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Dr. George Gu's Asia Watch
China & India: Can They Do Better Together?
By George Zhibin Gu
Contributing Writer
Pudong area of Shanghai, China

In this era of globalization, the elephant and the dragon are finally running fast, together. There is a sense of urgency for the two ancient peoples to catch up with the developed world. True, there is a high degree of rivalry between them, but all that this competition will produce in the end is a creative and productive partnership.

Mutual benefits are plenty. India has built up a world-class information technology (IT) army while China has created a fast-expanding manufacturing force. Their strengths are complementary in numerous ways, all they have to do is team up in a more productive fashion.

So far, India's IT army has successfully courted the big boys' club in the developed world. But there is a limitation to how far it can go. Indian software companies are service-oriented. They have not had a large space to develop their propriety products. China can provide them that space.

China Inc will benefit from this partnership as well. It has developed an extensive manufacturing capability and can produce nearly anything under the sun. But in terms of intellectual development, especially software and design, it has lagged behind. This is where the Indian software giants come in. Leveraging on this combination of knowledge and production, India and China together will be able to supply the world better and cheaper products of all sorts.

Pudong in Shanghai, which is called "The New York of the East."

One would estimate that trade between China and India should touch $200 billion in a decade or so. But we are far from there. In 2004, bilateral trade reached $13.6 billion. Even so, it was a record. China is now India's second-biggest trading partner. In many ways, businessmen in the two countries are way ahead of the governments, having smelt the potential for partnership much earlier and tapping into each other's resources.

Chinese companies generally undertake two kinds of projects in India. The first is manufacturing plants. Both Konka and TCL, two leading Chinese consumer product companies, have factories in India that produce consumer electronics and home-appliances. Haier, the biggest Chinese consumer product maker, is adding a handset production unit in India.

A booming Indian economy has a great market potential, besides being a great factory. All Chinese consumer product companies wish to tap into India's $4 billion home appliances market. When the Indian economy grows further, it will become an explosive consumption market. For now, India has 46 million handsets, which will rise to 340 million in a few years, like China.

The second is research and development (R&D) centers. A high-profile example would be Huawei, the biggest Chinese telecom network player. It has been operating a sizable R&D center in Bangalore for several years now. It has some 700 employees, mostly Indians and an investment of US$80 million. Satisfied with the general environment and the talent base, it is putting in another US$100 million to expand its programs there. ZTE, the second biggest Chinese telecom network manufacturer, is also active in India.

Several Indian companies have also been active in China. All top Indian software firms are in China today. Among them, NIIT, a leading consulting and educational concern, has been operating in China for several years. It has set up numerous training schools in major Chinese cities, each with thousands of students. In addition, it offers extensive consulting services to China Inc.

India's Economic Miracle Symposium in Cornell University

The other leading IT names, such as Infosys, Wipro, TCS and Satyam, all have a significant Chinese presence. They can definitely play a big role in helping China to move to the next level. In addition, their international experience is a huge plus.

Besides, there are plenty of Indian manufacturing companies operating in China. The country provides them both a factory and a market. Consumption in China is way ahead of India as of now. Again, China has plenty of component suppliers who offer a vast choice for Indian manufacturers.

For many centuries, the two nations have lived in isolation. So in many ways, they are being reborn in this era of globalization. Both are now active players in global development. A prosperous India and China is great news for the world. The more prosperous they are, the easier will it be for the developed world to tap into these two markets. The biggest gainers will be the multinationals, which can set up their shops in these low-cost and big-market nations.

An explosive entrepreneurial spirit leads the growths of Indian and Chinese economies for now. Both are creating millions of entrepreneurs. These entrepreneurial armies are changing the very basics of their traditional societies. In this new environment, their large burdensome populations are being turned into a productive force. Interestingly, they have become the new champions of global development.

But their development remains at the very start for now. There are enormous barriers to be lifted. Both nations face the task to create a truly entrepreneurial culture, especially at the government and institutional levels. In short, both nations must sharply reduce their traditional bureaucratic power. Indeed, if they can double the size of entrepreneurs as well as cut by half the government bureaucratic body, how much more progress will happen?



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Other Articles by George Zhibin Gu
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    Japan & China: What’s Really at Stake?


George Zhibin Gu, who serves as The Seoul Times special contributor, is a business consultant based in China and is the author of a newly released book, Made in China: Players and Challengers (Portuguese edition, www.CentroAltantico.pt) and of a forthcoming book, China's Global Reach: Markets, Multinationals, and Globalization (www.Trafford.com, Sept 2005). He can be reached at gzb678@yahoo.com.cn

 

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