China and India are flip sides of a large Asian coin that most investors want.
Historically, India has been the younger child: always behind, never as fast and too unwieldy to discipline into high productivity without the command-and-control structure of its elder.
But it seems as though the South Asian underdog may finally be catching up, with growth in China sputtering and demand in India booming.
At this new inflection point, will the two Asian giants be ready to move past competitive gamesmanship and national distrust, and instead set their eyes on strategic alliances that could help both global powers win?
Indian Prime Minister Narendra Modi’s administration, on the one hand, appears to be recalibrating India’s China facing disposition – as one that embraces opportunities to collaborate towards the goals of economic and industrial growth, while maintaining a fierce territorial instinct and vociferous competitive drive.
In Beijing earlier this month, Amitabh Kant, Secretary of India’s Department of Industrial Policy and Promotion, invited Chinese companies to establish themselves in India, citing the recent liberalization of several key sectors to foreign direct investment (FDI) and recent policy initiatives instituted by the Modi administration as markers of India’s increasingly welcoming business climate. India is pushing hard to stimulate Modi’s “Make in India” initiative as a means to kickstart domestic employment and growth, and stands to benefit from China’s know-how in large scale manufacturing efficiencies as well as Chinese investments in infrastructure development.
It’s not obvious why Chinese firms would up-end their manufacturing processes and move to India, where power supply can be intermittent and labor laws remain draconian. The Far East giant could more rationally be expected to want to export more Chinese goods into India, to tap into a rapidly expanding demographic representing over one-sixth of the world’s population with a purchasing power fueled by its rising and young middle class. The trade deficit substantiates this logic: India’s trade deficit with China stands at about $45 billion, with Chinese imports into India vastly overshadowing Indian exports and China’s foreign direct investment into India at less than 0.20% of total FDI into India from all countries.
Earlier in the month, a more exclusive meeting took place in New Delhi, between Indian Prime Minister Modi and Chinese e-commerce behemoth Alibaba’s Chairman, Jack Ma. Following Alibaba’s global record breaking IPO in September 2014, Ma has visited India twice, exploring ways to expand Alibaba’s presence in India and penetrate India’s explosive e-commerce market. Ma stressed the potential for the Alibaba platform to take Indian small businesses global. Ma earlier conveyed Alibaba’s desire to invest more funds into the Indian tech and venture space.
There is no doubting the fact that India’s demographics present an enticing demand market for Alibaba and other Chinese companies. India’s economy is expected to grow 7.5% in the upcoming 2015-2016 fiscal year, which begins in April, up from 7.2% in the current fiscal year. At this rate, India would be the world’s fastest growing large economy. However even with the faster pace of growth, China’s economic output far surpasses India’s, totaling more than $10 trillion in 2014, compared with India’s roughly $2 trillion.
The question of which Asian giant will dominate the supply of goods and global demand – and whether noteworthy collaborations between the two will materialize despite a complex history of rivalry and mistrust – remains to be seen.
Discussion
No comments yet.