Rupa Subramanya is a researcher and commentator.
In his first news conference since taking office, on Mar. 25, U.S. President Joe Biden squarely took aim at China.
Asserting that China's goal is to become the "leading country in the world," the new U.S. leader vowed that this would not happen on his watch. Indeed, one of the rationales for his massive infrastructure spending proposal is the race with China. Biden noted that China spends three times as much as the U.S. on infrastructure, a gap he has promised to close.
There is ample evidence that the battle for global economic domination is now a two-horse race, with the established hegemon, the U.S., trying to hold its main rival, China, at bay. In macroeconomic terms, China's gross domestic product at market prices is approaching that of the U.S. and likely will overtake it in the coming decade. China's GDP in 2020 was almost $15 trillion, as compared to $21 trillion for the U.S., based on preliminary estimates.
In fact, China closed the gap during the pandemic year, with the U.S. contracting while China -- remarkably -- grew, after quickly containing the spread of COVID-19. For comparison, the other Asian giant, India, recorded GDP in 2020 of approximately $2.7 trillion, down from the previous year after the economy was battered by the pandemic and an initial harsh lockdown.
While the U.S. still leads China in total economic activity, it fell behind for the first time ever, according to another important metric of global economic domination. The Fortune Global 500 last year featured 124 Chinese companies, as compared to 121 from the U.S. These two countries together account for almost half of the total, with Japan a distant third with 53 companies on the list. India, meanwhile, counts only seven companies in the Global 500.
One key difference, however, between the U.S. on the one hand, and China and India on the other, is that the American companies on the Fortune list are almost all commercial entities, with the exception of a few government agencies, such as the U.S. Postal Service.
By contrast, state-owned enterprises dominate the Chinese and Indian entries. Of the 124 Chinese companies on the Fortune 500 list, 84 -- almost 70% -- are SOEs spanning major sectors of the economy, not just infrastructure. Of the seven Indian companies, four are SOEs, of which three are oil companies and one is a bank.
If any evidence were needed, this demonstrates that the state continues to dominate the commanding heights of the economy in both China and India, years after economic liberalization in both countries propelled them into major globalized economies.
As one might expect, given that China liberalized its economy more than a decade before India, many Chinese companies have been on the Fortune list for many more years than Indian companies. In 2000, for example, nine Chinese companies were on the list, as against only one Indian company, the state-owned Indian Oil. India's largest private company, Reliance Industries, has been on the list since 2004, a period of rapid growth for the Indian economy.
Another noteworthy difference between China and India is the far greater proportion of new Chinese entrants, with eight Chinese companies making the list for the first time in 2020 -- more than India's total membership.
The newest Indian entrant, Rajesh Exports, a gold retailer, has been on the list for five years. The only other private company, Tata Motors, has been there for 11 years. It is noteworthy that India's latest entrant is not an IT or pharmaceutical company, which are presumed to be areas of strength in the Indian economy, but a stalwart of the old Indian economy, where gold still rules.
Despite the heavy state domination of China's economy, there appears to be a greater level of economic dynamism, with new companies joining the Global 500 just about every year. India's more static membership suggests an economy that is markedly less dynamic than China's, ironic given the common perception that the private sector is much more important in India's mixed economy than in China's communist-run and state-dominated economy.
Indeed, both Reliance Industries and Tata Motors are part of large family-owned conglomerates that have dominated the Indian economy for decades. India's membership in the Global 500 seems to have stagnated for more than a decade -- with the exception of one new entrant -- reflecting the economic slowdown of recent years.
Whether you look at GDP or its meager membership in the Fortune Global 500, it is clear that India is not going to become a global economic superpower anytime in the coming decades. Its significance is going to remain geopolitical, as it has through the decades, now as a would-be strategic counterweight to China in the region, and at least for now the world's largest democracy. Its membership in the Quad group of countries testifies as much.
China, by contrast, is legitimately within shooting distance of overtaking the U.S. and becoming the world's largest economy within a few years. This would be the first time in almost three centuries that a non-Western country would have the largest economy in the world. The significance of such a development cannot be overstated.