Explained International

Facts People Who Cite China’s Economic Path to Advise India Should Know

At a time when the discourse is about the state of the economy, often many comparisons are made with other economies. Many a time the opinion-makers tend to cite the example of China to explain how India should achieve growth and strengthen the economy. It is not to argue that no such comparisons should be made, but do we acknowledge at the same time that the economies like China have their own mess and, in many respects, India has addressed the problem before them? After all, the present concerns in the economy are global in nature.

What is Happening to Chinese Banks?

It is interesting to see what is really happening in the Chinese banking system at a time when the Indian government has already taken steps to make Public Sector Banks (PSBs) which were suffering from the NPA mess created by the UPA government. As we had explained in this article back in July, PSBs have recovered an amount of Rs 3,09,568 crore over the last four financial years.

The Modi government went in a systematic way to reform the banking system by recognizing the NPAs in the first place and then recapitalizing the PSBs. The merger of banks has also redrawn the nation’s path to harness their potential at its fullest in terms of increased lending and bigger risk appetite, with national presence and global reach. We have explained at length in our earlier article Mega Banks Merger – A Step Towards $ 5 Trillion Economy. In the next step, the government has also ensured that the banks transfer the benefits to the people and the needy sectors of the economy with prudence. Our article  ₹ 4.91 lakh crore disbursed in Two Months – How Govt Is Ensuring Credit Flow to Economy explains this in detail.

All this while, what we gather from the various media reports is that the Chinese banks are collapsing at a rapid pace.

The New York Times in a report in November 2019 explains how five banks have collapsed within seven months. The report very much sums up an economic stress story untold.

“A growing number of China’s smaller banks are stumbling as Beijing tries to navigate a difficult path, forcing regulators to balance economic concerns with the health of an enormous but fractured financial system.”

 

See a headline in ‘South China Morning Post’ of 2017 dateline that gives an idea of how deep-rooted the banking mess is in China.

 

In the year 2019, these are the kind of headlines emerging from China.

Conclusion

Facts about China’s banking system is an example. There are many areas in which it is suffering. This is not to suggest that India should find solace in these facts but to be confident about the fact that the Indian administration has already put forward its best efforts to address the problem which is global in nature.

The slowdown in the automobile sector has very much affected China. We have earlier explained how the manufacturing companies are shifting their base from China and India is pitching itself as a favorable destination. China’s ambitious global economic dream like CPEC is also under financial strain.

Considering the nature of government that China has, no surprise if the worst of news never comes out in open. Unlike China, India can never really follow the approach of ‘my way or the highway’. If one takes the note of how a change in the government in Maharashtra has reportedly resulted in halting of so many mega projects, the unique complexities for India can be understood. Within all such limitation the Indian government is addressing all the concerns in the economy in a transparent way.

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