The Rise of China and India
Lindsey Rice
BUSN601
Dr. Bob Barrett
January 10, 2015
Introduction
The steady rise of China and India within the global trade markets has seen exponential growth in recent years. There are several advantages that allow India and China to remain in front of their global competition. According to Gaspar et al. (2014), China competitive advantage lies in their exportation of manufactured goods, where “India’s abundant factor has been relatively well educated, English speaking labor that provides a low-cost gateway to global services exports.” However, one of the fundamental advantages China and India have is their “competitive and severe external restrictions” that “prevent labor from moving abroad” (Gaspar et al., 2014, 43).
The Rise of China and India
There are two trade theories that help identify why China and India have emerged as two of the fasted growing trade economies the Comparative Advantage and the Heckscher-Ohlin (H-O) Theory. The theory of “comparative advantage is the ability of one country that has an absolute advantage in the production of two or more goods (or services) to produce one of the relatively more efficiently than the other” (Gaspar et al., 2014, 42). The Heckscher-Ohlin (H-O) Theory attributes the comparative advantage of a nation to its factor endowments: land (quantity, quality, and mineral resources beneath it), labor (quantity and skills), capital (cost), and technology (quality)” (Gaspar et al., 2014, 42). The comparative advantage helps identify why India and China are emerging in the global commerce. India’s ability to overtake the IT and services industry is directly related to their competitive wage rates and availability of English-speaking engineers (Gaspar et al., 2014, 44). “Similarly, the supply of skilled, productive factory workers coupled with modern infrastructure makes China a global manufacturing hub” (Gaspar, et al., 2014, 44). In both countries,...