China surpassing India

Relation between India and China has never been positive and the border skirmishes along with several other petty disputes led to the major Sino-Indian conflict in 1962 and the same relation has continued ever since then. However, now it may become bitterer as reports state China’s economy is surpassing India in almost each respect. As per Bank of America Corp.’s Merrill Lynch & Co. unit and the Royal Bank of Canada, China’s stocks are more attractive than those in India as government stimulus spending drives faster economic recovery.

The same fact has been corroborated by Stephen Corry, Hong Kong-based investment strategist for Merrill Lynch Global Wealth Management in the Asia Pacific region, and said, “China’s economic growth will accelerate in the second half because of large government stimulus and strong consumer demand.”

As stated by study reports, China’s gross domestic product grew 7.9 percent in the second quarter and it became the first nation of the major economies to rebound from the global recession. In addition, Chinese government’s 4 trillion yuan ($585 billion) spending package and record bank lending have helped the Shanghai Composite Index to soar 78 percent this year, making China the world’s best- performing major market.

These two are being supported by others as well. One of them is Brian Jackson, a senior emerging market strategist at Royal Bank of Canada. He does prefer China over India and made clear that India has shown weakness in its fiscal policy. “We are worried that India looks set to remain in a fiscal no-man’s land, unable to deliver meaningful fiscal stimulus because of its rating outlook but also unable to address the structural budget problems that lead to persistent large deficits,” Jackson said at a Bloomberg Forum in Taiwan.

Stephen Corry said, “The risk in China is getting higher because all the growth is driven by liquidity.” “A lot of money is going into unproductive investments such as properties and equities. The big risk for China’s equity market is when the government will start tightening its economic policies.”