China + India: The Power of Two

Recently, I read an article in Harvard Review Magazine (Dec 2007 Issue) that tries to focus on the advantages of working with these two countries (India and China) for India, China and all multinational companies around the world. India is known for its Services sector and China for Manufacturing and infrastructure, they both should start working together as one business nation for mutual interest. Western countries often debate that these two countries can never work together as both are competing with each other to become the undisputed superpower in Asia. Indo-China war that took place in 1962, China support to Pakistan (not liked by India), and India allowing Tibetan refugees (which China resents) provides more evidence to support the argument about India-China relations were never better.

The tensions between India and China are real, but they both started to understand the importance of working together. China-India together form 2.4 billion population, economists predict that by 2016 they will account to 40% of world trade compared to 15% in 2006. China changed its global business polices or strategy in 1978, and as of now it is very strong in manufacturing and infrastructure sector. In contrast, India changed its policies in 1990’s, and its now global leader in services and Information technology sector. Both countries have appetite for oil, coal, and iron ore, for which they compete fiercely, and also fight for capital and foreign investments from North America, Europe and Japan.

There are three good reasons to believe that these two countries can complement each other – one historic, one economic, and one strategic. Historic – Before India-China war, both countries used to share strong culture, business relation, and free trade. The relationship between China and India was one of with mutual respect and admiration. Economic – They have started to trade, and do more trade than any other nation. Recently, committee that was set-up suggested that bilateral trade could touch $50billion by 2010. As of today, these neighbors do 40% less trade than they should. Apart from that, trading is more balanced between them then China’s trade in USA and Europe. Strategic - China – Strong manufacturing and Infrastructure, India – Service and Information Technology, they chosen different routes to enter global economy. What is China is good at; India is not – vice versa.

So, the kind of industries that flourish in China and India are very different. Already, Indian and Chinese companies started to work with each other and cashing on each other strengths. It's time for multinational companies to review its strategy, in which they treat these two countries as one big nation with two different models. It’s a huge task for multi-national companies to make the best use of both nations, but it’s not impossible. GE and Microsoft are very good examples of implementing this strategy of working with both countries, and bringing best out of them. In the end, author quotes – “Instead of balking at the inevitable expansion of economic power beyond New York and London, companies will do well to recognize the complementarities between Beijing and New Delhi and, in a fast-changing world, try to wrest competitive advantage from them”.