India and China: Fruitful Partnerships
and Bound to Grow
George Zhibin Gu
16 February 2005
In this era of globalization, the two biggest elephants,
India and China, are running fast, finally. There is
sense of urgency for these two ancient peoples to catch
up with the developed world. More is true: there is
a high rivalry going on in between them. But the really
fruitful thing should be creative and productive partnerships
Mutual benefits are plenty. So far, India has built
up a world class IT army, while China has created a
fast expanding manufacturing force. Their strengths
are complimentary to each other in numerous ways. If
they team together in a more productive way, then one
plus one is greater than two. Similar things can also
include more nations, especially in the developing world.
Indeed, there are tremendous potentials for them to
have a more active partnership. So far, India's IT army
has successfully courted the big boy club in the developed
world. But there is limitation to it. That is, Indian
software companies are service-oriented. They have not
had a large space to develop their own propriety products.
Instead, they act as an OEM player mostly. But China
can provide a larger room for them to develop their
products in all possible ways.
In the meantime, China Inc will benefit enormously
from this partnership with India Inc. China has been
able to develop a most extensive manufacturing capability.
It is able to produce nearly all products under the
sun. But its intellectual development, especially software
and design, has not gained an equal development. So,
the Indian software army can play a big role in this
regard. At the same time, these combined forces will
be able to supply the world with better and cheaper
products of all sorts.
At the next level, both nations have a low cost structure.
If the developed nations charge $100/hour, China and
India can do it for 10-20% of the price. So, if they
team up together, their low cost would make more sense
to each other, and to the rest of the world.
So far, businessmen from both nations have begun to
tap into each other's resources. Among Chinese companies,
two kinds of projects are most active in India. The
first is manufacturing plants set up in India. Both
Konka and TCL, two leading Chinese consumer product
companies, have factories in India that produce all
sorts of consumer electronics and home-appliances. Haier,
the biggest Chinese consumer product maker, is adding
a handset production in India. A booming Indian economy
can make it a great market, besides being a great factory.
All Chinese consumer product companies wish to tap into
India's $4 billion home-appliances market. Once Indian
economy growth further, it will become another explosive
consumption market. For now, India has 46 million handsets,
but in a few years, it will have 340 million as China
Another is research and development centers. The high-profile
case is with Huawei, the leading Chinese telecom network
player. It has been operating a sizable research and
development center in Bangalore for several years already.
It has some 700 employees, mostly Indians, with $80
million investment. Now it is satisfied with the general
environment and the talented employees. It is adding
additional $100 million to expand its programs there.
For Indian companies, they are also active in China.
All the top Indian software firms are in China already.
Among them, NIIT, a leading consulting and educational
concern, has been operating there for several years
already. It has set up numerous training schools in
major Chinese cities with thousands of students, among
other things. The other leading IT names, such as Infosys,
Wipro, TCS, and Satyam, are all-active. They can certainly
play a big role in helping China to move to the next
level. In addition, their international experience is
a plus. At this time, the Chinese have gained direct
experience, largely satisfying, working with these Indian
In addition, there are plenty of Indian manufacturing
companies operating in China. It provides both a factory
and market for them. They can fully take advantages,
as China now has vast business chains. It has plenty
of components suppliers and there are vast choices for
Indian manufacturers. They can also sell their products
to the Chinese directly. In fact, consumption in China
is way ahead of India for now. But India's growth has
become impressive in the late.
These businesses have helped economic ties for the
two nations significantly. With all the great benefits,
the trade between them should really become exciting.
One would guess it to be around $200 billion. But not
yet. In 2004, it reached $13.6 billion. Even so, it
was a new record. By now, China is the second biggest
trading partner to India, but India is way behind. Even
so, such trade momentum can increase only.
In many ways, their businessmen are ahead of the governments
in these two nations. They can easily get benefits by
working together. As long as the two governments are
concerned, they have become more pragmatic than ever
before. They are more active to search for ways to widen
doors for opportunities and partnerships. This is very
A Great Era
In the eyes of elite Indians and Chinese, once these
two nations learn how to work with each other, they
will reshape the world. Indeed, once their trade reaches
$200 billion, the developed world will have to work
harder to sell their highly priced chips and software
to Asia, among other things. At the same time, both
India and China can have better products and services
for the rest of the world.
It must be said that the developed world can easily
tap into these two markets. So, it will also benefit
most directly from a prosperous India or China. In fact,
it can get more benefits. The foreign multinationals
can easily choose OEM or set up their own shops in these
two low cost nations. In the end, they benefit more
than anyone else.
There are more to it. For many centuries, both nations
have tried to live in isolation. In this era, they have
become reborn. Both are active to participant in the
global development today. So, a prosperous India and
China is great news for the world. This has laid down
a grand framework for the great convergence of global
They do have a lot of new lessons for the world. An
explosive entrepreneurial spirit leads the growths of
their economies. Both are creating millions of entreprenurers.
These entrepreneurial armies are changing the very basics
of their traditional societies. Under this new environment,
their large burdensome population is being turned into
a productive force. For them, there is one direction:
growth. Interestingly, they have become the champion
About the Author
George Zhibin Gu is a veteran business consultant based
in China. He holds a Ph.D. from University of Michigan
(1987). He has worked for Prudential Securities, Lazard,
and State Street Bank, among others. His work covers
M&A, venture capital, business expansion and restructuring.
He is the author of two books, China's Global Reach:
markets, multinationals, and globalization (Haworth
Press, Fall 2005) and China Beyond Deng: Reform in the
PRC (McFarland, 1991).