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The economic expansion of these two neighbouring giants is frequently\ntracked, analysed and compared. Last month, the ChIndia conference gave the relationship a closer look.<\/p>\n
By Anthony Lin<\/p>\n
hina and India. India versus China. China or India. The relationship between the two anc ient civilis ations a nd behemoth countries has been viewed and versed in various contexts, on numerous levels and under different lights. Particularly in recent years, as these two neighbours \u2013 home to nearly two-fifths of the world\u2019s population \u2013 seemingly chase each other around the global economic circuit.<\/p>\n\n
Yet, as government and business leaders on both sides of the Himalayas insist, it is not a race, nor is there a definitive finish line. They prefer to raise and realise mutual benefits in an era of simultaneous and parallel development.<\/p>\n\n
In September, a group of professionals and entrepreneurs from China and India gathered in Shanghai to advance that objective at the business level. The occasion was the ChIndia Forum 2006, organised by the China Supply Chain Council (CSCC) \u2013 and the mantra was cooperation.<\/p>\n\n
\u201cWhen it comes to India-China ties, I believe it\u2019s only limited by our imagination,\u201d says Vishnu Prakash, Consul General of India in Shanghai, during the opening remarks. Common depictions that pit the two countries against each other are inaccurate, Prakash believes, suggesting instead, \u201cWhat about India plus China?\u201d<\/p>\n
Twin Engines<\/b><\/p>\n
Bilateral economic ties are strengthening, as Prakash pointed out. Trade between China and India grew to USD18.7bn last year. \u201cThat will easily surpass USD20bn this year,\u201d he says, foreseeing the figure to reach USD50bn by 2010.<\/p>\n
For the second time this year, the Asian Development Bank (ADB) raised its 2006 growth forecast for Asia, excluding Japan, and attributed the adjustment to \u201cstrong performance\u201d in both China and India. The Manila-based lender says, in its Asian Development Outlook 2006 Update \u2013 released on 6 September, the same day that ChIndia was taking place \u2013 that the region\u2019s developing economies will expand 7.7 per cent this year, up from April\u2019s forecast of 7.2 per cent.<\/p>\n
China is outpacing the other economies in the region. \u201cAcceleration in growth in China, due to booming investment and exports, has significantly influenced this regional upward revision,\u201d the ADB says. It adjusted China\u2019s growth projection from 9.5 per cent to 10.4 per cent, and India\u2019s from 7.6 per cent to 7.8 per cent. Together, however, the countries are the twin engines of Asia\u2019s growth, accounting for half of the region\u2019s economy.<\/p>\n
Divergent Developments<\/b><\/p>\n
Participants of ChIndia were keen to highlight the distinctions between China and India, as they analysed various business sectors. The two countries are most intimately bound by their immense economic potential and, in business terms, their seemingly boundless markets. Otherwise, they are distinct nations on divergent paths of development and with dissimilar business structures.<\/p>\n
Basic contrasts in political systems help explain some of the differences for doing business in the two countries, says Laurentius Metaal, Managing Director of Lehman & Co., a Beijing-based business advisory firm. The Chinese government is \u201ccapable of making fast yet unpopular decisions,\u201d says Jim Ridgwick of Deloitte Consulting, and its strong economic involvement means that the \u201cindustrial sector is based on a subsidised model,\u201d says Metaal. By comparison, India\u2019s federal system makes it \u201chard to push through reforms,\u201d but its economy may be \u201cfar more efficient.\u201d<\/p>\n
Thanks to the state-directed opening to external trade and investment, China has achieved a \u201cmuch more integrated\u201d economy, contributing to six per cent of global exports of goods and services in 2004, according to Heiko Bugs, Principal Consultant at Fiducia Management Consultants. India\u2019s share was one per cent during that year. Comparing labour costs between the two markets reveals minimal differences, according to Bugs, but China\u2019s significantly higher literacy rate among factory workers \u201ccan have a big impact\u201d on production.\nWhen it comes to sourcing, finding a proper supplier is an \u201ceasier task\u201d in India, given the availability of information, says Ridgwick. In China, there\u2019s more need to check cross-references and much of suppliers\u2019 information is often outdated. \u201cYou need to be really creative in terms of where you find suppliers from,\u201d he says.<\/p>\n
In the retail sector, the distinctions between China and India are stark. China\u2019s savings rate is more than four times that of India\u2019s: 94 per cent to 22 per cent, respectively. Despite a larger middle class, says Paul French, Director of Access Asia, India has \u201cvirtually no foreign retailer penetration,\u201d while 97 per cent of its sales are via \u2018Mom \u2018n Pop\u2019 stores. \u201cIn India, brands have the power,\u201d he says. \u201cIn China, retailers have the power. In that sense, it\u2019s a complete reversal.\u201d<\/p>\n
Cooperative Convergence<\/b><\/p>\n
As it laid out the distinctions, ChIndia also marked several points of convergence. Trade of goods and services, after all, has always been based on comparative advantages. In a sector where one country lacks know-how, the other can fill it with skills and investment. That is perhaps most \u201cWhat\u2019s happening today is it\u2019s not about having R&D in one place. It\u2019s having R&D centres across different time zones,\u201d says Anand Rangachary, Director, South Asia and the Middle East, at Chennai-based Frost & Sullivan. \u201cThe advantage is that you\u2019re not completely dependent on one person.\u201d<\/p>\n
U.S.-based IT firm Cognizant, which has 23,000 workers in Kolkata, employs 200 people i n Shangha i \u2019 s Zhangjiang Semiconductor Park. China\u2019s skills base is as immense as its market access, one that can be extended to Japan and Korea. \u201cThat, we believe we can leverage best with a development centre in China,\u201d says Atanu Mukherjee, the firm\u2019s Chief Architect.<\/p>\n
Chinese companies a lso have an opportunity to invest in various sectors in India, particularly its under-developed infrastructure. Whereas Indian companies have been \u201caggressive\u201d in pursuing manufacturing opportunities in China, \u201cI don\u2019t see many Chinese companies looking to India,\u201d says Bugs of Fiducia. \u201cI think this is an oversight.\u201d<\/p>\n
\u201cBoth China and India will continue to grow in manufacturing,\u201d says Ridgwick of Deloitte. \u201cWe cannot think of global manufacturing without a China and India strategy. There are benefits for both countries to collaborate.\u201d An ideal scenario would be to leverage the \u201cunique advantages\u201d of both nations, says Bugs. Motorola has set up an R&D centre in Bangalore and a manufacturing facility in Tianjin. \u201cTogether, you can reap the benefits of both countries.\u201d<\/p>\n
Why Now and How?<\/b><\/p>\n
and attract investment from China or elsewhere, its business leaders are optimistic about \u201cturning current challenges into opportunity,\u201d says lawyer Zarir Bharucha, of Bharucha & Associates. For business communities on both sides, China and India may still be looking over their respective shoulders, but the race is becoming more of a relay than an all-out sprint.<\/p>\n
This first Ch India \u2019s event will be replicated in India \u2013 and, when it comes to China plus India, there are certainly myriad issues be discuss.<\/p>\n
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Source: www.sbr.net.cn<\/a><\/p>\n\n