Letter from China: The cross-pollination of India and China

WEDNESDAY, NOVEMBER 9, 2005
SHANGHAI In its early years, globalization often seemed like something handed down from above. The rich countries of the world, led by the United States, foisted their rules and their advice on the poor, and their products were sure to follow. Who was globalized and who was not could be judged with a quick scan of the horizon for McDonalds and Starbucks signs, Levis jeans, Windows-equipped computers, or for that matter, American banks and insurance companies.
With the rise of China and India, however, old patterns are giving way to new ones. Until recently, the world’s two most populous countries had stood back to back, their gazes locked firmly on the United States for just about everything, from the direction of the global economy, to the creation of standards, to the enforcement of a certain order. Above all, they looked to America as a source of technology, capital and profits. Both clearly saw their links to the United States’ economy, the world’s largest and richest, as the secret to their own growth.
In its next incarnation, globalization will be more about interpenetration. China selling an endless flotilla of its manufactures to the rich countries, or Indian outsourcers winning jobs in everything from customer service to tax accounting to online help with homework, is hardly news any more. In its most momentous form, however, interpenetration means that the world’s emerging economic powers will begin to globalize each other, creating new sectors in each other’s markets, infusing each other with capital, and drawing on each other’s giant pools of talent.
Recent word of huge new investments by India and China in each other’s booming economies – most specifically in their red-hot information technology sectors – may just presage the dawn of this moment, one in which the giants of the developing world finally and truly discover each other.
The harbinger of this trend is Infosys Technologies, the Indian software and business service outsourcing giant that made waves in China recently with a $65 million investment to build large new research and training campuses in Shanghai and Hangzhou. Immediate plans call for the company to hire 2,000 Chinese engineers to begin writing business application software and providing back office consulting services in the Chinese market. But in this case, to focus on the short term is clearly only to see the tip of the iceberg.
Infosys is ramping up in China for the medium term when it already foresees the possibility of tens of thousands of employees, not just servicing the big Western corporations that are its mainstay at present, but introducing many thousands of Chinese companies to the benefits of outsourcing. “We are going to use China as a global development center, as much as we do India,” said Saikumar Shamanna, head of human resources development for China at Infosys.
And in this, Infosys is anything but alone. Suddenly, many Indian companies, from large, well known ones like Tata and Wipro to much smaller outfits, are scrambling to establish a foothold in China, where they aim to tap this country’s rich engineering talent to write software or get into the market for other computer services.
The Indian thrust is being matched by a newfound Chinese interest in India’s market, as well. One of China’s leading companies, Huawei, a big networking equipment manufacturer, for one, has set up a campus in Bangalore to tap Indian software talent and more broadly to study how India has become a force in software development in such a short period of time.
Regional business analysts say the obvious appeal of specific sectors, like information technology, in which each Asian giant has clear strengths, should not obscure a general background of rich opportunity. Together, the two countries boast a middle class of perhaps 400 million people that is growing fast. Already, China has over 100 million Internet users and 350 million cellphone users. No slouch itself, India’s mobile phone market has recently been increasing at a clip of 2.5 million users per month.
In a new report, “How India, China Redefine the Tech World Order,” Forrester Research, a technology consulting group says, “Over the next five years, nearly 40 percent of all PCs and a significant share of all cellphones sold worldwide will be in India and China.” The report claims that immature markets in consumer hardware, software and services “have room for double-digit growth for the next 20 years.”
Indeed, once the process of discovery is consolidated, it is hard to imagine it doing anything but picking up pace. India’s need for engineers today is pulling it into the Chinese economy. With its fast-aging population, believe it or not, China may need labor tomorrow, and the country’s emerging industrial giants may find India, with its younger workforce, irresistible.
If one places any stock in the notion of creative destruction, what could be more disruptive to the global status quo? With more than 2.3 billion people between them, agreement between India and China on almost any standard makes that item an instant contender for global standard status.
What does this mean in practical terms? That the successor to a ubiquitous product like Microsoft Office could very well be Chinese. (Indeed, a company called Wuxi Evermore Software recently sent me an advanced prototype.) It could mean that the mobile phone standards of the future are decided jointly in Asia, and not in Europe or the United States.
It could mean Indian employees in the back offices of rising Chinese corporations, implementing business systems devised not by Oracle or IBM, but by Indian companies like Wipro or Satyam. And it could also soon mean Chinese managers running production lines in factories in an India that will need far more industry than it has at present in order to lift hundreds of millions of people out of dire poverty.
What it clearly means already is the day when a cozy club of the rich – the United States, the strongest economies of Western Europe, and Japan – sets the pace for the rest of the world, passing out instructions and assigning grades, is fast drawing to a close.

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