China has had a spectacular performance since 1978 when reforms were first introduced. In about a quarter of a century, GDP is estimated to have zoomed by an astronomical 8-9% compound annual average growth rate-translating to a doubling in less than 10 years. But these numbers are being challenged. Thomas Rawski a professor of economics at the University of Pittsburgh in the USA has concluded that Chinese GDP figures could be puffed up by at least 2-3 percentage points. Rawski's analysis, however, has been questioned by other eminent economists like Nicholas Lardy now at the Washington-based Institute of International Economics and author of a number of acclaimed works on the Chinese economy.

Then there is the American lawyer of Chinese descent Gordon Chang who hit the headlines two years ago with his The Coming Collapse of China. Chang argued that the Peoples Republic has at most a decade before it crumbles. The trigger is the accession to the WTO that happened in December 2001 but there are other pressure points---a banking system that has all but failed, state-owned enterprises that are visibly dying, the Internet that is proliferating inspite of efforts to control it, a private sector that is strangulated, a society being wrecked by corruption and a state that is simply unable to accommodate the growing aspirations for freedom. Chang observes that China's economic success is built on very shaky and precarious political foundations and it is this that is causing growing unrest in that country.

It is not as if private Chinese companies do not exist. The top ten companies (groups) are Legend, Wanxiang, Hengdian, Chint, Delixi, Guanghui, Fosun, Xingaochao, China Orient and Tengen. However, the total turnover of these top ten is about half the turnover of the top ten Indian private companies. Huang talks of Indian private companies like Infosys and Wipro, Cipla, Ranbaxy and Biocon, and the Tata group as world-class firms owned and managed by Indians themselves. Since China has become the manufacturing platform for the world, a very large number of "Chinese" companies that are successful are actually affiliates or subsidiaries of companies from the USA, Japan, Germany and other countries. The Chinese corporate scene, however, is not entirely blank. Companies like Legend Computer, Haier, Kelon and Huawei---some of whom are coming to India as well-have emerged as global players. The Shanghai Stock exchange is being engineered to be a global bourse in five years time (if only the Indian government has been more proactive TCS may well have won the contract for its computerization that was awarded recently to American firms).

One of the reasons why China has attracted more foreign investment than India is because in India there has an influential business lobby against foreign investment, a lobby that has powerful political backers as well. This lobby is not as vociferous as it used to be but there are still a number of Indian companies who refuse to have anything to do with foreign investment. Sundram Fasteners, for example, has become a global supplier of radiator caps to General Motors and its success has not come out of any foreign investment inflow. Reliance is another example of such a company which has achieved global scale and standards without foreign investment. But there are other companies like Hindustan Lever that depend on foreign investment. Companies like Infosys and HDFC, of course, does not depend on FDI but more on FII-that is foreign institutional investors who invest for returns and not for management control.

Huang has certainly dealt a blow to the large tribe of Indo-critics and Indo-pessimists even though his sample of "successful" Indian companies is limited mainly to a couple of software and pharmaceutical firms. Sure, India has had a long tradition of private enterprise and pre-1991 policies may have created the platform for entrepreneurial take-off. But there were many elements of the ancien regime that, ironically, helped Indian enterprise. The public sector, for example, has fostered entrepreneurship---the growth of Bangalore and Hyderabad has been heavily dependent on public investment in high-tech areas of defence, space and engineering.

Huang is right to focus on the domestic economy. Sure, entrepreneurial drive and dynamism in India is greater reflecting vastly more political and social freedoms here. But the business-like manner in which the Chinese are moving, using the WTO as a pretext to carry out sweeping reforms, is striking. This is in stark contrast to India where reforms of domestic taxation particularly have been stalled, as evidenced from what has happened to VAT. In addition, structural change in India has been skewed. Agriculture's share of GDP has fallen as it should. The share of services has risen disproportionately to over 50% of GDP at the cost of industry, especially manufacturing. At less than a fifth, India has lowest share of manufacturing in GDP among all major countries. Manufacturing has staged a revival in recent years but there is still a very long way to go. Further, the share of agricultural employment has remained more or less unchanged because of rigid labour laws and small-scale reservations.

Huang raises an ever more fundamental issue. How is that while India's growth is 80% that of China between 1997 and 1999 (actually, about two-thirds if a longer 1980-2000 period is taken), India achieved this on the basis of about half of China's savings and investment rate and less than 10% of China's foreign investment inflows. Does this mean that capital utilization in India is more efficient than in China?

Foreign investment has made China the sixth largest trading nation in the world in a span of just over a decade. It is galloping foreign trade fuelled by "foreign" investment that has transformed China in recent times. Huang's radical work cannot detract from that reality.