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back to index backASIAtalk December,  2005

India and China: Competitive or Complementary?

Shanghai - Much has been written about the spectacular transformation of, first, the Chinese economy since the start of economic reform in 1978 and, a decade later, the Indian economy. Indeed, the resulting economic statistics are astounding.

In the case of China, annual GDP growth averaging 9%, and FDI accounting for 8.2% of world total by 2003, at USD 53 billion.

In the case of India, GDP growth rose to 8.3% in 2003, with FDI reaching USD 4.7 billion in 2003 and rising, fast. Looking ahead, even by conservative estimates China and India are likely to become the second and the fourth largest economies in the world by 2010, or shortly thereafter. Some view the emergence of these two economic powers as a prelude to an inevitable duel, but it does not have to be.

While contention for economic resources will result in conflict from time to time, India and China represent two economies with many complementary features. One often cited outlook divides up the world economy into (outsourced) goods and services with China and India, respectively, in the lead. India has excelled in software development, back-office processing, call centers and other services that do not depend on efficient infrastructure. China, on the other hand, has accumulated a lot of experience with building ports, airports, highways, rail systems, as well as various consumer goods. Both countries can benefit from free trade, technology transfer, cross-investment, and other forms of economic cooperation involving the exchange of goods and services.

In addition, joint R&D in automotive, bioengineering, chemical, and other industries requiring significant investment of financial and/or talent capital in both the public and private sectors are prospective opportunities for cooperation. Even in the area of search for energy sources and mineral resources, the relationship between India and China does not have to be directly competitive. Joint bidding leading to joint ventures would make more economic sense for both nations. Even more opportunities for cooperation exist in joint development of alternative energy sources such as hydro, solar, and nuclear.

A directly competitive economic relationship between India and China is not inevitable. Opportunities exist today for greater cooperation. Recent cases involving both nations in their respective pursuit of PetroKazakhstan and EnCana highlights the need for closer, mutually-beneficial, economic relationship. The key to economic co-existence or, better yet, to a synergistic and cooperative economic relationship between the two largest emerging economies in the world lies first and foremost in the wisdom, and the courage, of the political leadership in both countries.

Source: - GAI

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