The growth and development of markets is attributed to factors such as openness to trade, location, as well as market size. Such is the case of China and India. This essay focuses on the various theories that explain the rise of India and China into international markets at the global stage.
China and India have rapidly grown into the countries with the largest population in the world, as well as the fastest growing economies in Asia. This growth has transformed the global economy as well as political playing field (Amiti & Javorcik, 2008). The two countries have successfully utilized openness to trade, location, as well as market size to form the basis of their respective markets. The only difference that arises between the two countries is the manner in which their governments are run.
Their growth and economic development can be explained using the mercantilism theory as well as the theory of absolute advantage. Mercantilism is also referred to as the international trade theory and is applicable to cases where the host country participates in international trade and depends on the trade for its exports and imports. It is also applicable to cases where a country exports more than it imports (Gaspar, Arreola, Bierman, Hise, Kolari, & Smith, 2014). Such are the cases of India and China; due to their high productivity rates, they produce surplus goods; the surplus is exported, establishing them at the global stage. Their domestic industries also produce enough for the large market, minimizing the need to import.
On the other hand, the theory of absolute advantage is based on the principle that a nation concentrates on goods, produces, or services that are easy to efficiently produce for supply for trade. In this case, China and India have adequate, affordable labor and heavily depend on their manufacturers. For instance, both of the countries have petroleum as one of their most important products, and India exports services; this has enabled it to establish a wide market niche at the international level (Betina, Ianchovichina, & Martinr, 2007). The fact that both of these countries export refined petroleum as one of their products, not the major export, is an illustration of utilizing absolute advantage theory.
China and India have also utilized the openness in their respective markets to benefit from global competition and remain among the most reliable suppliers of refined petroleum at the global stage. They also benefit from their location (Ramasamy & Yeung, 2010). Their location significantly contributes to the success of their main export commodity. Both of them have coastal lands that are rich in fuels, gases, as well as petroleum. Such areas are ideal for the collection, refining, and export of the various types of fuels in the countries.
It is also notable that India and China have utilized the mercantilism theory in the sale and trade of their surplus petroleum and petroleum products, increasing their income, benefits, and profit margins (Tolentino, 2010). The volume of petroleum and amount of petroleum products which the two economies export have contributed to the growth of their market sizes. Normally, supply and demand determine the size of a market. This shows that China and India have incorporated the three elements of economic growth into their international strategies as well as trade and growth plans. This has contributed to continuous growth in their economies.
Amiti, M., & Javorcik, B. S. (2008). Trade costs and location of foreign firms in China. Journal of development economics, 85(1), 129-149.
Dimarianan, B. (2007). China, India, and the future of the world economy: Fierce competition or shared growth? (Vol. 4304). World Bank Publications.
Gaspar, J., Kolari, J., Hise, R., Bierman, L., & Smith, L. M. (2016). Introduction to global business: Understanding the international environment & global business functions. Nelson Education.
Ramasamy, B., & Yeung, M. (2010). The determinants of foreign direct investment in services. The World Economy, 33(4), 573-596.
Tolentino, P. E. (2010). Home country macroeconomic factors and outward FDI of China and India. Journal of International Management, 16(2), 102-120.
Winters, A., & Yusuf, S. (Eds.). (2007). Dancing with giants: China, India, and the global economy. World Bank Publications.
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