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India and China: Rampant elephant, raging tiger

Robin Elsham in Mumbai

For 40 years it's been impossible to fly directly from Beijing to New Delhi -- or between any two cities in China and India for that matter.

All direct air links were severed between the two Asian goliaths following a 1962 border war.

Now air travel between the world's two most populous nations could explode if India's business leaders take to heart the message Chinese Premier Zhu Rongji delivered on Wednesday in Mumbai, the Indian financial capital.

"The level of cooperation between China and India is by no means commensurate with our respective strengths and status," Zhu told a gathering of India's top industrialists and financiers.

Some technologists have described a future where the two Asian giants stake out complementary claims to massive chunks of the global economy: China continues to evolve toward becoming the world centre of manufacturing and India an emerging powerhouse in software and IT-enabled services.

IT-enabled services include tele-marketing, help desk support, medical transcription, insurance claim and credit card processing -- any service which can be delivered via phones, computers and the Internet.

China is well on the road to becoming a manufacturing export powerhouse. India aims to become "the world's back-office".

A McKinsey study has estimated e-enabled services could be worth more than $500 billion globally by 2008.

Small beans

So far, though, trade between the two countries is modest, last year totalling only $3 billion. By comparison, trade between China and Russia was almost seven times greater, even though Russia's economy is a third smaller than India's.

Both China and India are growing rapidly even in the wake of the global economic slowdown, benefiting from the demand provided by their massive domestic markets and the insularity from global shocks provided by having only partially convertible currencies.

China's top economic planner on Wednesday confirmed China's economy grew 7.3 percent in 2001, and predicted that blistering rate may be repeated this year.

"Can China maintain last year's growth facing the world's economic downturn? My answer is yes," State Development Planning Commission Minister Zeng Peiyan said.

The Chinese economy has been growing at similar or much faster rates for over 20 consecutive years.

Fuelling growth is snowballing investment by foreign companies setting up plants to take advantage of cheap wages in China to manufacture goods for export -- and eventually for the domestic market as incomes rise.

Foreign direct investment has been pouring in at the rate of $30-40 billion for years, and last year hit a record high of $46.8 billion.

India's economic performance seems pokey only by comparison.

The Indian economy is expected to grow at least five percent this year, but the country has struggled for years to attract even one-twentieth the amount of direct foreign investment.

The disparity has stirred fear in India that the country would be swamped with cheap Chinese-made goods after the lifting of quantitative restrictions on imports last April. The barriers were lifted to comply with World Trade Organisation rules.

Trade threat

That has not happened, and Zhu told Indian business leaders that instead of fixating on China as a trade threat, India should focus on the potential for expanded trade.

"China and India are clearly complementary economies," Zhu said, pointing to China's strength in manufacturing and India's global prominence in software and IT-enabled services.

"I asked some members of my delegation to go to shops selling household electronics and found prices three to six times higher than Chinese products," said Zhu.

Chinese entrepreneurs, he said, should be encouraged to set up factories in India for the benefit of Indian consumers and industry. In turn, high-tech Indian companies should set up branches in China.

"Growth in India and China will be driven by development of high technology, especially in the coming years," Zhu said.

That created opportunities for Indian companies in telecommunications software, computer networking and system maintenance and other high-tech areas in China.

"Before coming here I spoke to a Chinese business delegation and said to them: go to India. And now I am saying to you...welcome to China," Zhu told India's corporate chieftains.

Zhu said it would be no problem to triple two-way trade to $10 billion a year.

Before arriving in Bombay, Zhu stopped in the Indian capital New Delhi to witness the signing of a number of trade and technical cooperation agreements.

ALSO SEE:
The pacts signed between India and China

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