China (India) facts of the day

The ratio of incomes gives a sense of the relative differences in productivity between the cities and countryside. For China, this ratio is 3.2 – the highest in world. On average, urban workers are more than three times as productive as rural workers and are being compensated accordingly. No wonder some 270m migrant workers have flocked to the cities to secure better paying industrial jobs. For India, the same measure gives a ratio of 1.6, one of the lowest for emerging market economies, indicating that urban productivity is only moderately higher than in rural areas, and cities do not offer such a magnet of higher earnings.

The other key indicator is the relative difference in property prices in China versus India. China’s mega-cities have seen a five-fold increase in property prices in renminbi terms, or nearly seven-fold in US dollars over the past decade. No wonder concerns about a possible property bubble in China dominate global financial news. Yet despite these astounding increases, property prices in Beijing and Shanghai are still only half those of their Indian counterparts of New Delhi and Mumbai.

…India’s excessively high property prices reflect a combination of two archaic practices. One is the legacy of its colonial past in reserving large parcels of valuable urban land for government use, including sprawling and wasteful estates for civil servants and military cantonments. The other comes from outdated and overly rigid building codes that discourage concentrated development of commercial activity and housing in the core of its major cities. This pushes development to the outer suburbs, making it difficult to realise the agglomeration benefits that drive productivity gains.

That is from Yukon Hwang at the FT.