China Tops India as Most Likely to Grow

China ranks first among 22 emerging Asian economies as the country most likely to maintain steady and rapid growth over the next five years, according to the Bloomberg Economic Momentum Index for Developing Asia.

China scored 76.2 percent in a ranking of 16 areas including economic competition, education level, urban migration, high-technology exports and inflation that measure a country’s ability to continue delivering high growth. India was second with a score of 64.1 percent followed by Vietnam at 61.9 percent. Timor-Leste was last at 25.3 percent.

The index suggests China and India’s economic surge is durable and will likely continue to drive global growth as the U.S., Europe and Japan lag behind. China eclipsed Japan last year as the world’s second-largest economy.

“I am not surprised that China comes out on top on this metric, and China probably should be placed on top among emerging Asian economies,” said Victor Shih, a professor who studies China’s financial system at Northwestern University in Evanston, Illinois.

In the past 30 years, China’s economy has expanded on average by 10 percent a year as it overhauled state-owned companies and allowed more foreign investment. Among economies with annual gross domestic product above $1 trillion, India posted the second-highest growth rate after China last year, expanding by 8.2 percent in the last quarter of 2010.

The Organization for Economic Cooperation and Development forecasts U.S. economic growth of 2.6 percent this year, 2 percent for the eurozone and a 0.9 percent contraction for Japan.

China Shocks
Shih said the measure may overstate China’s rank relative to India’s and other countries, in part because Chinese official figures understate debt levels.

China could face economic and political shocks that would impact on its growth. Fitch Ratings said in March that China faced a 60 percent chance of a banking crisis by mid-2013 in the aftermath of record lending and surging property prices. Strikes, riots and protests are also on the rise, doubling in five years to 180,000 incidents last year, according to Sun Liping, a sociology professor at Beijing’s Tsinghua University.

The index put some countries with among the world’s highest growth rates in the past several decades, including Malaysia and Thailand, behind such countries as Vietnam, which ranked third, and Bangladesh, which ranked fifth.

Equity Markets
The index gives weightings of 10 percent each to four categories: the competitiveness of market structure, which rewards countries for having fewer big companies that dominate equity markets; the quality of the labor force, including education levels, the age of the work force, and the growth rate of scientific journal publications; gross national savings as a percentage of GDP; and the growth of high-technology exports.

A further 12 areas have 5 percent weightings, including growth in GDP per capita adjusted for the cost of living, growth in world share of GDP, stability of inflation rates, diversity of top trading partners, external and public debt burdens, lending costs, net foreign direct investment and deforestation. Four “cohesiveness factors” include ethnic and religious homogeneity, income equality, rates of urbanization and poverty reduction, and variation in the jobless rate.