The diverging patterns of profitability, investment and growth of China and India, 1980-2003
This paper documents the diverging patterns of capital accumulation, profit rates, investment rates, capital productivity and technological progress of China and India since 1980. It is concluded that the two Asian economies have followed very different growth patterns and, as a consequence, they face different challenges for the future. India's problem is how to accelerate growth, while China's is how to sustain it. India must address impediments to investment so as to increase its investment rate. China must deal with the question of whether investment can continue being the main source of growth given that profit rates and capital productivity are decreasing and that the economy has created substantial excess capacity.
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