Thomas Friedman, the esteemed New York Times columnist, says the world is flat. Every day, it seems, we are losing manufacturing, and now service, jobs to the emerging giants in the East. Is there a new Godzilla ready to tear its teeth into our economic fabric? China and India represent a whopping 20% of global output and, combined, are already larger than the United States.
If the two nations were able to structure their economies to achieve enduring collaboration, "Chindia" would take over the world.
But rest easy . This union will not be consummated for a very long time, if ever.
Complementary Economies
Were there ever two countries more yin-and-yang than India and China? On every dimension, in every sphere, their strengths and weaknesses are complementary, ripe for a commercial partnership that could -- theoretically -- alter 21st-century order. China, overflowing with technocrats, could build the factories. The business of building and managing global companies and brands could be turned over to India, a country of tremendous intellectual and strategic energy .
Compared to China, the subcontinent is a manager's nirvana (but lacks investment capital). Its service sector, representing well over 50% of output, is light years ahead of China's. Ditto the emergence of world-class multinational corporations led by seasoned management. Economic development is lubricated by sophisticated corporate governance and a stubbornly independent judiciary. The Indian economy seems to be -- finally -- thriving, despite dysfunctional state organs and petty political infighting. And Tata's long-awaited -- and skillfully executed -- bid for Dutch steelmaker Corus Group presages a new era for the Indian multinational. Finally, while primary education is lacking, India's universities produce legions of inventive, conceptually driven, English-speaking professionals. In contrast, China's "Innovate or die!" rallying cry is no more than a propaganda campaign orchestrated by party cadres.
The Middle Kingdom, on the other hand, boasts formidable production capability (but does not nourish its consumer markets). Fueled by armies of well-trained workers, it is a powerhouse, exploding with energy and ruthlessly propelling its way to the top of value chains. A massive, technocratic bureaucracy has, in spite of rampant corruption and few checks and balances, engineered a stunning industrial infrastructure within the past two decades. The PRC is roaring ahead, driven by a focused central (imperial) government as well as a dynamic private sector. The Chinese people, right down to the farmers, are equipped with an expansive worldview and trenchant ambition. They are hungry for glory.
Hurdles to Overcome
Flirtation between the two powers has begun. Bilateral trade figures -- up from practically nothing a few years ago to more than $20 billion in 2006 -- hint at a new age of win-win cooperation. It looks like a match made in heaven.
But the bride and groom are miles from the chapel. From a Chinese vantage point, there are three barriers that preclude symbiosis -- i.e., actual integration of economic and corporate structures. First, on the Chinese side, disputes regarding sovereignty, remnants of a 1962 border war, have not been resolved. More critically, India's embrace of Tibet's Dalai Lama, a "splittist intent on dividing the motherland," hits the paranoid third rail of centrifugal disintegration.
Second, India's most exportable products -- services such as education and software development -- have limited entry to the mainland. NIIT, the world's largest technology institute, has struggled valiantly to operate freely in the PRC, despite a severe shortage of qualified IT professionals. China's own service sector -- banks, travel, financial services -- is nascent. Its central government is obsessive about controlling political dialogue, shying away from industries driven by free expression, despite an oft-proclaimed need for innovation. Leaders are schizophrenically torn between "learning from the world" and insulating state-owned enterprises (SOEs) from the claws of foreign competition.
Finally, China and India spring from two radically different worldviews. Confucianism, the PRC's cultural blueprint, dictates that the individual accepts his place in, and then advances through, an intricate societal hierarchy. Chinese adhere to a striving, pragmatic, morally relativistic code of conduct (visitors driving through Beijing's Darwinian traffic will feel this firsthand). Hinduism and Buddhism, in contrast, reject materialism and embrace cosmological transcendence. "Brahminian restraint" (i.e., primary satisfaction derived from intellectual exchange) has yielded a love of debate. But the Chinese like to get on with it.
Are the Chinese and Indian nations destined to deal with each other on tender hooks, confounded by motivational discrepancies? True, both are scaled emerging economies with complementary strengths and weaknesses. But any marriage must be built on trust. Unless the leaders of both countries encourage their own people to celebrate cultural diversity, the potential for the Chinese dragon and Indian tiger to achieve collective greatness will be capped.