"China's and India's relative success in attracting FDI represents the sharpest contrast of all between the two countries. According to official data, China received 527 billion last year; India just 4% of that amount. Again some Indian economists cried foul.

India's figures are understated, they say, because they exclude foreigners reinvested profits, the proceeds of foreign stockmarket listings, intra-company loans, trade deficits, financial leases and so on. China's, on the other hand, are inflated by "round tripping of domestic investment through Hong kong. ...As for FDI, Sadhana Srivastava, in an article in India's Economic and Political Weekly, has recalculated both India's and China's figures for the year 2000 to make a fairer comparison. He found that China's FDI fell by half, while India's more than tripled. This meant that, as a percentage of GDP, there wasn't much differenc; 1.7% for India against 2% for China.

.....However, even on this basis, India was still attracting just 40% of the amount of foreign investment that went to China. Much of the gap is attributable to the activities of overseas Chinese ..they have ploughed back far more of their money into the motherland than have non-resident Indians..."

"Can there be much argument about the relative pace of growth fueled by such investments?....All evidence of the senses suggest that it is far faster than India's. This is specially true of industrial growth, and above all of manufacturing, which in 2002 made up just 15% of India's GDP, compared to 35% of China's ...

Much that holds India's economy and businesses back has little to do with democracy has such: corruption, fiscal mismanagement, a lack of international ambition and a history of over-protection at home.Where India overcomes these obstacles, and has a clear competitive advantage- as in software and other information-technology services- it can be a huge success...The way India's democracy has evolved has undoubtedly complicated policymaking. Coalition governments give disproportionate power to regional and caste based minority parties. Worse, the electoral time table, with many important states holding polls between the national votes, tends to put governments into cautious, electioneering mode for much of their time in office."

"It is already by far the biggest garment exporter in the world, with average wages in the industry of 40 cents an hour?less than a third of, say, Mexico's. Now that China belongs to the World Trade Organisation (WTO), moreover, it will benefit from an agreement by members to eliminate the quotas completely by 2005. As a result, according to estimates by the World Bank, China's share of world garment exports will increase from about 20% today to 50% by the end of this decade.

Shoes, semiconductors and televisions are expected to follow. .. Heinrich von Pierer, the boss of Siemens, a big German electronics and electrical conglomerate, has called the country ?a global factory? for his company. Comparisons are made with Manchester during the Industrial Revolution. China, it is said, is becoming the ?workshop of the world?.

"Imagine a pre-industrial society where population is pressing on limited land supplies, and the marginal product of labor - and hence the real wage rate under competitive conditions - is barely at subsistence. In that case, why bother establishing property rights in human beings? It costs no more to hire a free worker than to feed an indentured laborer. Indeed, by 1300 - with Europe very much a Malthusian society - serfdom had withered away from lack of interest.

But now suppose that for some reason land becomes abundant, and labor scarce. Then competition among landowners will tend to push up wages of free workers, and the ruling class will try, if it can, to pin peasants down and prevent them from bargaining for a higher standard of living. In Russia, it was all about gunpowder: suddenly steppe nomads were no longer so formidable, and the rich lands of the Ukraine were open for settlement. Serfdom was an effort to keep peasants from taking advantage of this situation. (And if I've got it right, those who were venturesome enough to run away and set up outside the system became Cossacks.)

Meanwhile, the New World opened in the west. Sure enough, the colonizing powers tried various forms of indentured servitude - making serfs of the Indians in Spanish territories, bringing over indentured servants in Virginia. But eventually they hit on a better solution, from their point of view: importing slaves from Africa."

"And an even bigger question: why hasn't indentured servitude made a comeback in the modern era? Yes, I know, human rights and all that - but if it was profitable to have indentured servants in the modern world, I'm sure that Richard Scaife's think tanks would have no trouble finding justifications, and assorted Christian groups would explain why it's God's will."

... Elites in developing countries can no longer be confident in their ability to earn hefty incomes by employing workers and paying them much less than their average product: an elite monopoly of land ownership is no longer worth much. So why haven't they responded to the potential erosion of their collective economic edge by turning to politics and force to bind workers. One answer is that, to some extent, they have: Consider that modern states are surprisingly effective as tax-collection machines, and in large chunks of the world the elite's power and (relative) prosperity is rooted in its "new class" control over the flow of resources from the state. Consider, also, the Communist Party of Vietnam--what is it but a gang labor boss for unfree labor deployed to produce shoes for Nike?"

".... At the same time, I do not believe China should be forced to hold democratic elections, even if that were possible. Its population would vote for leaders who distribute wealth to the poor. But there are still 900 million farmers in China with an average annual income of $500; distribution of wealth would simply be a synonym, as it is in India, for the distribution of poverty.

The Western debate over China?s political acceptability should not be cast as a simple matter of right or wrong, but of when and how. Politically, China is comparable to the United States of 1800: an emerging nation with high ideals but widespread poverty and a great many practices that other regions find intolerable. People tend to forget that the U.S. did not establish civil rights legislation until the 1960s. A decade or two of economic growth, under the shrewd and highly motivated leaders of Chung-hua Inc., will provide China?s people with the necessary education in the ways of capitalism,...."