Giant Affair

Walk through one of the main complexes in Shanghai's Pudong Software Park and you come across a prominently displayed sign for Infosys, one of India’s most respected IT firms. The same complex also holds Satyam – the first of India’s software services companies to set up offices in Shanghai. Nearby is the headquarters of Tata Consultancy Services (TCS), the largest software services company in Asia, which currently runs an outsourcing center for GE in the nearby town of Hangzhou. TCS is owned by the Tatas, one of India’s most prominent business families. Across the river, on the other side of town, is NIIT, the principal software training center in India’s private sector. NIIT has been operating in China since 1998 and now runs an extensive two-year course in 25 provinces, training around 20,000 students to be software professionals. There is widespread speculation that Wipro, the only one of India’s giant IT firms yet to have a presence in the city, will establish a Shanghai office very soon.

It is no surprise that Indian software companies are setting up in China. They, like everyone else, sense great opportunity in one of the largest, fastest-growing economies in the world. What makes the activities of Indian companies particularly interesting is that they are helping to create links between these giant neighbors – two countries that have been estranged since the mid-20th century.  With over a third of the planet’s population and the two most rapidly developing societies in the world, China and India are beginning to forge what will undoubtedly be one of the most important relationships of the 21st century.

For thousands of years the Sino-Indian ‘border’ was crisscrossed with trade routes. The flows of goods and ideas – particularly with the spread of Buddhism – had a profound influence on shaping the entire culture of Asia. As K.M Panikkar writes in "India and China: A study of Cultural Relations", "the thousands of years of contact between India and China constitute one of the central facts of Asian history. It is this prolonged contact which has been the major factor in the shaping of the Asian mind, for, from China its influence radiated to Korea, Japan, Mongolia and other more distant lands."

In recent centuries these links cooled and – after the Sino-Indian War of 1962 – they were almost completely severed. By the end of the twentieth century the two populations had become strangers to each other. Speak to the ordinary Chinese or Indian about their neighbors and they will more likely respond with stereotypes (not necessarily negative) or comments about strange eating habits than reply with any real knowledge or insight. Sometimes it seems that India and China appear even more exotic to each other than they do to those in the West. (This is partly due to the fact that, although flights are beginning to open up, it still costs about as much to fly from Shanghai to Bombay as it does from Shanghai to New York.)

Yet, despite this estrangement, the fate of the two countries has shared an almost uncanny resemblance, beyond anything that can be explained by mere geographical proximity. Both are demographic superpowers with more than a billion people each, and both are proud nations with ancient histories whose power waned throughout the modern period. They felt similarly overwhelmed by colonial influences, and, in response, both developed strong leaders who led their respective countries to national independence. Both Nehru and Mao created highly independent modern states which pursued strategies of cultural and economic protectionism (swadeshi and zili gengsheng). These were eventually abandoned – or at least radically reinterpreted – as both India and China adopted policies of economic reform and liberalization, opening themselves up to the world.

On the other hand, Asia’s giants can also appear as mirror opposites, a perception most succinctly expressed in both countries by the oft-repeated idea that China has excelled in hardware while India has excelled in software. In part this reflects a division within the IT industry: China manufactures chips and electronic components while India writes the codes that power the hardware. The slogan also works, however, in describing a much more profound and widespread difference in India and China’s respective paths of development. China’s strengths in buildings, bridges, power, telecoms and roads are all areas where India is remarkably weak. On the other hand, China’s great weaknesses – democracy, the spread of information, and a free and vibrant media sector – are all areas where India shines.

It is the realization of these complementary strengths and weaknesses that has prompted a surge of interest in bilateral business relations in the last one or two years. Businesses on both sides of the border are increasingly appreciative of the potential for growth in the giant next door. "In the last couple of years the whole relationship is taking a complete U turn," says Harsh Vardhan of Satyam.  "The amount of engagement which is happening between India and China now, both at the government level and at the business level, has exponentially increased." 

This renewed relationship can be concretely measured in levels of trade, with economic and bilateral trade tripling in the past 3 years. India is feeding and supporting China’s economic development by exporting raw materials and semi-finished goods, as well as shipping Chinese cargo to the world.  Chinese companies, for their part, are just beginning to tap India’s ever-expanding consumer market by exporting electrical machinery, home appliances, consumer electronics, and mechanical goods. Haier Appliances, China’s largest white goods manufacturer, is about to open a design center in India.  A decade ago, trade between India and China was a paltry $300 million, by the end of 2004 it is set to cross the $10 billion mark.

Yet, this is just the beginning. ’We are going to see a lot more action in business and commerce between these two countries’ promises Prakash Menon of NIIT. As this activity transforms India and China from suspicious competitors to friendly collaborators, it has, according to one Shanghainese currently working for an Indian company, the potential to completely reorganize the global economy. In the past ‘China and India counted so little in the world economy – so their words and activities could just be ignored.’ Yet, ‘as you can see from the last meeting of the WTO,  the two countries are now willing to work together to set up new rules of the game.”

"It's like in the early stages of infatuation," says Sunil Kumar, of the Confederation for Indian Industry, musing about the relationship between India and China. "You are mysterious to each other, but you are trying to find out more about each other."  The world should pay attention and get ready for a time, in the not-so-distant future, when this infatuation turns into a full blown affair. Since, as Prakash Menon suggests, "If India and China can learn to market to each other, I don’t think we will need any other country. In the first 50 years of this millennium the East meeting the East is going to be a lot more powerful than the East meeting the West."