The Challenge To Be First

hina and India are the most important nations in Asia in terms of population and economic
impact. These two nations are responsible for virtually 50 percent of the global growth. For years,
China was the undisputed Number One; but times could change. The World Bank estimates that India
could surpass China for the current year.

China accounts for 7.5 percent of the world’s total economic activity, and its economy is
expected to grow 9.8 percent this year, with 3.7-percent inflation, official sources say. Economic
growth in 2011 may be slower than last year’s growth, but the slower growth should help keep
China’s economy from overheating.

However, China is facing some problems, mainly in the textile sector. Official sources say
the country’s textile product exports totaled US$149.8 billion in the first nine months of 2010. On
an annual basis, this represents a 23.14-percent growth rate. However, some experts say this export
growth is only due to large bulk orders because the big retailers expect price increases for 2011
contracts. China’s textile industry is struggling: As an example, over a nine-month period, cotton
prices rose 51 percent from 18,160 yuan (US$2,720) to 27,405 yuan (US$4,120) per metric ton. Wages
have increased up to 30 percent.

Some production sites are having problems because there is a shortage of workers. All these
issues lead to the biggest problem for the Chinese textile industry: delivery time delays, which
are virtually not acceptable by any large retail company because of their short-term purchasing. On
top of that, China is in competition with other Asian countries that have low labor costs and
improving quality and efficiency. Buyers are sure that other Asian countries will soon catch up
with China.

This could be the chance for India to gain ground versus China, or at least become even.
Often, India is looking quite jealously at China’s big success. Yet, the first issue for India must
be to keep up the current growth rate of some 8 percent per annum. An inflation rate of some 20
percent and corruption are challenges for the country’s further upswing. The future will tell who
comes first at the end of the year.

February 16, 2011