Beside organising the Summer Olympics (2008) in Beijing, China organised three Asian Games in little more than three decades: Beijing (1990), Guangzhou (2010) and Hangzhou (2023). India on the other hand could not afford to organise any such big international event in the last four decades except the Commonwealth Games (2010) at Delhi which indeed was a much more modest event.

In fact, no Indian city today other than Delhi has the infrastructure to organise an international sports event of the scale of the Asian Games, not to talk of the Olympics. What made China so assertive to demonstrate its economic might in recent decades? According to the estimate of the IMF, average income per head in China, based on Purchasing Power Parity (PPP) as on 2023 is US $23,309, which is 2.5 times that of India at $9,183.

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Purchasing Power Parity is accepted worldwide as one of the standard methods for comparing the standard of living of people across countries having different currencies and different price levels. The average income of China in 2008, the year the Olympics was held at Beijing, was $7,501. Thus, the average standard of living of a Chinese in 2008 was less than an average Indian of today. Yet we can hardly think of organising an extravaganza like the Beijing Olympics. Where exactly did we lag behind?

The variations in the exchange rates of the currencies are important in comparing the economic strength of different nations over a period. The economic might of a country is crucially dependent on its capacity to trade, its foreign exchange reserves, its strength in extending aid and loan to other nations of the world and thereby to enhance its sphere of influence. There are many tiny nations in the world whose per capita GDP is high, thereby indicating a high standard of living of people, but they may not have significant economic or political influence on the other nations.

Though India’s GDP grew reasonably well in the last three decades, the Indian Rupee lost its ground steadily in the last sixty years and more so in the last three decades. In 2008, China’s GDP expressed in US dollars (4,577 thousand) was 3.74 times of India’s (1,224 thousand). In 2023, China’s (17,701 thousand) is 4.74 times that of India’s (3,732 thousands). The economic might of two nations, expressed in terms of the US dollar thus has widened in favour of China in a higher proportion as compared to what the growth rates would have led us to believe.

This had happened because China succeeded in holding the strength of its currency vis-à-vis other hard currencies, whereas the Indian rupee went on depreciating. The exchange rate of the rupee vis-à-vis he US$ was 17.01 in 1990 as against one US$ exchanged for 3.8 Chinese Yuan that year. Both the Indian Rupee and the Yuan declined substantially in the 1990s. In 2000, the exchange rate of the rupee was Rs 43.50 per US$ and that of the Chinese Yuan was 8.20. For the last quarter of a century, the exchange rate of Chinese Yuan has remained stable, rather the currency slightly appreciated (7.11 today), whereas the Indian rupee kept on depreciating in respect of the dollar (and other major currencies) from Rs. 46.21 in 2010 to 73.78 in 2020 and 83.30 as on today.

The spectacular success of the Chinese currency thus widened the economic gap between two Asian giants in favour of China. A nation’s capacity to trade depends on its ability in developing sectors of comparative strengths vis-àvis the international market. India hardly has any world-famous brand and our value of imports is much higher than our value of exports. China, in contrast, is the world’s largest exporter. The value of China’s exports ($3593.6 billion) was almost eight times that of India ($453.56 billion).

There are seventeen countries in the world (including the tiny states of Singapore, Hong Kong and Chinese Taipei) whose value of exports exceeds that of India. One US$ which was exchanged for 40 Thai Baht in 2000, is exchanged for 37 Baht today. Perhaps no other currency of any major economy of the world has depreciated so much in the last three decades as the Indian rupee. The value of India’s imports in 2022 was $732.6 billion.

The huge trade deficit did not though lead to any balance of payment crisis for India because of steady inflow of remittances from the diaspora (constituting 3.2 per cent of the nation’s GDP) and investments in the stock market by the Foreign Institutional Investors. India’s foreign exchange reserves today ($590.7 billion), is only about 17.6 per cent of the reserves of China ($3,357.8 billion). India had a foreign exchange reserve of $7 billion in 1980 when China had only $2.55 billion. The relative strength of the two economies has just reversed in the last four decades.

The inherent strength of the Chinese economy today comes from its capacity to trade and its huge reserves of foreign exchange. The economic might of China will be underestimated if we go by the average standard of living of people or per capita income of that country. When it comes to foreign exchange reserves and its capacity of extending aid and loans to other countries, the manufacturing infrastructure of China and its export-led growth over the last four decades have given her an edge over all other economies of the world.

No wonder China today can afford to host international events in many of its cities with all the extravaganza that perhaps very few countries of the world can think of.

(The writer, a former civil servant, is now an independent commentator on socioeconomic issues and public policies.)