation speci-fies the nature of community owner-ship of the assets of TVEs as follows: “Assets (of a TVE) are owned collec-tively by the whole of rural residents of the township or village who run the enterprise; the ownership rights over the enterprise assets shall be exercised by the rural residents’ meeting (or con-gress) or a collective economic organi-zation that represents the whole of ru-ral residents of the township or village. The ownership rights of the enterprise

assets will not change when the enter-prise is under a managerial contract responsibility system, leasing, or joint operations with enterprises of other types of ownership.”

Second, the regulation specifies the allocation of control rights: “The owner of a TVE, according to the law, determines the direction and for-mats of its business operations, selects managers or determines the method of such selection, determines the specific distribution ratios of after-tax profits between the owner and the enterprise, and has the rights over the enterprise concerning its spinoff, merger, reloca-tion, stop-operation, close-down, ap-plication for bankruptcy, etc. Thus the owner has control rights. While the

owner can delegate such rights to an agency, the agency must represent the whole of the community rather than a particular enterprise. Typically this agency is called the “Economic Com-mission” or the “General Corporation for Development” of the community government.

Third, the regulation also stipulates rules for the distribution of after-tax profits of TVEs: “The part retained by the enterprise should be no less than 60% of total and should be arranged under the enterprise’s autonomous de-cision. The retained after-tax profits for the enterprise should be mainly used


INFOCUS | CHINA| ECONOMY

tralized policy directive for rural indus-trialization. However, in 1999-2000, a National Programme on Rural Indus-trialization (NPRD) was announced. In addition to NPRD, a number of government sponsored programmes like the Khadi and Village Industries, Handloom, sericulture, coir, IRDP, DPAP, PMRY, DRIP, DAAP, Artisan employment guarantee programmes are in vogue. These programmes have different set of objectives, pattern of organization, and system of assistance. The focus of these schemes is either to develop industries or to develop target groups but not to promote rural in-dustrialization. The lack of coordina-tion among various poverty alleviation programmes contributed to the fight against poverty and unemployment in rural areas.

On the other hand, Chinese expe-rience with Rural Industrialization has presented remarkable growth in the non farm sector, its Township and Vil-lage Enterprises (TVEs) being the key driver of growth and rural industri-alization. The TVE lies at the heart of China’s rural development. Impressive rural industrial growth has raised the income of rural people and is therefore a powerful force in poverty reduction in China. It was realized in China, long ago, that the agriculture sector alone was not sufficient for sustainable rural development. Besides a diversified ag-riculture, employment through rural industrialization was a sustainable and alternative solution for the eradication of poverty. The Chinese experience il-lustrates that rural industrialization can play a crucial role in (a) raising the income of rural people; (b) solv-ing their unemployment; (c) checking rural migration; (d) supporting and enhancing the effectiveness of agricul-ture; (e) contributing to social sector development especially health and education; and (f ) transforming the socio-economic environment of the countryside.

The growth and development of TVEs in China have undoubtedly at-tracted great attention from the world in general and developing countries in particular. It has also provided an example of replacing traditional indus-trialization strategy with a new way of

industrialization. The conclusion that can be drawn is that the experience of one country might not apply in anoth-er country. However, the Chinese ex-perience provides important lessons on innovation, geographical location, em-ployment generation, and in the very significant role of local government for developing countries where indus-trialization has not been adequately diversified. In India, however thought on rural industrialization existed since the first Five Year Plan period, but the sector has not seen an encourag-ing trend either in generating employ-ment opportunities or income of rural population.

Comparing India and ChinaTable1 depicts the comparative

trend between India and China in the expansion and development of its non farm sector (rural industries) and employment generation. While China could generate employment and

earning opportunities for 160 million of its population by 2000, India could only provide support to 75-80 million rural jobs.

Table 2 depicts the total share (%) in the GDP of the country from rural non farm sector. While India could only contribute 15-18%, China con-tributed close to 25% of share in GDP by the year 2000.

The Chinese experiment In China, one of the most striking

developments in the past three decades has been the growth of its non-state (private) sector. The non-state sec-tor in China consists of four types of business entities-i. Township and Village Enterprises

(TVEs)ii. Urban Collectivesiii. Private and Individual enterprisesiv. Joint ventures and wholly foreign

owned enterprises (also called foreign funded enterprises FFEs)

rural nonfarm Employment

ChinaIndia

160140120100

80604020

01978 1983 1994 2000

mill

ions

rural nonfarm share

ChinaIndia

30

25

20

15

10

5

01978 1983 1994 2000

perc

ent

Table 2

Table 1


the managers of TVEs. They in ef-fect possess all the key components of property rights: control of residual income; the right to dispose of assets; the right to appoint and dismiss man-agers; and assume direct control if necessary. Local residents possess no ‘right of membership’ in the TVEs, nor do TVE workers possess any rights to participate in TVE management. For Township and village officials’ com-pensation is determined by a ‘mana-gerial contract’ with explicit success indicators covering economic and so-cial objectives. TVE output and sales value, profits, and taxes enter into the compensation schedule, as well as fam-ily planning, maintenance of public order and education. However there are strong pressures to stress profits since the township or village as a unit is subject to a fairly hard budget con-straint. The successful township official maximizes his own career prospects by producing economic growth during his

term as a community leader, and this is likely to crucially depend upon maxi-mizing net revenue from the TVEs.

Managers of TVEs not performing in a satisfactory fashion in accordance with such criteria can be dismissed. The role of China’s TVEs is unique in the context of an economy in transition. In no other economy has public ownership played such a dynamic role. However the collective ownership form does not have a precise definition in the country, leading to uncertainty about ultimate ownership rights.

However, although predominantly owned by local government, an in-creasing number of TVEs are now pri-vately owned. Many are now involved in joint ventures with SOEs and for-eign companies and a high propor-tion incorporate a complex network of affiliations and alliances involving sci-entists, engineers, academics and busi-ness entrepreneurs. This has enabled them to gain access to technology

and become competitive. It is these evolving alliances that will be essential to the sustainability of the TVE form of enterprise.

Performance and contribution TVEs allowed rural communities

to translate control over assets and resources into income, despite the absence of asset markets. The growth of product markets provided rural communities with the opportunity to realize value from locally controlled resources.

TVEs provided a way to convert assets into income without solving the difficult problem of privatization. The Chinese government then, and recon-firmed in 1993, was unwilling on ideo-logical grounds to permit mass privati-zation. The administrative difficulties involved with privatization would have been immense due to the sheer size of China and the lack of administrative apparatus. Hence the TVEs circum-vented this difficulty while contribut-ing importantly to competition and the opening up of markets.

With well functioning markets ur-ban firms would have purchased land and hired suburban labour. In the ab-sence of such institutions TVEs repre-sented an alternative solution. Urban SOEs could sub-contract to TVEs providing in the process technology and equipment, or rural governments could take the initiative. Many TVEs grew up as complements to state run industry. The majority of TVE growth has been concentrated in advanced periphery-urban regions. For exam-ple in 1988 in the three provinces of Jiangsu, Zhejiang and Shandong, pro-ducing half of all TVE output, linkages with urban firms were central to TVE growth.

Finally, TVEs facilitated access to capital on the part of startup firms. In China local government ownership played a key role in the process of fi-nancial intermediation. Local govern-ments could better assess the risks of start up businesses under their control, and were diversified and able to act as guarantors of loans to individual TVEs. By underwriting a portion of the risk of entry, local governments en-abled start up firms to enter production

TVE Leaders, appointed by country

administrators: key components of

property rights: control of residual income;

the right to dispose of assets; the right to

appoint and dismiss managers;

TVE Managers designated by the

Leaders: No right of ownership or

residual income, appointed through

managerial contract

Local residents of the area: No right of

membership

Workers: No right to participate in the

TVE management



for the increase of the funds for pro-duction development in technological transformation and expansion of re-production, and also for the appropri-ate increase of welfare funds and bonus funds.” And “the part remitted to the owner of the enterprise should be used mainly for the support of construction of agricultural infrastructures, agricul-ture technology services, rural public welfare, renewal and transformation of enterprises, or development of new en-terprises”. As is evident, this regulation restricts the use of revenue by com-munity residents and government to essentially two purposes: reinvestment and local public good.

TVE legislation: A vehicle of social welfare

The law further provides under Articles 2 and 3 that supporting agriculture and social welfare is the task and obligations of TVEs. Article 17 directs that a certain proportion of after-tax profits prescribed by the peoples’ government in provinces, autonomous regions and municipalities directly under the central government will be invested in agriculture and rural social undertakings. TVEs contributed part of their profit every year to agriculture in the form of a grant. Between 1978 and 2000 this grant exceeded 140 billion Yuan. The agriculture fund laid aside by TVEs in the past decade has more than doubled, averaging an annual increase of 7.9 percent. Moreover, there is evidence that the development of TVEs had much to do with the increase in grain yield. Agriculture benefited from subsidies provided by TVEs; the per hectare grain yield increased in those areas where TVEs were more developed. On the other hand, the per hectare grain yield dropped in areas where TVEs were underdeveloped.

Evolution, management and governance

EvolutionTVEs have their foundation in the

‘agricultural collectives’ back in 1958 that led the foundation of rural indus-tries in China. At that time these were known as ‘commune and brigade run

enterprises. By 1970s, the commune and brigade enterprises enjoyed greater autonomy and incentives for produc-tion and developed new businesses. In addition, the Chinese government implemented various policies encour-aging their development such as loans on favorable terms, tax reduction or ex-emption, and technical assistance. All these measures laid the foundations for the further development of rural in-dustries. In 1983, the responsibility of the Commune and Brigade enterprises was transferred to local government’s industrial department. This shift in the administration contributed start up funds, appointed managers, and led to strategic decision making. In 1984 commune and brigade run enterprises, of which there were approximately 1.4 million, were officially renamed as vil-lage and township enterprises (TVEs), but it was also decided that the label would apply to individual rural enter-prises and those based on farm coop-eratives. This meant that the number of TVEs suddenly increased fivefold to about 6.1 million in 1984.

Ownership StructureWith the transfer of commune

(township) and brigade (village) enter-prises to local government’s industrial department and their official designa-tion as TVEs, and consequent appli-cation of this definition to individual businesses in rural areas, four types of ownership structure evolved in rural areas. These were:

i tVEs, as defined by a government document in 1984 and prC law on tVEs in 1996

owned collectively by townships (formerly communes)) and villages (formerly brigades)

ii County and township run enterprises;

owned collectively by townships (formerly communes) and villages (formerly brigades)

iii village run enterprises; enterprises owned by individuals

iv Farmers' cooperatives; and individual or family run businesses

owned by individual farmers who pool their resources together for production

Many of the first two types that is county, township or village run enterprises, followed on from the commune and brigade enterprises. The additional farmers’ TVEs were mostly very small. Because of the family quota contract system, farmers

produced an agricultural surplus and found themselves with some free time. They were encouraged and supported by the government to use this time to develop certain new businesses. Unlike SOEs, TVEs’ finance, supplies, sales, production, and personnel were not subject to state planning, however they became intimately linked with local government.

Financial and competitive advantage TVEs operate outside the state

plan and largely without funds from state banks. Therefore, they are subject to quite rigorous market competition and hard budget constraints. China’s experience demonstrates that establishment of small townships to link the countryside with urban areas is a successful strategic policy for development.

This will facilitate the transporta-tion of goods between rural and urban areas, and rising income and productiv-ity in rural areas. As for urban enter-prises, this link would open up a big-ger market and help in diversification or restructuring. Rural enterprises can also compete in cities with their prod-ucts having the advantage of relatively low labour costs. They alsohelp absorb surplus labour locally, resulting in less rural-to-urban migration. Urban enter-prises will also provide more employ-ment opportunities since they would have a larger market. In addition, the linkage will benefit the rural industries via flow of technology and information.

Link between TVEs and local government

TVEs are essentially run by des-ignated township and village leaders. Township and village leaders are typi-cally appointed from above by county administrators, who in turn designate


markets, export oriented TVEs began to take off. They succeeded because of their operating flexibility and cus-tomer oriented approach. The position of TVEs in China’s foreign trade be-came increasingly important thereafter. From 1987 through 1992 TVEs’ ex-ports and imports grew by an average of 60 per cent per year. Their exports of US$20 billion in 1992 accounted for a quarter of China’s total exports (US$85 billion). By the mid 1990s about 80,000 TVEs were engaged in export oriented production, accounting for over 40 per cent of China’s total exports and over 30 per cent of China’s GDP.

Reasons for success

Small, flexible and market driven TVEs are small in size as com-

pared to other state owned enterprises (SoEs). Since TVEs are not self sus-taining, they have to rely on outside market for supply of material, they are market driven. Many TVEs positioned their businesses in areas where there were severe shortages, or where SOEs were weak. Most were small and auton-omous compared with SOEs and thus had flexibility to respond to market changes quickly. Their management was also more market oriented.

Appropriate production technologyTTVEs, in the very initial stages

had cheap labour and expensive capital and natural resources, causing them to choose appropriate production tech-nologies. As the reform process pro-gressed prices were gradually liberal-ized, reflecting more relative scarcity values that made TVEs choose most appropriate technologies.

Distortions, market opportunities and rural saving

TVEs are highly profitable because of the distortions carried over from the formerly planned system. At the begin-ning of the reform process in 1978, the average rate of profit on TVE capital was 32 per cent (capital being defined as depreciated fixed capital plus all in-ventories). Most new TVEs were in manufacturing, where state price con-trols kept profitability high so that the state could obtain high revenues from

the SOEs. In addition, due to past biases in the planned system against light industry and services, the TVEs could enter market niches for which the SOEs had either failed to produce or failed to innovate and improve qual-ity control. The resulting high profits achieved by TVEs attracted further investment and rapid growth. This was further strengthened by high rural sav-ing and demand following the agricul-tural reforms of 1978, in conjunction with the limited scope for emigration from rural areas.

Low taxationTaxes on TVEs are low, requiring

them to pay only 6 per cent of profits as tax in 1980, climbing to 20 per cent after 1985. Such low tax rates in China were primarily due to a policy driven desire to foster rural industrialization.

Decision makingInformation channels between

TVE managers and local government authorities tended to be both shorter and simpler compared to that for the SOEs, encouraging greater efficiency. Further, this greater flexibility and au-tonomy in management has meant that inter-firm alliances and technological alliances with universities and research institutes have produced a ‘networked’ approach to innovation and industrial production.

Decentralization plus financial discipline

In 1984 decentralization of fiscal power took place in China which allowed lower levels of government to retain locally generated revenues, creating a strong incentive for development of local industry. A non performing TVE in this system would become a drain on limited resources, therefore local government officials and TVE managers had to focus more on financial objectives, profit plus local tax revenues, since local governments lacked the borrowing capacity of higher levels of government. Hence the TVE enterprises under their jurisdiction faced harder budget constraints than SOEs, and were more likely to fall into bankruptcy if persistent losses were made. This focused upon the need for

TVE EmPloymEnT morE ThAn qUAdrUPlEd

bETwEEn 1980 And 1995, FosTErIng A nEw Form

oF rUrAl IndUsTrIAl rEVolUTIon, growTh And

dEVEloPmEnT In ChInA.



with a larger size, starting with some mechanization, and exploiting econo-mies of scale. With local governments playing an important role in the flow of capital to rural enterprises, such firms were able to take advantage of China’s relatively abundant household savings. In return, the profitable opportunities and reasonable risk levels in the TVE sector kept real returns high and con-tributed to the maintenance of high savings rates.

Contribution to the EconomyVarious factors including adminis-

trative changes coupled with entrepre-neurial drive resulted in the remark-able growth for the TVE contributing significantly to the rapid growth of the Chinese economy during this period.

a) Exponential Output in terms of growth

The output value of TVEs increased from 49.3 to 6,891.5 billion Yuan over the period from 1978 to 1995. In line with this rapid expansion in output, TVE numbers also increased rapidly from over 1.5 million in 1978 to 22 million by 1995. In 1995 the GDP of the TVEs accounted for 25.5 per cent

of the national total, and in 1994 they contributed some 30 per cent of gross industrial output. By the mid 1990s TVEs were contributing over 30 per cent of industrial output. Today TVEs contribute almost equivalent to SoEs and FFEs together and it is claimed that 60 percent of the Chinese production and innovation is attributed to TVEs.

b) EmploymentIn terms of employment creation

the contribution of TVEs has been spectacular. TVEs employed some 28.3 million workers in 1978 rising to 128.6 million by 1995 and to 135 mil-

lion by 1996. Currently, TVEs are the largest employers of industrial labour.

c) ExportsDuring 1985 exports from TVEs in-

creased rapidly; in 1986 TVEs’ exports of US$5 billion accounted for one-sixth of China’s total exports. In the same year about 20,000 TVEs specialized in production for export, 2,400 TVEs were involved in equity and coopera-tive joint-ventures, and about 10,000 were engaged in compensation trade and production according to clients re-quirements or samples. In 1987 China’s new policy of accelerating the econom-ic development of coastal regions gave 14 cities the status of coastal open cities, with extra freedoms and tax breaks for foreign trade and investment and gave a further impetus to the development of TVEs. From the second half of 1988 to 1991 both central and local govern-ments put great emphasis on the devel-opment of export oriented businesses to acquire capital, technology, and raw materials from western companies and international markets. Although dur-ing the same period the central gov-ernment was tightening money supply and controlling investment in domestic

AboUT 60 PEr CEnT oF InVEnTIons And

InnoVATIons dEVEloPEd by ChInA’s sCIEnTIFIC And TEChnologICAl InsTITUTIons hAVE

bEEn PUT InTo ProdUCTIon by TVEs


Shawahiq Siddiqui is an Advocate in the Supreme Court, Delhi

direct investment (FDI). Joint ven-tures between TVEs and foreign com-panies have grown rapidly in the last few years.

Lower cost structureTVEs have lower cost structures

than SOEs, and they pay less tax. Be-cause their managers historically had to rely on retained earnings and loans instead of government grants, they constantly pressured local authorities to give them tax breaks. Wages in rural areas are also significantly lower than in cities where most SOEs are found.

They also do not have thousands of retirees on their books. TVEs also do not have to offer welfare benefits like healthcare and social security insur-ance. Workers at TVEs work long hours, and the quality of their produc-tion has improved towards the SOE level. Where simple technology is re-quired this represents a big advantage, particularly in light industries like tex-tiles and electrical appliances.Lessons for India

The Chinese experience with rural development has endorsed the fact that rural industrialization is an essential requirement for the development of rural areas. While the rural non-farm sector has played a significant role in

the economic transition of both India and China over the past two decades, compared to China, rural non-farm employment has increased only mod-erately in India.

In India, the small-scale sector in-cluding traditional village enterprises contributes nearly two thirds of organ-ized sector employment. However the growth in output and employment in the Indian rural industrial sector has been stagnant and comparatively low. The difference in the patterns and de-velopment of rural industrialization are the result of the institutional differ-

ences between the two countries, espe-cially in the structure and functioning of their local governments, credit insti-tutions, government support and in-frastructural (physical and social) sup-port. Differences in the performance of rural enterprises in China and India are obvious. A thorough comparative study of these differences might be examined mainly to understand why these factors have generated such a variation in the performance of rural enterprises in India and China.

The Indian government’s emphasis on small-scale enterprises is quite dif-ferent from the Chinese emphasis on rural location and employment for lo-cal residents. For small-scale enterpris-

es in India, geographical location does not really matter, while reorganization of rural settlement mostly in favour of small rural towns received a high priority in China.

The Chinese experience also sug-gests that this was a “bottom-up” ap-proach, and public policy provided sufficient scope for peoples’ and local government initiatives. Therefore local government played an important role in the establishment and development of TVEs in China. By law, Panchayats in India are responsible for the prepa-ration and implementation of plans

for economic development. However, Central government policies and in-terventions to promote rural indus-trialization have largely ignored the role of Panchayats. This could be one of the reasons for the relatively low level of rural industrial development in India.



TVEs to be efficient, competitive and profitable in a period of a rapid opening up of markets. Meanwhile, managers of SOEs, having responsibility for housing and other social services as well as industrial operations, faced a more complex set of objectives and state obligations.

Kinship and implicit property rightsThe incentives facing TVEs is

similar to that of private firms in that residual profits are dispersed among a small group, consisting of a stable local community and in particular its

local government and TVE manager. Studies have shown the importance of TVE profits in local government budgets and the close links between local economic performance and the status, income and career prospects of local officials.

Links with state enterprise The state sector also represents an

important component in the successful development of TVEs and other non state firms. TVEs and collectives in general rely on the state sector as a source of capital, material, equipment, specialized personnel, technology, sub-contracting arrangements and sales revenue. Local government officials

attempting to develop industry in poor localities are encouraged to pursue joint operations with scientific research organizations or large and medium scale enterprises.

Market entry and competitionThe continual reduction of entry

barriers associated with China’s indus-trial reform created a domestic product cycle in which new products, materials and processes introduced by innovative state firms were adopted by TVEs and other non state enterprises. They could then use their cost advantages to erode

state sector profits and force state in-dustry toward fresh innovations. In ad-dition there has been intense competi-tion for investment, including that for foreign investment, among communi-ties with TVEs. The ability to attract such investment is strongly influenced by the reputation of the TVEs as well as local economic performance. TVEs themselves are being increasingly sub-ject to competition from the even more dynamic but smaller private and foreign invested sectors.

Dedication to human resources, innovation and quality

Many TVEs put special emphasis on human resources, innovation and

product quality. With their autono-mous and flexible systems it is their usu-al practice to recruit highly competent engineers and technicians from SOEs, to pay them attractive salaries and ac-tively pursue innovation. At the begin-ning of the 1980s they mainly target-ted and sought retired technicians and engineers from urban areas. Since the mid 1980s their attention has shifted to scientists and technicians working in research institutes and SOEs, who are not content with their working conditions. Currently they are compet-ing with large and medium sized SOEs

for talented staff and trying to attract foreign experts. TVEs maintain close links with research institutes. About 60 per cent of inventions and innova-tions developed by China’s scientific and technological institutions have been put into production by TVEs.

International orientationMany TVEs, particularly those in

coastal provinces, are actively pursu-ing co-operation and joint ventures with SOEs, with other TVEs, and with foreign companies. By develop-ing joint ventures and sub contracts with foreign firms, TVEs have gradu-ally upgraded their technology and many have become involved in foreign


Wei Houkai and Wu Xiaoxia

A well-crafted regional policy can further the Chinese central government’s goals of balanced

regional growth, optimized spatial de-velopment, and efficient resource-allo-cation. Balanced regional development will be an overarching goal during the 12th Five Year plan. Therefore, China should continue to improve its region-al policy to coordinate development between well-defined priority devel-opment zones; intensify interaction between eastern, central and western regions, strengthen public service, and equalize living standards.

Evaluation of China’s Current Regional Policy

To promote balanced regional de-velopment, China has implemented a string of policies including the west-ern development programme, revi-talization of old industrial bases in the northeast, a strategy to accelerate the rise of the central region, and intensi-fied transfer payments to select areas including former revolutionary bases, regions dominated by ethnic minori-ties, border areas, and impoverished regions. These policies have yielded positive results. Investment in the cen-tral, western, and northeast regions has grown rapidly; regional economic development has been relatively bal-anced; and poverty alleviation in the rural areas has been progressing well.

Notably, the disparity between per capita gross regional product (GRP) in the east and west of the country has been shrinking since 2003. Per-capita GRP in the western region was 63% lower than that of the east in 2003, but by 2009 the difference had fallen to 55.2%. The gap between average urban and rural household incomes has been shrinking since 2006.

However, China’s regional policy has been hampered by weak institu-tions and a lack of coordination be-tween departments. There has been ex-cessive emphasis on efficiency, with the effect of clustering the majority of the country’s special economic zones in the coastal region. Strategies to promote the prosperity of the northeast and other archaic industrial bases were too

general to be effective. There were no effective efforts to coordinate relevant agencies including the State Council Leading Group Office of Poverty Al-leviation and Development, and the National Development and Reform Commission. Regional development was financed mainly through public expenditure and there was insufficient private investment.

Preferential policies enacted after 2006 have also disrupted China’s re-gional policymaking. In addition to the “Western Development Program,” “Northeast Revival Strategy,” and the “Rise of Central China Strategy,” China launched preferential policies

targeting the Yangtze River Delta, the Cross-Strait Economic Zone, and the Tianjin-Binhai New Area. While these favourable policies have increased growth, they have had multiple side ef-fects. Because these policies were not selected by rigorous and uniform cri-teria but rather due to administrative wishes and pressures from local gov-ernment, they seriously undermined the impartiality and the rationality of China’s regional policymaking system. Local governments may continue to be tempted to lobby or even bribe cen-tral government officials to formulate regional policies that favour them. By targeting both poor and wealthy areas, these policies also blurred the focus of regional policymaking, which is sup-posed to address regional disparities by focusing on less-developed regions.

Lastly, these policies cast doubt on the fairness of national policymaking by arbitrarily favouring certain regions over others.

Rationale for China’s New Regional Policy

Guided by the Scientific Develop-ment Perspective, China has re-focused its regional policy on achieving coordi-nated regional development as meas-ured along three dimensions. First, development should be comprehen-sive with a balance between urban and rural growth, coordinated social and economic development, and harmony between human society and nature. Second, development should be sus-tainable, incorporating resource-saving and environmentally-friendly technol-ogies, strong institutions, and effective policies. Third, development should be guided by mechanisms for regional cooperation, central government-funded support, and eco-compensa-tion, all of which aim at promoting social stability, population well-being, employment, etc.

China’s new regional policy should adhere to three principles. First, the main rationale of regional policy should be more in fairness than in effi-ciency. The market mechanism usually widens rather than narrows regional disparities. China’s regional policy should therefore prioritize fairness, and focus on supporting those disad-vantaged regions that will benefit most from central government intervention.

Second, China’s regional policy should be tailored to the areas targeted. For a long time, the country’s regional policy has been too general to respond to the diverse needs of its many regions, as witnessed in aspects of the Western Development Program and Northeast Revival Strategy, which suffered from a one-size-fits-all approach.

Third, regional policy should be implemented with greater precision to those areas facing problems. Inter-nationally, regional policies have been used to address areas that are under-developed, experiencing depressed growth, or experiencing excessive growth. Given China’s transition from a planned- to a market-economy and significant urbanization, industrializa-

LocaL governments may continue to be tempted to

Lobby or even bribe centraL government officiaLs to

formuLate regionaL poLicies that favour them. by targeting

both poor and weaLthy areas, these poLicies aLso

bLurred the focus of regionaL poLicymaking, which is

supposed to address regionaL disparities by focusing on Less-

deveLoped regions.


INFOCUS | CHINA | POLICYINFOCUS | CHINA-INDIA IT SECTOR | REPORT

Needs to be fair, to fare wellIn pursuit of more balanced regional development, China should base its regional policy during the period of the 12th Five-Year Plan on the principle of fairness and tailor it to the specific characteristics of needy areas and development priority zones. The country’s master plan of developing the western region, revitalizing the northeast, supporting the rise of central China, and upgrading the east should continue.

China’s regional poliCy

DEVELOPMENT rEViTaLizE

SUPPOrT UPGRADE


been applied nationwide to 44 cities. Policies implemented to develop the west have also been carried out in 243 localities in the central region. Second, regionalization and zoning are differ-ent. The central government’s involve-ment in regionalization and zoning is necessary but the central government should guard itself against bias in its regional policy-making. Third, re-gional aid policies should be directed to needy areas as a whole, rather than individual provinces or cities (with Tibet and Xinjiang as the only excep-tions). In this way, China could build a uniform and differentiated system of state regional aid policy.

Development of Priority ZonesA development priority zone is

a spatial unit defined by its develop-ment priorities according to a universal standard. The intention of demarcating development priority zones is to ensure orderly spatial development, optimum resource allocation, and harmony be-tween human beings and nature.

As discussed in the National De-

velopment Priority Zones Demarcation issued in June 2011, China’s territory may be classified according to differ-ent standards: by priority, administra-tive level, or by function. Each type plays an important but varied role in China’s socioeconomic development. For example, urbanization zones are the site of human habitation and economic activity, whereas ecologi-cal zones contribute to environment protection and restoration.

The formulation of development priority zones depends on supporting laws, regulations, institutions, a system for evaluation, and policies tailored to the needs of each type of development priority zone.

(1) Fiscal policies. China should accelerate the establishment of a pub-lic fiscal institution with the objec-tive of equalizing the public services provided in different development priority zones. This demands: the es-tablishment of national standards for public services and increased transfer payment to major ecological zones for public service provision; a comprehen-sive review of all environment transfer payment schemes and establishment of the schemes for ecological restoration and eco-migration; establishment of a horizontal payment transfer mecha-nism and increased transfers to equal-ize payments for the major ecological zones; and establishment of a long-term mechanism for better compensat-ing the major ecological zones.

(2) Investment policies. Field-ori-ented investment policies should be integrated with investment policies for development priority zone. Govern-ment-funded investment should be di-rected to public service provision and environmental protection in the major

china’s new regionaL poLicy shouLd adhere to three

principLes. first, the main rationaLe of regionaL poLicy

shouLd be more in fairness than in efficiency.


INFOCUS | CHINA | POLICY

tion, and globalization, the country contains all of these areas and more. The state should help them as long as the problems are truly grave and local government intervention is insufficient to resolve them.

China’s Regional Policy FrameworkTo promote coordinated regional

development, China should adopt a re-gional policy framework that classifies the country into “Four Regions” and “Two Zones.” The Four Regions re-fers to the division of the country into western, northeastern, central, and eastern regions, a categorization with two advantages: it is comprehensive, convenient for macroeconomic plan-ning and master regional policy formu-lation, and it maintains the continuity of national strategies and policies (as the 12th Five-Year plan calls for contin-ued implementation of the “Western Development Program,” “Northeast Revival Strategy,” the “Rise of Central China Strategy,” and the “Upgrade of the East”). However, variation within the eastern and western regions are so

large that policies for them had bet-ter be broken down into five smaller economic regions: the southeast area including Guangdong, Fujian, Hain-an, Hong Kong, Macao, and Taiwan; the Yangtze River Delta area covering Shanghai, Zhejiang, and Jiangsu; the Bohai Rim area comprised of Beijing, Tianjin, Hebei and Shandong; the southwest area comprised of Guangxi, Chongqing, Sichuan, Guizhou, Yun-nan, and Tibet; and the northwest area consisting of Inner Mongolia, Shanxi, Gansu, Ningxia, Qinghai and Xinjiang.

The Two Zones refer to the classifi-cation of the country into development priority zones and problems zones. Depending on their resource-bearing capacity, development-density, and development- potential, development priority zones fall into four categories: optimized development zones, key development zones, restricted develop-ment zones, and prohibited develop-ment zones. Each type of zone should be assigned specific functions and development goals to ensure orderly

and reasonable spatial development. Regional aid policy should be adminis-tered in needy areas with consideration for these characteristics, rather than as a single blanket policy, thus increas-ing its effectiveness. In summary, the emphasis in development priority zones is human prosperity, whereas in needy areas the emphasis is regional prosperity. In a country with wide regional disparities, both are discrimi-natively important.

Within this framework, China’s current regional policy formulation and implementation should adhere to the following points. First, the four regions are the basis for overall re-gional policy planning, but the two zones are the units for regional policy implementation. In fact, the classifica-tion of needy areas and development priority zones has increasingly guided China’s regional policy. For example, policies to revitalize industries in the northeast have been extended to 26 in-dustrial cities in central China. A pilot programme to assist cities previously dependent on resource-extraction has


standards and will intensify its efforts to alleviate poverty. It should continue to pursue a strategy of development-oriented poverty reduction, with additional poverty-reduction funds earmarked for infrastructure construc-tion and skills-training. More projects should be launched to create jobs instead of issuing relief subsidies. Assistance for eco- migrants should also be increased.

(2) Ageing industrial areas in rela-tive decline. Old industrial bases are lagging because of their industrial de-cline and lack of competiveness, a result of unsolved historic problems, social tension, and environment constraints. Various policy tools should be applied to revitalize the old industrial bases. Transfer payment should be increased, and a favourable tax system should be adopted. The laid-off and unemployed should be assisted to find jobs. The so-cial security system should be strength-ened. Industries should be restructured and key projects should be supported. Zoning should be adjusted and new zones developed.

(3) Areas dependent on resource extraction or on monolithic indus-tries. Since 2008, the State Council has identified 44 areas that face challenges due to exhausted resources, unemploy-ment, monolithic economies, dispro-portionately resource-based industries, short industrial chains, or weak sub-stitute industries. The central govern-

ment should increase its financial sup-port to these areas and establish a fund to aid them in their transition to new industries. Substitute industries should be developed and enhanced. The social security system should be improved. Environmental protection and restora-tion should be carried out for sustain-able development.

(4) Grain-producing areas under severe financial burdens. The main centres for China’s food supply have contributed enormously to the coun-try’s food security, yet because of in-stitutions and policies they have expe-rienced slow income growth and high rates of poverty, underdevelopment of their food processing industries, insuffi-cient local revenues, and so on. China’s central government should offer more financial support to these areas and re-duce their tax burden, construct and upgrade infrastructure, and better sup-port the food-processing industry so as to increase agricultural output, farmers’ income, and local fiscal revenues.

(5) Frontier border areas with weak governance. Ethnic minorities and poor population are concentrated in border areas where conflicts frequently occur and social security and infra-structure are inadequate. The central government should launch as soon as possible a development plan for bor-der areas, increase investment in them, improve infrastructure, and carry out more projects in order to facilitate

their self-development and socio-eco-nomic development.

(6) Overly-extended metropolitan areas. Characterized by high popula-tion density and chaotic urban expan-sion, China’s cities are plagued by traf-fic jams, insufficient housing stock, and degraded environments. If urban areas continue to expand, their prosperous downtown areas may degenerate into troubled zones.

Population and industries should be encouraged to shift away from downtown areas to relieve pressure; new towns should be developed; public services—particularly public transpor-tation, road infrastructure, and parking facilities—should be provided; and ur-ban planning should be improved.

(7) Areas vulnerable to natural disasters. Early warning systems should be improved in order to provide more accurate observations and forecasts. When disasters occur, increased fi-nancial support, human resources, equipment, information, and tel-ecommunication facilities should be delivered in time. During the rebuild-ing process, the central government should invest more to build infrastruc-ture, develop industries, and assist in outward migration.

Wei Houkai and Wu Xiaoxia are from the Institute for Urban and Environmental Studies, Chinese Academy

of Social Sciences, Beijing; College of Urban Economics and Public Administration, Capital University

of Economics and Business, Beijing.


INFOCUS | CHINA | POLICY

ecological and agricultural production zones, and to infrastructure construc-tion in key development zones. Gov-ernment-funded investment should accord with the function and goals of the development priority zones.

(3) Industry policies. The existing industrial restructuring directory should be revised to satisfy the differing needs of the development priority zones. Fixed asset investment tax should be levied at different rates according to the development priority zone, and varying standards for land use, energy consumption, water consumption, waste discharge, and carbon emission should be applied to projects in different priority zones. Optimized development zones should be upgraded in order to move up the value chain and promote indigenous innovation. Key development zones should receive investment in order to enhance their capacity for supporting industry, their industrial carrying capacity, and their competitiveness. Restricted development zones should receive investment for developing ecological and local industries.

(4) Population policies. The intent of population policies is to manage population flows and residence regis-tration. Optimized development zones should encourage inhabitants with stable jobs and permanent residences to obtain residential registration. Key development zones should improve

their population carrying capacity and encourage migrant labourers to obtain residential registration. Major ecologi-cal zones should encourage voluntary outward migration. At the same time, China should reform its household registration system as well as the house-hold registration-based education, health care, social security systems.

(5) Land policies. Optimized development zones should control new land-use. Key development zones should increase land available for construction. Major ecological zones should tightly control land use and prohibit land-use changes. To maintain fixed acreages of cultivated land, land requisition by urban areas must be offset by increased cultivated land in rural areas.

(6) Environmental policies. First, each type of development zone should satisfy respective natural area indica-tors. Optimized development zones should comprise no less than 30% nat-ural areas; key development zones no less than 40%; restricted development zones no less than 80%; and prohibited development zones no less than 95%. Second, development priority zones are subject to specific requirements for pollution reduction, industrial entry, and waste discharge. Optimized devel-opment zones should strictly control pollution and promote environmental protection. Key development zones should increase production while re-

ducing pollution intensity. Restricted development zones should implement as early as possible the deposit regime for post-mining ecological and envi-ronmental restoration or even charge higher deposits for mine environmen-tal protection.

Regional Aid PolicyDuring the 12th Five Year plan,

China should readjust its regional aid policy to direct funds to each type of needy area based on their characteris-tics, promoting their self-development and sustaining their growth.

Regional aid policy includes iden-tification of needy areas, establishment of the objectives of regional aid, selec-tion of policy tools, institutional sup-port, and policy evaluation. To deliver assistance that meets the varied needs of different regions, needy areas should first be classified according to the na-ture and gravity of their problems. Currently, needy areas in China are di-vided into underdeveloped areas with lagging economic development, ageing industrial areas in relative decline, areas dependent on resource extraction or monolithic industries, grain-produc-ing areas under severe financial bur-dens, frontier border areas with weak governance, overly-extended metro-politan, and areas vulnerable to natural disaster.

(1) Underdeveloped areas with lag-ging economic development. China has increased its poverty reduction


look at, particularly how India is trying to get the private sector more actively involved in the skill development exer-cise by helping it make a business out of skills and also giving it a voice in de-vising the curriculum framework and occupational standards for different job roles across sectors.

Despite the Indian government’s active interventions in the skills space over the last four years starting with the fixing of a target to skill 500 mil-lion people by 2022 through state-run and private delivery systems, the put-ting in place of an institutional framework to achieve this goal, the announcement of a Nation-al Policy on Skill Development, and appointment of a Skills Adviser to the Prime Minister, there is no getting away from the fact that the skills culture has not yet taken deep roots in India. It is here that India could explore how it could take a few leaves out of China’s book on how to make the skills cause achieve a more universal buy-in among stakeholders.

The success that China has had with converting many of its high schools into skills training centers, promoting internships for the vocationally-trained, and the use of simulators for training could hold a lot of lessons for India as it tries to leverage its demographic divi-dend and seeks to emerge as the Skills Capital of the world a decade from now. The fund-ing framework that China has put in place to ensure that more people could enroll at skilling institutions could serve as an excellent example for India as it endeavours to evolve a mecha-nism to ease entry, particularly of those at the bottom of the pyramid, at VET centers.

The formation of a National Skill Development Corpora-tion (NSDC) as a Public Private Partnership to galvanize private sector involvement in skills training ventures – an experi-ment unique to India – could hold great interest for China,

Despite the inDian government’s active interventions in the

skills space over the last four years starting with the fixing of a

target to skill 500 million people by 2022 through state-run anD

private Delivery systems, the putting in place of an institutional

framework to achieve this goal, the announcement of a national

policy on skill Development, anD appointment of a skills aDviser

to the prime minister, there is no

getting away from the fact that the

skills culture has not yet taken

Deep roots in inDia

given the successes achieved by the NSDC in the limited time that it has been in operation of making the cor-porate sector and NGOs look at skills from the perspective of sustainability and as a for-profit/surplus generating venture with the potential of changing the lives of millions of people.

Although majority-owned by the private sector (Government is a mi-nority shareholder with 49% equity in the Corporation), the money for meeting the NSDC’s funding require-ments is made available to it through a trust called the National Skill Devel-


INFOCUS | INDIA-CHINA | SKILLS

As nations whose futures are inextricably linked with each other, the time has possibly come to look at collaboration

opportunities between India and China on skill development.

Dilip Chenoy

For countries like India and China which face the common challenge of ensuring that their large, young

workforce are equipped to meet the changing needs of industry, the level of engagement between the world’s most populous nations on the skill develop-ment front has hardly been anything to write home about.

Thus, even as bilateral trade and investment have witnessed an upswing in the past decade, skill-related link-ages have never received the attention that is due, with little or no cognizance taken of the fact that many of the is-sues surrounding vocational education and training (VET) are the same in both countries.

Need to collaborate oN skill developmeNt

Sharp Skills

Whether in terms of making skill-ing aspirational, and enrollment at VET centres voluntary, to making the training more relevant for industry/the employer, or getting businesses to value skills more by paying better wages to aligning the vocational educa-tion stream with the formal one, and improving financial accessibility, India and China have their work cut out on many of these aspects.

India has much to learn from China on how it has gone about the task of increasing vocational training capacity and improving financial accessibility to skilling programmes, besides how technology could be effectively used in technical education. Similarly, there are a lot of things which China itself could


traiNiNG NeedaNalYsis

cUrricUlUmdevelopmeNt

rolloUt oFtraiNiNG

assessmeNt aNd

certiFicatioN

l Creation of Occupational Standards

l Towards National Vocational Qualification Framework

l Labour Market Information Systeml Skill Development Plan

l Accreditation of Training Institutes

l Academics of Excellencel Guidelines and Participate in

Assessments and Certification of Trainers and Trainees

tem for skill development. Through the incubation of industry-led Sector Skill Councils (SSCs) and development of Labour Market Information Systems, the NSDC has put in place the bedrock within which all skills training is to be conducted.

SSCs are employer-driven national partnership organizations that bring together all stakeholders to achieve the common goal of creating a skilled work-force for the segments they represent. Funding for the establishment of SSCs in India is initially done by the NSDC. As it grows, each SSC can become a self-funded, for-profit organization.

Roles and Responsibilities NSDC has been actively engaged

in fast-tracking the establishment of SSCs and integrating the courses being run by its training partners with the re-spective SSCs to facilitate SSC-driven accreditation, assessments, certifica-tion and employment. Till August 2012, the NSDC Board has approved funding for 14 SSCs pertaining to ag-riculture, auto, BFSI, electronics, food processing, gems & jewellery, health-care, IT, media and entertainment, private security, retail, telecom, leather and rubber sectors.

Many of the SSCs are now at ad-vanced stages of rolling out occupa-tional standards for the top job roles in their respective domains. Four of the NSDC-funded SSCs – auto, IT/ITeS, retail and private security – are now involved with the National Vocational

Education Qualification Framework (NVEQF) pilot project of the Ministry of Human Resource Development in 40 schools in Haryana, which is to be replicated in more states at a later date.

The NVEQF is a nationally inte-grated education and competency-based skill framework that would provide for multiple pathways both within vocational education and be-tween general and vocational educa-tion to link one level of learning to a higher level starting from any point in education or in skills. The framework is aimed at enhancing the employability of students who choose to leave stud-ies for the job market and is based on a competency-based modular approach, with provision for credit accumulation and transfer.

Through the involvement of the SSCs in the NVEQF pilot, industry would get integrated with educational institutions at various levels leading

to students being able to pick up the skills that businesses and employers are on the lookout for. The biggest gain of the entire exercise would be the enhancement of the employability quotient of those emerging out of the education system.

As China moves ahead with plans to introduce a dual degree frame-work encompassing the formal and vocational systems, the results of the NVEQF project in India could hold interesting insights for stakeholders responsible for promoting the skills agenda in China.

For a very long time now, the ten-dency has been to look to the West for best practices on skills, often without taking into account whether systems that work in developed nations could function equally well in developing countries. As nations whose futures are inextricably linked with each other, the time has possibly come to look at collaboration opportunities between India and China on skill development in a new light for there could be no better way than harnessing the power of youth in both countries to deepen people-to-people ties.

as china moves aheaD with plans to introDuce

a Dual Degree framework encompassing the formal

anD vocational systems, the results of the nveQf project in

inDia coulD holD interesting insights for stakeholDers

responsible for promoting the skills agenDa in china

Dilip Chenoy is Managing Director & CEO of the National Skill Development Corporation (NSDC).


INFOCUS | INDIA-CHINA | SKILLS

opment Fund (NSDF) for which the NSDC acts as an investment manager. The NSDF’s current corpus is Rs 2,500 crore following the Finance Minister’s announcement of a further infusion of Rs 1,000 crore in 2012-13.

Officially launched in October 2009 with a mandate to skill 150 mil-lion people by 2022 in 20 focus sectors identified by the government and the informal segment, the three-pronged role played by the NSDC of catalyzing the creation of, funding, and enabling sustainable VET projects in the private space has already resulted in a wide array of organizations ranging from large stock market-listed enterprises to NGOs, start-up firms, and edu-cational institutions aligning with it to start skill development projects in different spheres.

By seeing its role as that of a social venture capitalist cum development bank and putting its own skin in the game through patient capital, flexible financial terms, and a transparent and time-bound project approval, fund-ing and monitoring framework, the NSDC has enabled its partners to make a business out of skilling people. Incidentally, a 2011 report by leading brokerage firm Kotak Institutional

Equities has forecast that skill devel-opment has the potential to become a $20 billion business in India by 2022.

Various Roles of NSDC Till August 2012, the NSDC

Board of Directors has committed funds to 59 training proposals envis-aging a fund requirement of nearly Rs 1,500 crore over a 10-year span. Till July 2012, NSDC partners have trained over 246,000 people across India and ensured jobs for more than 187,000 of those who enrolled at NS-DC-funded institutions to pursue skill development courses.

Till July 2012, NSDC partners had set up 4,031 physical and mobile train-ing centres nationwide. Significantly, the capacity creation by NSDC partners has taken place not just in the bigger cities and towns, but also in remote and far-flung areas, small towns and villages. Special skills training initiatives of the NSDC have been helping youth in res-tive parts of India, Jammu & Kashmir and the North-East to join the main-stream, and participate in and contrib-ute to the process of economic growth. Rather than be a pure play financial in-stitution, though, NSDC has continued to focus on creating a supportive ecosys-

proactively catalyze creation of large,

quality vocational training institutions

create

create the vision and help define the path

reduce risk by providing patient

capital

improve returns by providing viability

gap funding

Fund

demonstrate commitment to

the purpose

support systems required for skill

developmentl Sector skill councillsl Quality Assurancel Information systeml Train-the-trainerl Set Standards

enable

create a viable ecosystem


Zhengsheng, Comrade Liu Yunshan, Comrade Wang Qishan, and Comrade Zhang Gaoli.

Comrade Li Keqiang served as a Standing Committee member of the Political Bureau of the 17th CPC Cen-tral Committee while other comrades served as members of the Political Bu-reau of the 17th CPC Central Com-mittee. You have known them well.

Here, on behalf of the members of the new central leadership organisa-tion, I sincerely thank all comrades of the party for their trust in us. We will live up to the great trust placed on us and the mission assigned to us.

The great trust of all members of the party and the expectations of people of all ethnic groups around the country are not only a tremendous encourage-ment to our doing the work well, but also a heavy burden on our shoulders.

This great responsibility is the re-sponsibility to our nation. Our nation is a great nation.

During the civilisation and devel-opment process of more than 5,000 years, the Chinese nation has made an indelible contribution to the civilisa-tion and advancement of mankind.

In the modern era, our nation ex-perienced constant hardship and dif-ficulties. The Chinese nation reached the most dangerous period. Since then, countless people with lofty ideals to realise the great revival of the Chi-nese nation rose to resist and fight, but failed one time after another.

Since the founding of the CPC, we have united and led the people to advance and struggle tenaciously, transforming the impoverished and backward Old China into the New China that has become prosperous and strong gradually. The great revival of the Chinese nation has demonstrated unprecedented bright prospects.

“Our responsibility is to unite and lead people of the entire party and of all ethnic groups around the country while accepting the baton of history and continuing to work for realising the great revival of the Chinese nation in order to let the Chinese nation stand more firmly and powerfully among all nations around the world and make a greater contribution to mankind.

This great responsibility is the re-

sponsibility to the people. Our people are a great people. During the long pro-cess of history, by relying on our own diligence, courage and wisdom, Chi-nese people have opened up a good and beautiful home where all ethnic groups live in harmony and fostered an excel-lent culture that never fades.

Our people love life and expect bet-ter education, more stable jobs, better income, more reliable social security, medical care of a higher standard, more comfortable living conditions, and a more beautiful environment.

They hope that their children can grow up better, work better and live better. People’s yearning for a good and beautiful life is the goal for us to strive for.

Every bit of happiness in the world has to be created by diligent work and labour. Our responsibility is to rally and lead the whole party and all of China’s ethnic groups and continue to emancipate our way of thinking, insist on reform and opening up, further unleash and develop social productive forces, work hard to resolve the diffi-culties faced by the masses in both pro-duction and life, and steadfastly take the road of common prosperity.

This is a major responsibility to-wards the party. Our party is a politi-cal party that serves the people whole-heartedly. The party has led the people in scoring accomplishments that cap-ture the attention of the world. We have every reason to be proud. How-ever, we are proud but not complacent, and we will never rest on our laurels.

In the new situation, our party faces many severe challenges, and there are many pressing problems within the party that need to be resolved, especially problems such as corruption and bribe-taking by some party members and cadres, being out of touch with the people, placing undue emphasis on formality and bureaucracy must be addressed with great effort.

The whole party must be vigilant.The metal itself must be hard to be

turned into iron. Our responsibility is to work with all comrades in the party to be resolute in ensuring that the party supervises its own conduct; enforces strict discipline; effectively deals with the prominent issues within the party;

earnestly improves the party’s work style and maintains close ties with the people; so that our party will always be the firm leadership core for advancing the cause of socialism with Chinese characteristics.

It is the people who create history. The masses are the real heroes. Our strength comes from the people and masses. We deeply understand that the capability of any individual is limited, but as long as we unite as one, there is no difficulty that we cannot overcome. Individuals have limited time in work, but there is no limit in serving the people wholeheartedly.

Our responsibility is weightier than Mount Tai, and our journey ahead is

long and arduous. We must always be of one heart and mind with the people; share weal and woe with the people; make concerted and hard effort with the people; attend to our duties day and night with diligence; and strive to deliver a satisfactory answer sheet to history and the people.

Friends from the press, China needs to learn more about the world, and the world also needs to learn more about China. I hope you will continue to make more efforts and contributions to deepening the mutual understand-ing between China and the countries of the world.

Thank you everybody!”


INFOCUS | CHINA | LEADERSHIP

“Good day, ladies, gentlemen, and friends. Sorry to have kept you wait-ing. I am very happy to meet with you, friends of the press.

Yesterday, the 18th CPC [Com-munist Party of China] National Con-gress victoriously concluded.

During these days, friends of the press have made lots of coverage on the congress and conveyed China’s voice

People are our real heroes

Xi Jinping is the leader of China’s ruling Communist Party and is expected to become the country’s President in 2013. Xi, who had been vice president, was elevated to general secretary of the party at the end of its 18th National Congress in Beijing in November 2012, a meeting that culminated in its second orderly hand-over of power in more than six decades of rule. Xi became the leader of the new Politburo Standing Committee, the elite, seven-member group that makes crucial decisions on the economy, foreign policy and other major issues.We reproduce the full text of the speech by new Communist Party General Secretary Xi Jinping at the Politburo Standing Committee Members’ meeting with the press at the Great Hall of the People in Beijing on Nov 15, 2012.

in abundance to every country around the world. Everyone has been very ded-icated, professional and hardworking. For this, on behalf of the Secretariat of the 18th Party Congress, I would like to express sincere gratitude to you.

Just now, we have conducted the first plenary meeting of the 18th CPC Central Committee and elected the new central leadership organisation

during the meeting. The plenary meet-ing election has produced seven Stand-ing Committee members of the Politi-cal Bureau and elected me as the CPC General Secretary.

“Here, let me introduce to you my colleagues, the other six Standing Committee members.

They are: Comrade Li Keqiang, Comrade Zhang Dejiang, Comrade Yu


capital of Sichuan province is Cheng-du, situated in the middle of the Prov-ince. With an area of 485,000 square kilometers and a population of over 87 million, Sichuan is the hometown of Deng Xiaoping, the general architect of China’s reform and opening up to the outside.

The economic strength of Sichuan has ranked ninth in the country and first in West China. The GDP and oth-er main economic indexes of Sichuan account for one quarter of the total of the 12 provinces, municipalities, and autonomous regions in Western Re-gion of China.

Sichuan is the biggest commodi-ties distribution center in Western Re-gion of China. Chengdu is the center of commerce, trade, finance, science and technology as well as the hub of transportation and communications. Recently, Chengdu has been desig-nated by the State Council as National Urban-Rural Integration Supporting Reforms Comprehensive Trial Area.

Sichuan has very strong agriculture and sound industry systems, featured by outstanding advantages in elec-tronic information, machinery, met-allurgy, hydropower, beverage, foods, medicine, chemical industry, and tourism etc.

With continuous expanding and opening up, Sichuan has conducted economic and trade exchanges with over 190 countries and regions in the world. A total of 125 of the world’s top 500 companies have set up offices or started business in Sichuan. The infra-structure in Sichuan is being gradually improved and the investment environ-ment is being steadily perfected.

Geographical LocationSichuan province is located in

southwestern China and the upper reach of Yangtze River which resides between 97°21’-108°31’east longitude and 26°03’- 34°north latitude. The area of Sichuan province is the fifth larg-est one among all Chinese provinces covering 485 thousand sqkm. Sichuan province features mountainous areas and plateaus supplemented with plains and hills.

Climate Because of different geographical

features, the climate of the basin is totally different from that of mountainous areas and the plateaus in the west. The basin part of Sichuan province bears mild subtropical monsoon climate which has warm winter, dry spring, hot summer and

rainy autumn, while the mountainous areas and plateaus at northwest enjoys long lasting winter, absence of summer, mix of spring and autumn, large temperature fluctuation between day and night, intense and long lasting sunshine during day.

DemographyThe majority of the population of

Sichuan is Han Chinese, and they are found scattered throughout the prov-ince. In addition, significant minorities of Tibetans, Yi, Qiang and Naxi reside in the western parts of the province. Sichuan has China’s second-largest Tibetan region as well as the largest re-gion inhabited by the Yi ethnic group and the only region where the Qiang people live in their own homogeneous communities.

InfrastructureSichuan’s infrastructures are im-

proving. An all way transportation net-work has shaped, combing highways, railways, civil aviation’s and inland river transportation.

EconomySichuan, occupying an important

position in the upper reaches of the Yangtze River, is the strongest province


INFOCUS | CHINA | SICHUAN GUIDE

Chengdu has been named the most popular foreign investment destination in western China. Not without reason.

Convenient Chengdu

Investment GuIde to Western ChIna and sIChuan ProvInCe

Area- 485,000 km2Population-80,418,200Population density-180 people/km2Gross domestic product-1718.5 RMBGDP per capita-21182 RMBGDP growth-15.10%Fixed Asset Investment-1,358.2 billion RMBUtilized Foreign Direct Investment-6.03 billion US$

One of China’s major agricultural production bases, Sichuan’s ma-jor products includes rice, wheat,

and rapeseed and boasts Western Chi-na’s largest base for pork production. The province is also a major indus-trial centre, with industries like coal, energy, iron and steel; its light indus-tries include building materials, wood processing, food and silk processing. Despite having the largest proven re-serves of natural gas, a large amount of Sichuan’s natural gas production is transported to more developed, east-ern provinces, and the province’s own power use is in short supply.

As the economy grows, the prov-ince must now focus on growth out-side of the capital, where cities face inadequate transport infrastructure and an expressway system that does not link many cities to each other. The local government plans on improving transportation linkages in cities in the northeast and south.

Sichuan at a GlanceSichuan is located in the upper

reach of the Yangtze River and the hinterland of Southwest China. The


and food. Sichuan is also known for its cottage industries. It has a long his-tory of silk production. Also produced are hand-woven cloth, embroidery, porcelain, carved stone, bamboo mats and carved bamboo, and silver and copper items. In addition, such local products as distilled liquors, Sichuan peanuts (groundnuts), and cured meats (notably ham) are known nationwide.

Sichuan’s economic development has six unique characteristics:I. Abundant energy and mineral re-

serves provide powerful economic advantages

II. Vibrant industrial base combined with comprehensive infrastruc-ture form today’s growth engines

III. Large talent pool and strong R&D support a strong foundation for future development

IV. Strong agricultural roots create ample opportunities for the modernization of the nation’s food supply

V. Role as integrated service hub for western China propels the province into increased national importance

VI. Chengdu’s urban-rural reforms open China’s path toward urbanization

IndustriesComposition of GdP (%)

2000 2010Primary 24.1 14.4

Secondary 36.5 50.5Industry 29.4 43.2Tertiary 39.4 35.1

Source: Sichuan Statistical Yearbook 2011

Sichuan is strong in agriculture. In 2010, its added value in the primary in-dustry ranked 5th among all provinces.

Sichuan is one of the most indus-trialized provinces in western China. While heavy industries (67.5% of the gross industrial output value in 2010) such as coal, energy and iron and steel remain dominating sectors, the prov-ince has also established a light manu-facturing sector comprising building materials, wood processing, food, silk processing, etc.

Sichuan’s high-tech industry has been developing fast. It is richly en-dowed with herbs (around 5,000 spe-cies) and is the home to many senior Chinese medicine doctors. Sichuan is strong in R&D of modern Chinese medicine. Chengdu is selected by the Ministry of Science and Technology to set up the first state-level Modernized Science and Technology Industry Base

for Traditional Chinese Medicine. A number of Hong Kong companies have invested in modernizing tradi-tional Chinese medicine, including New World Group.

Tourism 2010 %

changeNumber of overseas tourist (thousand)

1049 +23.5

Foreign exchange income (US$ mn)

354.1 +22.7

Source: Sichuan Statistical Yearbook 2011

Sichuan has abundant tourism re-sources: it is home to the Giant Panda; it has four world natural heritages and nine national nature parks, the largest number in China. Its internationally famous scenic attractions include Mt. Emei, Jiuzhaigou Valley and Duji-angyan Irrigation System. Due to the earthquake, the number of overseas tourist dropped markedly in 2008.

Foreign TradeForeign trade grew strongly in the

past few years. In terms of total trade, Sichuan ranked number 11 among other provinces, but is the leading ex-port base in the western region. It was



in western China in terms of overall economic strength. The Sichuan Ba-sin has a good natural environment, abounds in specialty products, and commands an ample labour force. Its outputs of grain, meat, rapeseed, and silkworm cocoons are ranked among the highest in China. Completely in-tegrated industrial sectors produce high-quality machinery, electronics, metallurgical products, chemicals, building materials, foodstuffs, and silk. Economic growth has been especially pronounced in Chengdu, Deyang, Le-shan, Mianyang, Neijiang, Panzhihua, and Xichang.

Agriculture and forestryMost of the population of Sichuan

earns their livelihood from agricul-ture, and a large portion of provincial exports are agricultural products. Cul-tivation is characterized by the diver-sity of crops, intensive land use, exten-sive terracing, irrigation, cultivation of zaisheng dao (“rebirth” rice), and special methods of soil culture, fertili-zation, composting, and crop rotation.

The basin area of eastern Sichuan is extensively terraced and is often called a “land of one million steps.”

Irrigation is widely practiced in the terraced fields, and numerous methods and devices are employed. Crops range

from those of subtropical climates to those of the cool temperate zone. Al-though Sichuan is generally classified as a rice region, it is also a leading pro-ducer of agriculture products.

Sichuan is a national leader in the total number of its cattle and pigs. It is the only region in China in which both water buffalo of South China and oxen of North China are found together. Pig bristles from Sichuan have been an im-portant item of foreign trade for years. About half the inhabitants of the west are pastoral. Their animals include cat-tle, sheep, horses, donkeys, and yaks.

Sichuan is second only to China’s Northeast as a lumber region. Valuable forests are located on the peripheral highlands that surround the basin area and on the numerous hills within the basin. Western Sichuan still has much of its original forest cover. The most important products from the forests are tung oil, white wax, and various kinds of herbs.

Resources and powerMineral deposits are abundant

and varied in Sichuan province. They include both metallic and non-me-tallic deposits, such as iron, copper, aluminum, platinum, nickel, cobalt, lead and zinc, salt, coal, petroleum, antimony, phosphorus, asbestos, and

marble. The production of brine salt is the most extensive mining activity. Petroleum and natural gas are often located together and are widely spread throughout the province, especially in the Zigong area. Most coalfields are located in the eastern and southern mountain areas. The most important iron deposits are along the southern and western plateau areas. Some placer gold is panned along the Jinsha (“Gold Sand”) River. Other valuable minerals include tin and sulphur.

Power is generated from a variety of small and medium-sized thermal and (in the mountains) hydroelectric plants scattered throughout the province. Power supplies are sufficient for local needs, and the excess is added to the national grid for consumption farther east.

ManufacturingThere has been considerable indus-

trial development since the 1950s, and Sichuan has become the most industri-alized province of southwestern China. The most important industries include iron and copper smelting, production of machinery and electric power, coal mining, petroleum refining, and the manufacture and processing of chemi-cals. Other important products are aircraft, electronic equipment, textiles,


lege students annually and 10 thousand high-end professional and technical workers. The employee turnover is sta-ble in the province. Sichuan provides complete financial services for invest-ment, with banking institutions, insur-ance companies, securities companies, financial back-office outsourcing com-panies. The number of foreign banks and foreign insurance institutions ranks No. 1 in central and western China.

Economic and technology zonesChengdu Economic & Technological Development Zone

Chengdu Economic and Techno-logical Development Zone was ap-proved as a state-level development zone in February 2000. The zone now has a developed area of 10.25 square kilometers and has a planned area of 26 square kilometers. Chengdu Economic and Technological Development Zone (CETDZ) lies 13.6 kilometers east of Chengdu, the capital city of Sichuan Province and the hub of transporta-tion and communication in southwest China. The zone has attracted inves-tors and developers from more than 20 countries to carry out their projects there. Industries encouraged in the zone include mechanical, electronic, new building materials, medicine and food processing.

Chengdu Export Processing ZoneChengdu Export Processing Zone

was ratified by the State Council as one of the first 15 export processing zones in the country in April, 2000. In 2002, the state ratified the establishment of the Sichuan Chengdu Export Processing West Zone with a planned area of 1.5 sqkm, located inside the west region of the Chengdu Hi-tech Zone.

Chengdu Hi-Tech Industrial Development Zone

Established in 1988, the Chengdu Hi-tech Industrial Development Zone was approved as one of the first national hi-tech development zones in 1991. In 2000, it was open to APEC and has been recognized as a national advanced hi-tech development zone in successive assessment activities held by China’s Ministry of Science and Technology. It ranks 5th among the 53 national hi-tech development zones in China in terms of comprehensive strength. Chengdu Hi-tech Development Zone covers an area of 82.5 sqkm, consisting of the South Park and the West Park.

By relying on the city sub-centre which is under construction, the South Park is focusing on creating a modernized industrial park of science and technology with scientific and technological innovation, incubation

R&D, modern service industry and headquarters economy playing leading roles. Priority has been given to the development of software industry. Located on both sides of the “Chengdu-Dujiang yan-Jiuzhaigou” golden tourism channel, the West Park aims at building a comprehensive industrial park targeting at industrial clustering with complete supportive functions. The West Park gives priority to three major industries i.e. electronic information, biomedicine and precision machinery.

Mianyang New & Hi-Tech Industrial Development Zone

Mianyang Hi-Tech Industrial Development Zone was established in 1992, with a planned area of 43 square kilometers. The zone is situated 96 kilometers away from Chengdu, and is 8 km away from Mianyang Airport. Since its establishment, the zone accumulated 177.4 billion Yuan of industrial output, 46.2 billion Yuan of gross domestic product, fiscal revenue 6.768 billion Yuan. There are more than 136 high-tech enterprises in the zone and they accounted for more than 90% of the total industrial output. The Zone is a leader in electronic information industry, biological medicine, new materials and production of motor vehicles and parts.



the only province that recorded posi-tive growth in both exports and im-ports in 2009. Major export markets included the US, Hong Kong, India, Russia, Indonesia and Japan.

Major import sources were the US, Japan, Hong Kong, South Korea, Germany and Taiwan. Major imports include machinery and electric equip-ment, video and audio appliances, transport equipment and minerals.

As a result of increased foreign investment in recent years, foreign trade conducted by foreign investment enterprises has risen. In the first nine

months of 2011, exports conducted by FIE increased by 133.5%, accounting for 39% of the province’s total exports.

Core IndustriesSichuan has established six core

industries based on its natural resource advantages and regional characteristics, namely in machinery and metallurgy, hydropower, electronic information, modern traditional Chinese medicine (TCM), food and beverages, and tourism. Leading enterprises in each of these industries are gaining prominence in domestic and foreign markets.

Investment advantages in Sichuan General advantages of Sichuan in Sectors Energy & resources Huge Market Geographical location Cost advantage

Market accessibilitySichuan is not only home to a huge

market of nearly 90 million people, but also has access to the Southwest’s 250 million urban population in six prov-inces, as well as the 2.2 billion people in Southeast Asia, South Asia, and Central Asia.

A good industrial mixSichuan has industrial clusters such

as electronic information, equipment manufacturing, energy, electricity and others.

Convenient logistics & transportationThe province has Asia’s largest rail-

way container station, 15 direct inter-national passenger and freight routes from Chengdu to Amsterdam, Frank-furt, Mumbai, Bangalore and others.

Rich in human resourcesThe province has 92 colleges and

universities and more than 30 national R&D bases, providing two lakh col-


ICEC hosted a 15 member Chinese Busi-ness delegation from Zhejiang Department of Commerce in Bangalore in September

2012. The purpose of the delegation’s visit was to strengthen the understanding of the service outsourcing industry and learn to undertake international service outsourcing experience in order to promote outsourcing enterprises and to develop its outsourcing market.

During the visit, ICEC organized a trip to the Tata Consultancy Limited Campus where they had a meeting with Mr. Karthi Madhavan, Regional Head of TCS.

ICEC also organized an interaction with IT/ITES companies in Bangalore. Mr. MN Vidyashankar, Karnataka’s Principal Secretary of industries and commerce was the Chief

the local furniture market and distribution cen-tre and discussed ways to adopt the industry in their own state back home. The Chinese asso-ciation showed an interest in increasing further relations with Madhya Pradesh by developing a common platform for future interactions. It was agreed that an industrial summit should be or-ganized to take the move forward. The summit will also include an exhibition.

The delegation’s last stop was Beijing where it was met by officials from the Ministry of Agriculture and Rural Development. The delegation learnt and understood the ways through which China has developed its rural population by using modern technologies and notably ICT in agriculture.

The meet resulted in an agreement between officials of both country on technology transfers and bilateral cooperation in the field of agricul-tural production as well as the promise of con-tinuing discussions to improve bilateral relation-ship between Madhya Pradesh and China.

OutsourcingBusiness Delegation from the Zhejiang Department of Commerce

(September 2012)

ous other interventions.Spanning three cities, the delegation met

with both Chinese government and rural lead-ers in an effort to learn from their successful model of development. These meetings allowed the delegation to gather information on how to adapt technologies, business models and mar-keting strategies in their own state, based on the success of the Chinese models.

Starting in Guangzhou, the delegation met with officials from the department of fisheries of the Government of China. Here, they discussed ways and means of improving Indian fisheries and the sericulture industry. The delegation also learnt ways of increasing rice and paddy produc-tion. The Chinese are currently ranked as the world highest per capita rice producers, produc-ing 26% of the global production.

In Shenzhen, the second leg of the trip, the delegation interacted with the Guangdong in-dustrial Cooperation Association (GICA). Through the association, the delegation visited

Guest at the function. During his address, Mr Vidyashankar said the Karnataka government had major plans for turning Bangalore into a manufacturing hub for IT related industry and that the state government had already allocated land for the purpose near the Bangalore International Airport.

Mr Jairaj, head of ICEC’s Bangalore Chapter, announced that, “We are in discussion with the state government to send a delegation to China led by senior bureaucrats and industry representative for a fruitful business and cultural exchange between the two countries. The Chinese delegation was extremely happy with the business exchange during its visit to Bangalore and would like to undertake more such visits.”


September marked a historic moment in the field of education between the world’s two fastest growing nations, India and China.

The India China Economic and Cultural Coun-cil (ICEC) organized the first India China Man-agement Education Conference in Chengdu, China on 23 September 2012. It provided a fo-rum to bring together prominent academicians, professors, deans and experts from leading man-agement schools in both countries to engage in an interesting dialogue. This sparked further dialogue in the field of Management Education between India and China.

Dr. Yao Wang, Director General of the Boao Forum for Asia and Dr. Narendra Jadhav opened the session by outlining the two emerging powers and the need for cooperation between the two in the field of education. “Both India & China now form the backbone of the new global economy, and this brings a unique

differentiation in terms of management practice and expertise required, that is quite different from the West,” Dr. Yao commented. Dr. Jadhav noted that “Though the West already has a well established and mature model of education, Asian educational models have existed for a long time in history, and now there is a need to integrate these Asian models for the benefit of the region.”

The conference was attended by eminent academics from India and China which included Prof. Raj S. Dhankar (Dean, Faculty of Management Studies, Delhi University), Dr. RC Natarajan (Director, T.A. Pai Management School, Manipal), Dr. Sanjiv Marwah (Director, Era Business School), Prof. Li Weiguang (Chief Professor of Finance, Tianjin University of Finance & Economics), Dr. Wang Yuesheng (Director, International Economics Institute, Peking University), Dr. Wei Sen (Professor, School of Economics, Fudan University), Prof. Huang Haifeng (Associate Dean, Peking University, HSBS Business School).

The Open discussion session chaired by Dr. Narendra Jadhav, Member, Planning Commis-sion of India, and Prof. Huang Haifeng, Dean of Peking University HSBC Business School, saw a rich exchange of ideas in terms of areas of cooperation possible between India and China in the field of education.

It was mutually decided to create an Asian Education Society, in order to take forward the notion of prominence & importance of the Asian Model of Education through collabora-tion and exchange between educational insti-tutes in Asia, beginning with India and China, the two Asian giants.

The ICEC will work on the formation of this society and will be responsible for finalizing the role and activities of this Forum.

Asian Model of EducationIndia China Management Education Conference at the Education Forum for Asia 2012

(September 21-23, Chengdu, Sichuan province, P.R. China)

Learning ExperienceStudy Tour to China

(3-9 August, 2012)

India China Economic and Cultural Coun-cil (ICEC) organized a Study Tour to China for a High level delegation from the state of

Madhya Pradesh in August 2012. The delegation was led by Mr. Gopal Bhar-

gava, Minister of Panchayat and Rural Develop-ment, Govt. of Madhya Pradesh. The delegation comprised senior officials from the department:

1. Mrs. Aruna Sharma, Additional Chief Secretary and Development Commis-sioner

2. Mr. L.M. Belwal, CEO, M.P. State Live-lihood forum

3. Mr. Neeraj Mandloi, Commissioner,

SEGC, Bhopal4. Mr. H.P. Shivhare, Chief Engineer,

Rural Employment Scheme5. Mr. R.M. Goantia, Chief Engineer,

Madhya Pradesh Rural Road Develop-ment Authority

The tour was undertaken with the primary objective of providing first hand learning and the experience of sharing in the area of provid-ing enhanced livelihood opportunities with in-creased income for the rural population by de-veloping rural support infrastructure, marketing systems, government policy, initiative and vari-


EXHIBITION DATE VENUE EVENT PROFILE CONTACT PERSON

1 International Leather Goods Fair

03 - 06 March 2013

Poly World Trade Expo Center Guangzhou, China

Guangzhou Entertainment Technology Show will take place in Guangzhou, China for four consecutive days. This international trade show is unique as it will bring into lime light the importance and value of entertainment technology industry in the recent times.

Industry Association Of China Entertainment EquipmentMs. Rita Tel: +86-131-60851605

2 China Shanghai International Textiles Fabrics & Accessories Exhibition

04 - 06 March 2013

Shanghai World Expo Exhibition And Convention Center Shanghai, China

China Shanghai International Textiles, Fabrics & Accessories Exhibition (CTFE) shows the way to strengthen Garment and Textile industrial associations and clusters to compete in global market, and Free Trade Agreement. CTFE is the best choice for both domestic and international trade.

Shanghai Gehua Exhibition Service Co. LimitedMr. Perry Chen Tel: +86-21-54451978

3 China International Industry Automation Technical & Equipment Exhibition

06 - 09 March 2013

Tianjin Meijiang International Convention & Exhibition Center Tianjin, China

CIAI China - The 9th China International Industry Automation Technical & Equipment Exhibition get attendance of national pavilions to participate our exhibition

Beijing Zhenwei Exhibition Co. LimitedMr. Santo Lucia Tel: +86-22-66224095

4 China Xiamen International Stone Fair

06 - 09 March 2013

Xiamen International Conference & Exhibition Center (XICEC) Xiamen, China

China Xiamen International Stone Fair (CXISF) ensures that the exhibitors here will meet the best cooperators and capture more business opportunities; the buyers here can find various products at the right price and quality in a short period of time. It will make your purchasing trip more effective and convenient.

Xiamen Jinhongxin Exhibition Co. LimitedMr. Shirley Tel: +86-592-5959616

5 Homedecor & Housewares China

18 - 21 March 2013

China Import & Export Fair Pazhou Complex Guangzhou, China

Homedecor & Housewares China is a significant event for producers and suppliers of gift and decoration products, is an opportunity for people to live in style here and now rather than in the distant future.

China Foreign Trade Guangzhou Exhibition CorporationMs. Pei Tel: +86-20-26084089

6 SOLARCON China 19 - 21 March 2013

Shanghai New International Expo Centre(SNIEC) Shanghai, China

SOALRCON China will serve the complete PV supply chain-from manufacturing equipment and materials, to solar cells, modules, systems, and installation. The exhibition will be held between 19-21 March 2013 at Shanghai New International Expo Centre.

Semiconductor Equipment & Materials InstituteMs. Min Hua Tel: +86-21-50270909

7 Ecobuild China 01 - 03 April 2013


Ecobuild China is a fabulous event of its kind which will have large number of exhibitors from different parts of the world and the participating companies will get a fabulous platform to showcase wide variety of goods and services.

UBM Built EnvironmentMr. Ronnie Chen Tel: +86-21-64371178

8 China International Nutrition & Health Expo

07 - 09 April 2013

China International Exhibition Center Beijing, China

Exhibitors covered health food,nutritional food, functional food, leisure food, health drink, slimming beauty product, cosmetics raw material, pharmaceutical material, healthcare medicine, healthcare product field.

Beijing Shibowei International Exhibition Co. LimitedMr. Smith Song Tel: +86-10-85821200

9 China (Shanghai) International Wind Energy Exhibition and Conference

08 - 10 April 2013


China Wind Energy Exhibition (CWEE) jointly organized by the Chinese Wind Energy Equipment Association, Wind & Tidal Power Special Committee of Chinese Society for Electrical Engineering and World Wind Energy Association as well as Shanghai Deray Exhibition Planning Co., Ltd., will be held regularly in April every year in Shanghai.

MP International Pte LtdMr. Liu Bob Tel: 86-21-51978788

10 China Outbound Travel & Tourism Market

09 - 11 April 2013

National Agricultural Exhibition Center (NAEC) Beijing, China

China Outbound Travel & Tourism Market (COTTM) is the only dedicated business-to-business outbound travel event in China. The show creates an annual platform where global and local industry professionals meet, discuss and contract the upcoming seasons.

Tarsus Group PlcMr. Qinghui Qing Tel: +86-21-64484882

11 IPM China 17 - 20 April 2013

Venue to be announced Shanghai,China

IPM China is designed to provide solutions to industrial end-users to keep their facilities and operations running safely, smoothly and efficiently. A free, two-day conference runs concurrently with the show. Consecutive, one-hour sessions on the latest topics concerning facility engineers and maintenance professionals will be presented.

Messe Essen GmbHMs. Xiang Zhi Tel: +49-201-7244727

ShowsExhibitions&TradeIn India • In China


EXHIBITION DATE VENUE EVENT PROFILE CONTACT PERSON

1 Garment Technology Expo

01- 04 March 2013

NSIC Exhibition Complex, New Delhi, Delhi, India

Garment Technology Expo provides a huge networking platform for the businessmen who are involved in the textile and garments sector. This show will motivate and support the newly established companies to expand their marketing networks and launch their brand name so that the global buyers can know about their existence.

Garment Technology Expo Tel: +(91)-(11)-41601662

2 India International Handwoven Fair Chennai

05 - 07 March 2013

Chennai Trade Centre Chennai, India

India International Handwoven Fair Chennai is a fair that will be held for the first time in India which has an international edge to it. The fair will showcase products of the handwoven industry which are exclusive by bringing together handwoven and handloom manufacturers from all over the country under one roof.

Handloom Export Promotion CouncilEvent Manager Tel: +91-44-28476124

3 International General Aviation Expo

07 - 10 March 2013

Ahmedabad Airport Ahmedabad, India

International General Aviation Expo is an event that mainly deals with aviation market and which are going to be an interested one for the people who are related with the adventure flying and it is both in hobby and business field.

Virgo Communications And Exhibitions Pvt LtdEvent Manager Tel: +91-80-25567028

4 Indian Engineering Sourcing Show (IESS)

14 -16 March 2013

Bombay Exhibition Center(BEC), Mumbai, Maharashtra, India

Indian Engineering Sourcing Show (IESS) is a three day event. This is the biggest event of the country that concentrates on the development of the sector and helps the engineers to get good information about the latest products, services and technologies related with the sector.

Engineering Export Promotion Council Tel: +(91)-(11)-23711124/23711125

5 International Leather Goods Fair

15 - 17 March 2013

Netaji Indoor Stadium Kolkata, India

The International Leather Goods Fair (ILGF), the fair will showcase all kinds of leather goods like handbags, purses, wallets, sports goods, leather upholstery, industrial leather goods, finished leather and lining leather, components & accessories of leather goods an leather goods machinery.

India Trade Promotion OrganizationEvent Manager Tel: +91-33-22825820

6 Indian Ceramics 19-21 March 2013

Gujarat University Exhibition Hall, Ahmedabad, Gujarat, India

Indian Ceramics is one of the largest ceramics sector trade shows in India. The event provides attendees with the chance to have interactive business meetings between buyers and product suppliers are organized during the event and all the different facets related to the rapidly developing Indian ceramics sector are discussed upon here.

Gattaca Communications +(44)-(2032)-395572

7 Motor Show Bengaluru

04 - 07 April 2013

Bangalore International Exhibition Centre (BIEC) Bengaluru, India

Motor Show Bengaluru is going to provide a big platform to the exhibitors and the visitors so that they can gather at one place and share their viewpoints with each other.

Society of Indian Automobile ManufacturersEvent Manager Tel: +91-11-24647810

8 India Steel 2013 11 - 13 April 2013

Bombay Exhibition Centre

India Steel 2013 is an exciting event for the entire steel industry in India. The event has been organized by FICCI at Bombay Exhibition Centre/ Mumbai and it will act as a global platform for the promotion of Indian steel industry.

Federation of Indian Chambers of Commerce & IndustryTel: +(91)-(11)-23738760/23738770

9 Great Indian Travel Bazaar

14 - 16 April 2013

B.M.Birla Auditorium Jaipur,India

Great Indian Travel Bazaar is one of the top travel and tourism sector trade events in India. The show is attended by more than 4500 eminent corporate professionals from this sector and topical discussions on the latest industry happenings are regularly held here.

Federation of Indian Chambers of Commerce & IndustryMr. Rahul Chakravarty Tel: +91-141-23487490

10 Pharma Pro&Pack Expo

24 - 26 April 2013

Bombay Exhibition Center(BEC) Mumbai,India

PHARMA Pro&Pack Expo 2013 offers you an EXCELLENT opportunity to expand your business in India and international pharma industry.

GPE EXPO PVT LTDMr. Pranav Raval Tel: +91-79-40008253

11 Poly India 25-27 April 2013

Chennai Trade Centre, Chennai, Tamil Nadu, India

Poly India is the International Exhibition on Plastics and Petrochemicals at Chennai. The show serves as an effective meeting podium for a large number of distinguished business professionals from this industry.

Federation of Indian Chambers of Commerce & Industry Tel: +(91)-(11)-23738760/23738770


INFOCUS | CHINA-INDIA IT SECTOR | REPORT

Indicator India China

GDP US$ 1680.69 billion(2011-12)

US $11.29 Trillion (2011 est.)

GDP Growth Rate 6.9% (2011–12) 9.2%(2012)

Exports US$ 23.69 billion(September 2012)

US$ 176.9 billion (2011-12)

Imports US$ 41.78 billion(September 2012)

US $ 151.8 Billion(2011-12)

Trade Balance US $ 20.9 billion(October of 2012)

US$ 32 Billion(October 2012)

Foreign Exchange Reserves US$ 295.04 Billion(As on October 5, 2012)

US$ 3.2 trillion(As on September 2011)

Foreign Direct Investment (FDI)

US$ 1.76 Billion(July- 2012)

US$ 1.9 Trillion(2011)

Number of Telephone Subscribers

929.32 Million (May 2012)

960.9 Million(May 2012)

Inflation Rate 7.81%September 2012

5.4%December 2011

Economic Indicators

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· Vol 1, Issue 4, December 2012 Editor-in-ChiEf Mohammed Saqib Editor Prashun Bhaumik Editorial...

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