Dragon and the Mahatma

If there was anything that came across loudest and clearest at the World Economic Forum in Davos, it was the message about emergence of China and India as powerful global economic engines. The different routes they adopted to path of growth needed no telling and was evident in the way they were represented; India almost entirely by the private sector and China by its public sector, beauracrats and politicians. It is encouraging that despite being such polar opposite politically, they are both marching ahead at an impressive pace. So any argument that blames governments as deterrents to growth will find itself challenged by China with its awesome scale in manufacturing and India with its promise of intellectual and labour capital along with a fast growing service industry. Together they are probably unbeatable and they allow the world to work, seamlessly, day and night.

Unlike India, where the reform process started only in the early 90s, China is ahead as it takes its place as the fourth largest economy displacing the UK.

How did these two underperforming, poor countries from the developing world become the center of attention of the entire world. One of the hallmarks of a success, as every MBA course will teach you, is turning your weakness into strength.. It is interesting how, in the case of China and India, their and disadvantage turned to their advantage.

Disadvantage – Large population
Advantage – Huge markets

None of us in India have forgotten several attempts made by the government to control our population. Thanks to our agrarian culture where it was important to have more hands to work on the farm and our religious belief about children being a gift of God, our population multiplied. And similarly with China. Today those numbers show up on every corporations marketing radar. As markets in the West get saturated and the population is ageing, companies are looking for growth towards Asia with China and India accounting for 33% of the total world population.
There is growing fear in the West of jobs moving East, and the growing importance of the region economically and politically. One outcome of that could be protectionism and while the West needs these markets for growth, China is already turning to its own domestic market so that it is not dependent on exports. These two countries are large enough to have scale in their own countries as urbanization and affluence grow..

Disadvantage – Unskilled, uneducated, and semi skilled labour
Advantage – Relatively cheaper labour cost

Both countries offer much lower wage structures and lower manufacturing costs. Since bulk of the population lives in rural areas, as urbanization increases there will be an endless supply of relatively inexpensive source of labour.

Disadvantage – High population growth
Advantage – Young population

Today, the West is facing zero or negative population growth rate. This means a declining labour force and the added burden of cost of growing population of pensioners and retired people. 60% of India’s population is 25 and under- promising an ever growing numbers of those joining the labour pool. The same is true for China. However, recently there are concerns that their one child policy might lead to an ageing population with all the problems that accompany it. An ageing population only consumes whereas a young population contributes and consumes – an unbeatable combination.

Disadvantage – Poor education system
Advantage – Vast resource of intellectual capital

For years in India we bemoaned the Indian education system where learning by rote was at a premium and the focus on numbers and science was high. Asian parents focus on the child’s education and the money spent on it, often was a source of amusement in the West. Today this intellectual capital is in high demand in global markets. The number of engineers, computer programmers, science graduates coming out of India and China are driving world markets.

Disadvantage – State owned and run businesses and utilities
Advantage – a culture of living with hardship and scarcity

Most of us have lived with scarcity, beauracratic procedures and low incomes. Today all these serve us in good stead – human resource from these regions is hardy, they can do with less, work long hours, are hungry for a better life, are street smart, are resourceful and can thrive in any culture and adapt. With increasing globalisation, intercultural workforce is the new paradigm that needs a new work ethic which we can easily conform to.

Disadvantage – Technologically backward
Advantage – Can adopt new technology fast as there is no baggage
The fastest growing mobile phone markets are in India and China. While the West struggles to update its old technology to, we can leapfrog to the latest- quicker and cheaper. Similarly Internet is growing fast with broadband.

There are lessons here not just for other countries but also for businesses in Asia. Countries have done it in the past, Singapore a small island with not much natural resources or labour made Singapore a financial and technological hub for Asia. Japan another small island, became the electronic goods provider to the world and Ireland saw its GDP soar with IT outsourcing.

Given the global environment, what are some of the things that hitherto you considered your weakness and perhaps can now become your big strength.

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