India and China: Cooperation for Competitive Advantage

Prof. Yogita J.Kadam and Prof. Manisha Phate, Assistant Professors at S.K.N.Sinhgad School of Business Management, Ambegaon (Bk) 41.

Abstract:
China and India, the two giants are the worlds oldest civilizations have a long history of trade and cultural exchange dating back to at least the early part of the first millennium A.D. The twentieth century saw tensions between the two increases over disputed borders and geopolitical competition for power, influence, resources, and markets. In 2003, China and India signed a joint Declaration on Principles for Relations and Comprehensive Cooperation, which laid down guiding principles and goals for bilateral relations, including economic ties and a pledge that neither country would use or threaten to use force against the other. As the worlds largest developing countries, China and India share a number of interests, chief among them domestic development and economic reform. Both countries are experiencing a period of exceptional economic growth and are struggling with complex social challenges that are arising as a result of this growth. Both countries are also struggling to define their role in the world given their newfound influence on the global economy and in global affairs. China and India share great power ambition and seek to preserve dominant political influence. They both promote the notion of a multipolar world in which they each may serve as major international players alongside the United States. Both are also preoccupied with maintaining their sovereign independence from outside influence, a lasting residue of their unhappy colonial experiences. The objective of this paper is to highlight the similarities and problems of both the countries. The paper tries to elaborate upon the need and importance of combine strategizing by India and China for their future growth opportunities, energy security and to consolidate their position as the major players in the multipolar world. Key Words: India, China, Strategy, Similarities and Problems, Opportunities.

I INTRODUCTION:
India and China, both heirs to ancient civilizations, have emerged today as the two most powerful and influential Asian nations in terms of their economic capabilities and geopolitical standing. India continues to be an open, participatory, multiparty democracy, while China has an authoritarian, one party regime, though it is liberalizing. India and China are the fastest growing market anywhere in the world. Chinas proficiency in large scale production and Indias new economy skills are unbeatable combination. The High economic growth rates rapidly rising their share in world exports. India and China have enjoyed the best bilateral relations since the early 1950s. Economic ties between China and India have accelerated steadily over the past decade. . China-India bilateral trade has risen significantly in the past few years from US$3 billion in 2000 to an impressive rise of trade to US$32 billion in first half of 2010 , the expected trade is US $ 60 billion by the end of 2010 making China Indias second-largest trading partner and India Chinas tenth-largest partner.Chinese exports to the emerging world accounted for about 9.5

percent of gross domestic product in 2008, compared with 2 percent in 1985. Indias jumped to 7.3 percent from 1.5 percent in 1985. Most recently, as the developed world has slipped into a severe and prolonged recession which many observers are calling a depression China and India stand alone among major economies in registering positive growth, with the rest of the worlds economies hoping that these emerging giants will help to bring the rest of the world out of its deep morass. Nevertheless, these countries are fragile and are still in the midst of ongoing dramatic structural reforms, facilitated by their governments in some straightforward as well as peculiar ways. As per the World Economic Forum (WEF) report 2010-2011, China has risen to 27th position and India 51st position in global competitiveness this year. It is an attempt through this paper to do the significant study of India and China, their similarities and problems, economic growth and how the cooperation between both the countries will help them to become superpowers. Instead of competitors if they join together no one can beat them and they became the major players in the international market.

II OBJECECTIVES:
The objective of this paper is to highlight the similarities and problems of both the countries. The paper tries to elaborate upon the need and importance of combine strategizing by India and China for their future growth opportunities, energy security and to consolidate their position as the major players in the multipolar world.

III.METHODOLOGY:
The present study basically being Secondary data based exclusively relies on information collected from Research Journals, Magazines and Internet.

IV. LITERATURE REVIEW:

Gopalan (2001), provides the cost comparisons for Chinese and Indian manufactured goods which both countries sell in world markets. These comparisons indicate that China has lower costs in many products than India. Maddisons (2002), explained the sustainability of growth of India and china since 1950 by comparing the per capita income, regional disparity and diversity. T.N.Srinivasan (2002), discussed the Economic Performance, Competition and Cooperation of India and china. It explained the economic issues common to both countries and concluded that China and India. have a lot to gain, both from trading with each other and cooperating in the WTO. Sean Dougherty and Vittorio Valli ( 2008), discusses the complexity of both economies economic transformations, and the feedback loops that have promoted the development and transformation of both economies first increasing their scale, then their profits and investment and finally facilitating various types of productivity-enhancing shifts. The major challenges remain for both: for India to broaden the industrial base of its economy beyond its current services niche, and for China to adjust in light of the crisis to improve its terms of trade.

Recent comparative studies of China and India include Swamy (2003) and Srinivasan (2004) on reforms and economic performance, Srinivasan (1994) and Balasubramanyam and Wei (2005) on international trade, Kehal (2005) on foreign investment, Singh (2005) and Wu and Zhou (2006) on bilateral relationships, and Wu (2007) on the service sector. Lall and Albaladejo (2004) ,examine Chinas competitive threat to East Asia and conclude that China is a tough competitor in low-technology products. However, with imports outpacing exports, China also acts as an engine for export growth for its neighbours.

V SIGNIFICANT STUDY OF INDIA AND CHINA

INDIA: India is a country of great diversity with a wide range of landform types, including major mountain ranges, deserts, rich agricultural plains, and hilly jungle regions. Diversity is also evident in the geographical distribution of India's ethnic and linguistic groups. The neighboring countries of India are Pakistan, Bangladesh, Afghanistan, Nepal, Myanmar, China and Sri Lanka. India became democratic after gaining independence from Britain in 1947. . From then, up to the early 1990s India has had a mixed economy, which was identified by a lot of stateowned businesses, centralized planning, and subsidies results in construction of the private sector. India is large economy, semi heavy weight category. India is being cohort in a very small number of sectors. India s exports are larger in information and computer services. India share in global production is very high but still there is gap between china and India. India is much stronger than china in software development, IT enable services and many types of analytical and knowledge intensive tasks like legal research, finance, accounting and advertising. POPULATION: With 1,150,000,000 (1.15 billion) people, India is currently the world's second largest country. India crossed the one billion mark in the year 2000, one year after the world's population crossed the six billion threshold. Demographers expect India's population to surpass the population of China, currently the most populous country in the world, by 2030. CULTURE: India's languages, religions, dance, music, architecture, food and customs differ from place to place within the country, but nevertheless possess a commonality. The culture of India is an amalgamation of these diverse sub-cultures spread all over the Indian subcontinent and traditions that are several millennia old. The Indian religions, yoga and Indian cuisine have a profound impact across the world.. English is the major language of trade and politics, but there are fourteen official languages in all. There are twenty-four languages that are spoken by a million people or more, and countless other dialects. India has seven major religions and many minor ones, six main ethnic groups, and countless holidays. Religion is central to Indian culture, and its practice can be seen in virtually every aspect of life in the country. Hinduism is the dominant faith of India, serving about 80 percent of the population. Ten percent worship Islam, and 5

percent are Sikhs and Christians; the rest (a good 45 million) are Buddhists, Jains, Bahai, and more. ECONOMIC PERFORMANCE: In comparison, Indias economic performance has not been less impressive. Indias average growth in last 10 years has been 7.3%; it is predicted that Indias growth can outpace that of the PRC in 2013-15, equalling with the latter in per capita terms by next 10 to 11 years, thanks to Indias demographic advantage and efforts towards structural reforms[11]. Projections also indicate [12] that Indias nominal GDP reached US$ 1.22 trillion in 2008-2009; it may grow by 9% to 10% annually further. Like in the case of China, Indias per capita GDP of US$ 1400 is also low in terms of the levels of the advanced countries. Indias savings and investment rate is 35% of the GDP and is rising. FOREIGN DIRECT INVESTMENTS: As the fourth-largest economy in the world in PPP (purchasing power parity) terms, India is a preferred destination for FDI. India's recently liberalized FDI policy (2005) allows up to a 100% FDI stake in ventures. In 2009 Indian FDI was USD 36.6 billion and in 2010 Jan Jun FDI is USD 10.78 billion. Industrial policy reforms have substantially reduced industrial licensing requirements, removed restrictions on expansion and facilitated easy access to foreign technology and foreign direct investment. India has strengths in telecommunication, information technology and other significant areas such as auto components, chemicals, apparels, pharmaceuticals, and jewellery . India has positioned itself as one of the front-runners of the rapidly growing Asia Pacific Region. India has a large pool of skilled managerial and technical expertise. The size of the middle-class population stands at 300 million and represents a growing consumer market. CHINA: With nearly 4,000 years of continuous history, China is one of the world's oldest civilizations. Prior to the 19th century, it possessed one of the most advanced societies and economies in the world. In 1949, after major combat ended in the Chinese Civil War, two states calling themselves "China" emerged:

The People's Republic of China (PRC), established in 1949, commonly known as China, has control over mainland China and the largely self-governing territories of Hong Kong (since 1997) and Macau (since 1999). The Republic of China (ROC) established in 1912 in mainland China, now commonly known as Taiwan, has control over the islands of Taiwan, Penghu, Kinmen, Matsu, the Pratas island group, and a few other outlying islands.

Chinas achievements made since the year 1978, when reforms began, has been unprecedented for a developing nation, with 10% average annual growth in the last three decades. China is surrounded by developed countries like Japan, South Korea, Taiwan, Hong Kong/Macao and Singapore which are formidable high-tech industry, trade and investment centers with huge mutually beneficial interaction and economic interdependence patterns with China.

China is a giant, a heavy weight; China manufacturing production is 10 times as large as in India. It is worlds largest producer and exporter of wide range of goods in both heavy and light industries. Todays china is strong in producing and exporting final goods but is much weaker in the production and exports of inputs: parts, materials as well as various kinds of production machineries. Chinas are stronger than India in physical infrastructure and manufacturing and chemical industry. POPULATION: With just over 1.3 billion people (1,330,044,605 as of mid-2008); China is the world's most populous country. As the world's population is approximately 6.7 billion, China represents a full 20% of the world's population so one in every five people on the planet is a resident of China. China adopted a one child policy in 1979 to slow down the population.. CULTURE: Traditional Chinese Culture covers large geographical territories, where each region is usually divided into distinct sub-cultures. Each region is often represented by three ancestral items. The religions were practiced in China includes Taoism, Confucianism, Buddhism, Christian.. The language speak in china is Mandarin and very few people speaks English. The Chinese culture have a traditional belief in the medicinal value of food, and that food and medicine share the same origin. The Chinese culture have a number of rules and customs associated with eating. The Chinese religions are more of a philosophical way of living and understanding of life, and moral values. ECONOMIC PERFORMANCE: Chinas achievements made since the year 1978, when reforms began, has been unprecedented for a developing nation, with 10% average annual growth in the last three decades[7]. The World Bank expects China to grow by 9.5% to 10% in 2010 and by 8.5% to 8.7% in 2011[8]. Other estimates [9] show that by 2020, China will have completed its transformation from the "world's factory" to the world's biggest market of both consumer and industrial products and that its present nominal GDP of about US$ 5.7 trillion will grow three times by that time. A key question will be when China will be able to improve its per capita GDP; it is at the low level of US$ 3750 now, making the country to rank 104th in the world. Also not clear is whether the PRC can achieve ultimate success in overcoming its major economic challenge of uneven development, notwithstanding the governments well-intentioned shift of policy focus from GDP-centric growth to achieving a balanced development in the country. FOREIGN DIRECT INVESTMENTS: China has become one of the worlds favorite spots for foreign investors. The FDI of china in 2009 was USD 95 billion accounting for 1.9 per cent of its GDP and in 2010 Jan Jul it is USD 58.35 billion. In its investment policy like in the economic policy it is making shift from quantity to quality. Special emphasis is put on encouraging FDI into the knowledge economy:

high tech manufacturing, modern services, R&D, energy saving and environment protection industries and environment friendly labor intensive sectors. The numbers of incentives are to be introduced.

VI. SIMILARITIES AND PROBLEMS OF INDIA AND CHINA

The globalization of a company goes always along with a great amount of opportunities but also with many risks. India and China are both very interesting countries to move into. Religion is one of the biggest driving forces in History. Different cultures have different religions, causing differences in morals, and points of views, creating conflict. Even more important is the development of religion in different regions of the world. The development of religion means a spread of new ideas and traditions within a culture. Two Cultures that display Religious development are the Chinese and Indian cultures. China and India have revealed strategies to govern their global market roles. What is common to them is the priority accorded to the need for responding suitably to the falling external demand under the impact of the global financial crisis. Also, both the nations have announced ambitious long-term goals. China wants to make the country a strong trading power with a volume of US$ 5.3 trillion by the year 2030. On its part, India aims at doubling the countrys current share of 1.5% in global trade by the year 2020. Improving China-India trade and business relations can have a sobering effect on the global competition between the two countries. China is emerging as biggest trade partner of India. It now recognises India as one of Chinas largest overseas engineering contract markets. Both sides need to narrow down the existing differences in the matter of arriving at a bilateral free trade area agreement. Major challenges remain for both: for India to broaden the industrial base of its economy beyond its current services niche, and for China to adjust in light of the crisis to improve its terms of trade. India has a well-developed institutional framework in place, which includes property rights protection, a democratic political set-up, and the presence of various market regulators SIMILARITY: There are many similarities between India and China. They can take the advantage of the similarities by cooperation for the development of both the countries and become the major players in international market. Following is the list of some similarities between the two countries. India and China are two most populous countries in the world and both are located in Asia. Both are proud of their own individual long civilization that goes back some 5,000 years, but both suffered invasions and colonial rules. Both won true independence in the late 1940s and both advocated the principles of peaceful co-existence. Both Indian and Chinese people respect family and treasure sincerity. Both share a deep love for their land and culture. Both are peace-loving, and dislike violence. Both have unparallel intellectual capital. US labs there are more Chinese and Indian scientists only.

There is a hunger of Indian and Chinese entrepreneurs for growth. Both countries has Demographic advantage. Younger generation have a greater appetite for risk. A Large base of consumers: People of both the countries want the latest and best. The joint population of both the countries is 2 and half billions. Both the counties are the first to come out from recession/slow down. Energy and Environmental area (consumption is more than developed countries)

PROBLEMS OR CHALLENGES: There are many problems in both the countries which creates obstacles for further development. Following is the list of some of the similar problems which both the countries are facing . Food and energy security to the citizens of the countries. The need to reach the basic amenities like health care, education, housing to large populations. The example of it is India is diabetic capital but recently fact is known that China is also having many diabetic patients just like India. Both counties need to build the world class infrastructure. Need to develop their own intellectual property like health and ecology. Both are competitors for most of the times which results in increase in the cost of the products and both has to pay more for the product. Bidding against each other results in increase in purchasing cost of product. Both the counties are facing the problems of structure. The Structural differences are enormous. Geographical rivalry of both the countries. Energy and Environmental problems. A targeted approach to bring millions of families above the poverty line. Generation of nearly ten millions of new employment opportunities per annum, especially for those in the lower income groups. Massive investment in power generation, telecommunications and other physical and social infrastructure. Becoming a more important player in the world economy in terms of both trade and investments. Sustainability of growth rate.

VII. SUGGESTIONS:
COMBINED STRATEGIES: BENEFITS Today economic links between India and China are comparatively weak, while their geographical rivalry deeply rooted in the history, amplified by enormous cultural and ideological differences. Both the countries want to become superpower. The competition among both the countries is creating obstacles in the way of growth and success in the world market. However prospects for bilateral economic relations should be looked upon from different angles. The combined strategy of business is helpful for both the countries.

The major benefit from a combined India- China strategy is that the company can capture the compelling growth opportunities as well as the associated scale efficiencies, offered by committed persuit of the market in both countries. If both the countries cooperate with each other to secure their interest, it will helps in energy security and growing consensus. They should buy the assets together and share the produce. If scientists of both the countries go together, The inventions made by both countries scientists will helps for the more production, growth and development of both the countries. The media of both the countries can try to bring both the countries together by highlighting the efforts that are being made to address emerging markets problems. Regarding energy and environmental issues they have to discover environment friendly consumption patterns and lifestyles alternatives to the mass consumption in society born in the West. The combined market strategy is important for cost structure and profit margins. Both India and china economies could learn from each other, India to learn form china are building infrastrure to spur growth and not to cost competitive through investment in scale and efficiency. China should learn from India to create value from the resource light services and not be a resource guzzling , pollution spewing champion at least cost replication of given products. Environmental destruction is major growth impediment and social irritant. Both the countries need to develop and introduce energy saving technologies and environment friendly solutions.

VIII. LIMITATIONS AND FUTURE SCOPE FOR STUDY

The limitation of this paper is that it is just considering only the similarities and problems of both the countries and try to explain the importance of cooperation between India and China through secondary data analysis. There is a scope for further research through primary and secondary data by using statistical analysis. This paper does not take into account trade in services which is becoming an increasingly important part of global commerce with China and India emerging as key players. The future research can extend our analysis and examine the extent of these effects on the global economy The further research can be done on significant impact of India and China Growth on USA. How the growth of both the countries affect the share of USA in world market. It will therefore be very important to analyze how the US will respond to the rise of India and China, and how India and China will adapt to their roles as world influencers.

IX. CONCLUSION:
Economic liberalization reforms undertaken by both countries may have played an important role in triggering the high growth rates. This paper sets out some of the challenges confronting the two countries and argues that how India and China perceive the gains and opportunities of mutual cooperation. As we look to the future, there are many concrete signs that a cooperative environment is already developing. Despite a long history of mistrust, China and India are beginning to forge strong economic ties. Trade between the two countries, which was less than $200 million five years ago, has grown to more than $14 billion and will likely be more than $50 billion in another 5 years. Indian companies are already investing in China, as well as locating manufacturing operations there (e.g., software and bulk drugs). There are also indications that India is opening up to much greater Chinese investment, especially in infrastructure projects. The

optimism for this relationship is so great that one of the major economic advisors to the Indian government, Jairam Ramesh, wrote a book called Making Sense of Chindia, which examines the huge potential for trade and other forms of exchange that exist between the two countries. The future mutual cooperation, trade and commerce will definitely make this two giants the super powers of the multipolar world.

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