The authors present their views on the article by Foreign Policy highlighting the fact that, “If China is going to build on its growth, it’s going to need an industrial policy that backs it up instead of holding it back.”

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“Many western observers think that as the Chinese currency is allowed to float with market forces, it will make Chinese exports more expensive. Couple this with the recent spate of increases in wages of Chinese workers announced by many companies operating in China, it is tempting to conclude that Chinese companies will suffer a setback in their global competitiveness. But this may be at best a short-term effect. To figure out the long-term consequences, one might want to look at what happened to the Japanese companies in the 1980s when energy costs increased dramatically, and Japanese currency appreciated significantly under international pressure. To deal with these pressures, Japanese companies redoubled their innovation efforts. For example, the Japanese auto industry created luxury brands Accura, Lexus, Infinity – brands that have successfully attacked mighty Mercedes, Audi, and BMW. So while we might see less of the low cost Chinese products flooding the western markets, we should also watch out for a slew of innovations from China in the next decade that might change all our lives.”, -Authors, Winning in Emerging Markets.

Do you agree? Looking forward to your comments and experiences in similar situations.

Potential for Sino-Indian Collaboration at the Microeconomic Level

Q (Question): What is the possibility of China and India emerging from the economic crisis?
A (Tarun): China and India are complementary economies. While there are many opportunities for partnerships at the macro level, I am particularly optimistic about the potential to collaborate at the micro level. I believe economic cooperation will supercede current border conflicts.

Q: What are potential areas for collaboration?
A: Biotech due to differences in genetic composition; Microfinance – India has a lot of experience; China is gradually open its doors to foreign participation in the sector

Q: How can Chinese companies have successful M&A transactions like the Tatas of India? Is this a good time for global M&A?
A: Chinese M&A has not been successful as seen from CNOOC’s failed attempt to acquire Unicol. This is not due to the English proficiency of Chinese managers but rather the understanding of Western culture as well as political opposition. I recommend Chinese companies to start by purchasing smaller businesses and practice what Zhou Xiaochuan suggests of being down-to-earth and pragmatic.

Q: How does the role of government differ in these two countries?
A: China too strong but world-class policy making; India too weak due to constant political turnover.

Q: How do Chinese and Indian entrepreneurship differ?
A: Indians are encouraged to experiment. I recommend youth of both countries to visit each other’s countries to better learn about each other.

Q: Why do China and India’s development models differ?
A: India is a far more diverse country than China. This diversity has eased the internationalization of India. Chinese society is comparatively more homogeneous, thus there are many opportunities for it to learn from my diverse societies.

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Pundits are wrong to focus purely on Sino-Indian border tensions, China’s string of military establishments around India, or the competition for natural resources. I am an academic, but as a business school professor, live very much in the present, and recognize these tensions. Nonetheless, I aver that we will miss the much richer forest for the sparser trees by failing to highlight many more positive-sum possibilities, whose signatures are already among us. One such reality concerns the future growth of global commerce lying largely with interactions among developing countries, so-called ‘south south’ interaction.

Whether one looks at the Indian mobile operator Bharti buying assets across Africa, the Chinese investing in Brazil’s natural resources, or the Afrikaner-origin Naspers gradually buys Russian media assets, much of the next several decades of cross-border commerce will likely bypass New York and London. Indeed, economic symbiosis between China and India, the biggest ‘south’ economies, ought to be the sine qua non of such South-South interaction.

But will it be? Though bilateral trade has skyrocketed, there is reason to be sanguine. As I argued in Billions of Entrepreneurs in 2008, there is an underlying complementarity between the Chinese and Indian economies – what China is good at, India is not, and vice versa – but neither country has capitalized on the possibility of leveraging the other’s strengths. Paradoxically, global corporations, developing ‘hardware’ in China and ‘software’ in India, are more attuned to this. India must drop its reflexive insecurity of Chinese competition, and China must recognize that India’s strengths now extend far beyond software, ranging from microfinance to life-sciences.

Further, a modicum of creativity will expose many win-win opportunities. India is often held to punch over its weight globally in the projection of soft power, whether through Bollywood, or English literature with an Indian twist. Lately, China’s Confucius institutes, disseminating language and culture worldwide, are in catchup mode. Surprisingly, India, the ultimate palimpsest of influences, a cultural mélange through the centuries, has expressed skepticism of this; wouldn’t it have been better to suggest a reciprocal cultural program from India into China?

Unlike competing for factories, telephone licenses, or oil patches, cultural exchanges are not zero-sum. In Sino-Indian history, for example, travelling monks between the countries lubricated commerce. Instrumentally, monasteries provided respite for traders; more to the point, interchange bred familiarity and it is harder to demonize the familiar.

The American philosopher, Will Durant, said in a 1945 speech, “It is a mistake to think that the past is dead. …..The present is merely the past rolled up and concentrated in this second of time.” Naysayers about Sino-Indian relations perhaps, paraphrasing Durant, suffer from a limited perspective. [Pessimists] “view history as a turbulent stream of conflicts….But if we turn from that Mississippi of strife, hot with hate and dark with blood, to look upon the banks of the stream, we find quieter but more inspiring scenes.”

For China and India to be lodestones for the impending gush of South-South commerce, they must learn to cooperate, as they have in history, and more than they do currently.

Authored by Prof. Tarun Khanna, featured in Jinri Yindu (published by the Embassy of India, Bejing). Jinri Yindu translates to Our India in English.

Prof. Tarun Khanna shares his opinion in Fortune magazine on the recent uprising in Egypt and how can it be reconstructed back. He opines that “Business leaders working in the Middle East should not stand by the sidelines or hop on the next flight out. They should act to rebuild trust, wherever and whenever it is possible.”

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