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Asia Vs. China

Essay by   •  June 2, 2011  •  Essay  •  617 Words (3 Pages)  •  1,583 Views

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Incentive is a way to encourage or influence someone's behavior. Therefore, there are two types of incentives, positive and negative. Positive incentives reward people financially for making certain choices and behaving in a certain way. Whereas, negative incentives punish people financially for making certain choices and behaving in a certain way. Incentives can happen within a business or within a country. It is true that the less a country has controlled markets, the more reliance the country will have as a democracy. China and India were two countries who once were totally communist and had controlled markets, where the government regulated how the goods, labor and services are used and priced. China and India are two countries that are known for their incentives.

China had a theory that wanted everyone to be equal. They wondered why is it, that we have people who are not wealthy. Why do people have to starve, or wear dirty clothes? So therefore the government would control everything and isolate the country from the world. It is difficult to believe that an economic system serving more than 800 million human beings could disappear from observation for a decade, but that is largely what happened to the People's Republic of China during the 1960s.

Though after the ten year period of economic downfall, China reopened its markets for trade and a new era began. China's fast acting government implements new policies with blinding speed, making India's fractured political system appear sluggish and chaotic. China's economy emerges from the Great Recession; India once again seems to be playing second fiddle. Pundits around the world laud China's leadership for its well-devised economic policies during the crisis, which were so effective in restarting economic growth that they helped, lift the entire Asian region out of the downturn.

Though India still cannot compete on top-line economic growth, India's gross domestic product will increase, far short of that China though, only because of the incentive choices that were agreed upon during their closed markets. Yet since India has started to reopen, the economic increase has not been as fast and China's, which is good. Good because India has more of a sustainable growth, whereas China's consequences might have a surplus in economic growth.

Though China is facing the consequences of its largesse, fears are rising that Beijing's easy money policies have fueled a potential property price bubble. The credit boom has also sparked worries about the nation's banking system. Many economists expect the large surge in credit to lead to a growing number of non-performing loans. Though in spite of China, India has managed to achieve its substantial growth without putting its banking sector at risk. In fact, India's banks have remained quite conservative through the downturn, especially compared with Chinese lenders.

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