The World Presidents’ Organization India University New Delhi, November 3, 2007

India’s giant strides – How do these affect China, Southeast Asia and the West?

by W. SyCip

THE TOPIC ASSIGNED TO ME: “INDIA’S GIANT STRIDES – HOW DO THESE AFFECT CHINA, SOUTHEAST ASIA AND THE WEST?” IS MADE EASIER FOR ME AS YOU HAD A COMPARISON OF THE TWO COUNTRIES AT YESTERDAY’S MEETING. HAVING BEEN INVOLVED IN BOTH INDIA, CHINA AND SOUTHEAST ASIA IN THE LAST 65 YEARS, I HOPE THAT SOME OF MY COMMENTS MAY BE USEFUL TO YOU AS YOU PLAN ON THE FUTURE OF YOUR BUSINESS. IF YOUR PLANS DO NOT INCLUDE INDIA AND CHINA, I WILL STRONGLY SUGGEST YOU CHANGE YOUR ADVISERS OR HAVE THEM TAKE A TWO-MONTH VACATION, SPENDING ONE MONTH IN EACH COUNTRY.

THE TWO COUNTRIES ARE DIFFERENT IN MANY WAYS – BUT THEY ARE NEIGHBORS AND THEIR PRESENT LEADERSHIPS ARE PRAGMATIC AND HAVE A BETTER UNDERSTANDING OF WORLD AFFAIRS THAN MANY OF MY WESTERN FRIENDS.

THE FOLLOWING QUOTATION FROM MANJEET KRIPALANI, AN INDIAN LADY JOURNALIST MAY BE APPROPRIATE:

“INDIA AND CHINA ARE THE TWO GIANT EXPERIMENTS OF OUR TIME. NO OTHER COUNTRY HAS ATTEMPTED TO DO WHAT THEY ARE DOING. THESE TWO ANCIENT CULTURES DOMINATED AND CHANGED WORLD HISTORY IN THE PAST. THE RISE OF THE WESTERN, INDUSTRIALIZED POWERS IN THE 19TH AND 20TH CENTURIES WAS A BRIEF INTERRUPTION. INDIA AND CHINA WILL ONCE AGAIN CHANGE THE COURSE OF WORLD HISTORY – FOR NOW INDIA WILL DO IT THROUGH ITS SOFT POWER AND CHINA THROUGH ITS HARD POWER. HOPEFULLY, THEY WILL LEARN FROM EACH OTHER. THEN ASIA WILL REGAIN ITS CENTRAL GLOBAL STATUS.”

THESE TWO GIANTS HAVE 37% OF THE ENTIRE WORLD POPULATION. TO BETTER UNDERSTAND HOW THEY MAY AFFECT YOU AND YOUR CHILDREN’S FUTURE, YOU HAVE TO RECOGNIZE THE DIFFERENCES BETWEEN THE TWO COUNTRIES.

1. INDIA IS A DEMOCRACY, PUTTING POLITICAL FREEDOM AHEAD OF ECONOMIC FREEDOM, WHICH HAS BEEN A HANDICAP IN INFRASTRUCTURE DEVELOPMENT. MEDIA IS FREE – MAYBE AT TIMES TOO FREE. INDIA’S NEIGHBORS IN SOUTH ASIA ALSO PROFESS A BELIEF IN DEMOCRACY.

CHINA WAS AN ECONOMIC FAILURE UNDER MAO BUT THE COUNTRY’S ECONOMIC GROWTH TOOK OFF WHEN DENG HSIAO PENG SUGGESTED THAT MAKING MONEY IS “GLORIOUS” AND RELEASED THE ENERGY OF ITS PEOPLE. MEDIA IS SUBJECT TO DECLINING GOVERNMENT CONTROLS BUT IS NOT FREE BY WESTERN STANDARDS. NEIGHBORING COUNTRIES BELIEVE IN ECONOMIC FREEDOM AHEAD OF “WESTERN” DEMOCRACY.

BOTH COUNTRIES ARE PROUD OF THEIR ANCIENT CIVILIZATIONS AND THEIR ASIAN CULTURE. CHINA’S PRESENT PER CAPITA INCOME IS ALMOST DOUBLE THAT OF INDIA.

2. INDIA HAS DIFFERENT RACES, DIFFERENT RELIGIONS, AND AN OLD SOCIAL STRUCTURE. IT IS REMARKABLE HOW THE COUNTRY HAS BEEN UNITED AND HAS BEEN ABLE TO RESOLVE PROBLEMS THAT THE REST OF THE WORLD IS STILL STRUGGLING WITH.

CHINA HAS MINORITY PROBLEMS BUT THESE ARE CONFINED TO CERTAIN AREAS WITH RELATIVELY SMALL POPULATIONS.

WITH NO RESTRICTIONS ON POPULATION GROWTH, INDIA HAS A YOUNGER POPULATION BUT BIRTH RATES IN INDIA WILL DECLINE AS INCOME LEVELS RISE.

CHINA’S POPULATION IS MORE URBAN THAN THAT OF INDIA. CHINA: 43%, INDIA: 29%. CHINA HAS 183 CITIES WITH A POPULATION OF 1 MILLION OR MORE. INDIA HAS 35.

3. INDIA HAS DEVELOPED A SERVICE SECTOR VERY SUCCESSFULLY WITH A LARGE ENGLISH SPEAKING POPULATION. IT HAS MANY BRILLIANT LEADERS THAT HAVE HEADED MANY MULTINATIONAL COMPANIES AND THE TOP UNIVERSITIES OF THE WORLD HAVE HAD THE BENEFIT OF INDIAN PROFESSORS.

CHINA’S ECONOMIC GROWTH HAS BEEN IN MANUFACTURING COMPANIES INITIALLY ESTABLISHED BY ETHNIC CHINESE FROM TAIWAN, HONG KONG AND SOUTHEAST ASIA THAT WERE NOW PROUD THAT THE COUNTRY HAS EMERGED FROM THE “AGE OF HUMILIATION” WHEN THEY LOST EVERY WAR AND WESTERNERS AND JAPANESE OCCUPIED PORTS AND THE NORTHERN PART OF CHINA.

4. INDIA’S EXPORTS OF GENERICS IS TEN TIMES LARGER THAN CHINA’S BUT CHINA IS THE LARGEST PRODUCER OF RAW MATERIALS FOR DRUGS.

5. INDIANS IN SOUTHEAST ASIA WERE MOSTLY TRADERS AND IN SMALL LENDING ACTIVITY. ITS SUCCESSFUL OVERSEAS BUSINESS WERE MORE FOCUSED IN EUROPE AND AFRICA.

ETHNIC CHINESE IN SOUTHEAST ASIA WERE IN TRADING AND MANUFACTURING AND WERE MORE SUCCESSFUL IN JOINT VENTURES WITH THE NATIVE POPULATION.

6. INDIA’S FOREIGN EXCHANGE RESERVES HAVE STARTED TO GROW ALTHOUGH THEY ARE MUCH SMALLER THAN CHINA’S $1 TRILLION 300 BILLION. BOTH COUNTRIES DO NOT WANT HEDGE FUNDS, WITH THEIR VERY SHORT TERM OUTLOOK, TO BE INVOLVED IN THEIR STOCK MARKETS.

BOTH COUNTRIES MAY HAVE HAD TOO RAPID GROWTH IN SHARE MARKET PRICES. CHINA MORE SO THAN INDIA SO WE SHOULD EXPECT ADJUSTMENTS AS CHINESE AND INDIANS ARE PERMITTED AND ENCOURAGED TO INVEST ABROAD WITH MUCH LOWER PRICE/EARNINGS RATIOS.

7. BOTH COUNTRIES HAVE TRAINED MORE ENGINEERS THAN LAWYERS! THE EXCEPTIONALLY TALENTED PEOPLE OF BOTH COUNTRIES HAVE MET IN SILICON VALLEY WHERE 30% TO 40% OF NEW COMPANIES WERE STARTED BY CHINESE OR INDIANS.

8. THE WORLD TOURISM FIGURES WILL CHANGE. FRANCE WITH OVER 75 MILLION VISITORS HAS BEEN THE LARGEST COUNTRY OF DESTINATION WHILE MORE GERMANS, OVER 80 MILLION, TRAVEL ABROAD THAN ANY OTHER COUNTRY. BY 2020 CHINA WILL DOMINATE THE TRAVEL INDUSTRY. MORE THAN 130 MILLION TOURISTS ARE EXPECTED TO VISIT CHINA AND OVER 100 MILLION CHINESE ARE EXPECTED TO TRAVEL ABROAD.

I WOULD LIKE TO QUOTE FROM THE RECENT CONFERENCE BOARD STUDY ON CHINA AND INDIA:

• INCREASING EDUCATIONAL ATTAINMENT IN INDIA AND CHINA IS CHALLENGING ANY COMPLACENCY IN DEVELOPED COUNTRIES ABOUT OUR GLOBAL LEADERSHIP AND SUPERIOR TALENT POOLS.

• CHINA AND INDIA ARE PROJECTING THEIR ECONOMIC AND DIPLOMATIC STRENGTH IN ASIA, AT THE UN, IN INTERNATIONAL DIPLOMACY. NO LONGER CAN THEY BE IGNORED.

• RAPID ECONOMIC DEVELOPMENT IN BOTH COUNTRIES IS RAISING THEIR POPULATIONS OUT OF POVERTY, GENERATING ENORMOUS NEW CONSUMER DEMAND, AND RAPIDLY INCREASING PER CAPITA INCOMES, THUS DEEPLY AFFECTING THE GLOBAL ECONOMY.

• INDIA AND CHINA ARE BOTH COMPETING AGGRESSIVELY IN THE WORLD ECONOMY. CHINA IS THE WORLD’S WORKSHOP AND INDIA IS THE WORLD’S BACK OFFICE. THEY BOTH HAVE MORE GROWTH POTENTIAL.

YOU SHOULD, OF COURSE, ALSO REMEMBER THAT BOTH COUNTRIES HAD CLOSE RELATIONSHIP WITH THE SOVIET UNION AND HAVE CONTINUED TO PURCHASE MILITARY HARDWARE FROM RUSSIA. BOTH COUNTRIES WOULD LIKE TO MAINTAIN AN INDEPENDENT BUT FRIENDLY POLICY WITH THE U.S. AND EUROPE BUT DON’T EXPECT THEM TO BE SUBSERVIENT TO THE WEST!

CHINA’S EFFECT ON SOUTHEAST ASIA IS VERY CLEAR. MANY OF THE REGION’S MANUFACTURING PLANTS HAVE CLOSED OR REDUCED THEIR OUTPUTS DUE TO LOWER COST PRODUCTS FROM CHINA. CHINA IS TRYING TO OFFSET THIS BY INCREASED CHINESE PURCHASES OF RAW MATERIALS, MINERALS, AND FOOD PRODUCTS. CHINESE INVESTMENT IN INFRASTRUCTURE AND TOURISM ARE EXPECTED TO INCREASE.

THERE HAS ALSO BEEN INCREASED ACTIVITY OF INDIAN COMPANIES IN SOUTHEAST ASIA. MULTINATIONALS OFTEN PREFER TO “OUTSOURCE” IN MORE THAN ONE COUNTRY IN CASE OF POWER SHORTAGES OR NATURAL DISASTERS!

WHILE ARTICLES WRITTEN BY POORLY INFORMED WESTERN JOURNALISTS HAVE DOUBTS ABOUT THE SUSTAINABILITY OF CHINA’S GROWTH BECAUSE IT IS NOT A DEMOCRACY, MANY OF US IN ASIA BELIEVE THAT CHINESE LEADERSHIP ARE AWARE OF THEIR OWN PROBLEMS AND HAVE BETTER SOLUTIONS THAN WHAT WESTERN LEADERS WOULD SUGGEST. WITH GLOBALIZATION ANY ECONOMY WOULD HAVE TO RESPOND QUICKLY TO CHANGES IN OTHER COUNTRIES. THE SLOW LEGISLATIVE RESPONSES TO ECONOMIC CHANGE MAY REQUIRE THE U.S. AND EUROPE TO MODIFY THEIR PRESENT POLITICAL PROCESS.

THE FUTURE IS EXCITING FOR ALL OF US WHO LIVE IN ASIA. WE HAVE SEEN HOW ASIA HAS RECOVERED AFTER THE FINANCIAL PROBLEMS OF 1997. IT IS NOW FOR THE U.S. AND EUROPE TO RECOGNIZE THEIR PRESENT ECONOMIC SLOW-DOWN, EFFECT CHANGES, SO THAT THEY CAN PARTICIPATE EVEN MORE IN ASIA’S LONG TERM GROWTH.