Tango of the dragon and the elephant

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: For much of the last 1,000 years, what India and China had in common was the fact that they were the richest nations on earth. In 1500 AD, their combined GDP commanded 25% of world’s GDP. Then they both had a disastrous phase during the last decades of the 19th century, partly eclipsed by famines and earthquakes and partly due to the emergence of Europe and America.

By mid-20th century both countries were relatively poor. The reversal of China’s fortunes started with Deng Xiao Ping in power in 1978 and the institutionalisation of the market-driven economic policies. India adopted that path in the early 1990s. Since then, both the economies have been growing at breakneck speed. China has done better than India in its ability to attract foreign investment suitable for an export-led, low-cost manufacturing economy while India has largely been a domestic consumption story with success in knowledge and services industry.

The bilateral trade between India and China has increased 30-fold in the last decade. Last year, bilateral trade touched $18 billion and an aggressive goal of $50 billion is set to be reached by 2010. These numbers may seem low looking at China’s overall trade numbers but the trajectory is on a fast track and China, which is currently the second largest trading partner of India may replace the US to be the largest trading partner within the next few years.

Indian companies have invested in industries like pharmaceuticals, IT, electronics, engineering goods, auto components and diamonds. The way Indian companies have taken advantage of Chinese power in manufacturing and market, Chinese companies have responded with equal vigour. Huawei has already invested $100 million in India in R&D and has committed a further $150 million. Their revenue from India was around $300 million last year. Haier considers India a very important market and had set a revenue target of $65 million last year (from India). 

The company has struck local alliances with Whirlpool and Voltas and more strategic alliances are on the cards. Apart from the private sector, there has been action in public sector too. We have seen the government moving from competition to co-operation in important sectors such as energy after realising that working together is going to be in their best interest.