MIT Sloan School of Business professor Yasheng Huang's editorial in the Financial Times "What China could learn from India's slow and quiet rise" got a firestorm of discussion going with a few friends. His thesis is that China's economic growth is being driven by capital investment both domestic and foreign whereas India's is driven by domestic demand so the use of capital is far more efficient. Additionally, China's political structure is inherently unstable whereas India's turbulent democracy is stable-- "15 years, six governments, five prime ministers, one direction" is the slogan from a recently formed organization www.ibef.org trumpeting the Indian brand. My random thoughts on China versus India:
- The trade between them has grown rapidly in the past two years as a result of thawing of political relations but also Adam Smith at work. A few examples of this: (1) we had the Chairman of Infosys Narayan Moorthy speak at www.tie-boston.org and he described the growth of their China office to address IT outsourcing opportunities in East Asia: Japan, China, Korea, etc.; (2) a friend from Delhi who designs and manufactures industrial speakers found it was more reliable and cheaper to manufacture in China than India inspite of his low volumes; (3) one of www.keyvp.com portfolio companies supports a Chinese plastics manufacturer that is moving it's entire plant from Shenzhen to Chennai as the Indian market is less competitive than the Chinese market
- India's urban infrastructure is atrocious and definitely has an impact on growth. When I was in Beijing a couple of years ago 10 year old buildings were being torn down to be replaced by building as or more modern than those in Boston. India's infrastructure in circa 1970s. This is a failure of governance in India.
- Many of the professionals I met in Beijing had one leg outside the country, almost as if they felt the current political/business situation could dissapear overnight. I met many people with a spouse and children in Australia or Canada. Clearly the Chinese political situation has to change to encompass broader dialog of the future.
- Economic well being is important but so are social cohesiveness and spiritual happiness. I find India has an abundance of the latter two but China appears to be more like Japan. Once economic well being is achieved people thirst for more. Japan is facing that transition and so will China.
- So both countries' future depends on reform of their respective governments. China's government needs to evolve to plurarism and India's towards greater efficiency and free markets.