China-India synergy spells new superpower

The global business landscape is set to be galvanised by the inherent potential of a synergy between China and India with their combined GDP to account for up to 20 per cent of the world's total by 2025 if two Asian giants agree on free trade, a study has said.

"The China-India business synergy is the tip of the iceberg of immense economic power," said Yuwa Hedrick-Wong, economic advisor to MasterCard International in Asia/Pacific.

"The new generation of joint China-India companies will change the competition landscape in global business. Any way you look at it, this synergy is set to change the world. However, the extent to which the two economies can be brought closer together would increase their impact," Hedrick-Wong said.

In one of its latest 'Insights Reports,' MasterCard points out that rather than viewing Chinese and Indian economies as competing, it is much more important to understand their potential business synergy.

The impact of a China-India business alliance will, however, catapult their corporate sector to be among the best in the world, the study said.

Multinationals around the world have already begun leveraging the respective comparative strengths of China and India.

China's manufacturing prowess is unrivalled and it is the world's factory. Juxtaposed against this, are India's strengths in R&D and high-tech services. With the ease of instantaneous communications and information flow, spatial and temporal distances between both countries are virtually non-existent, the report said.

"Therefore, some of the leading multinationals that operate in both China and India are combining their respective complementary strengths to create powerful competitive advantages for themselves," the report said.

"What the multinationals are doing today, Indian and Chinese companies will do tomorrow" suggests Hedrick-Wong.

"Imagine combining China's infrastructural and logistical efficiency and massive economies of scale with India's world class innovations capability, management know how, and corporate leadership; what you have are the makings of a business superpower of the 21st century.

"This emerging China-India business synergy will be able to tap into a huge reservoir of high quality human resources in China and India," the report said.

It said in 10 years' time, they will have a combined workforce of close to five million young knowledge workers who are under the age of 30, in cutting-edge fields of engineering and the life sciences. These are the kind of resources that the China-India business synergy can leverage in the future.

From a macro perspective, the China-India business synergy comes from economic efficiency gains when China's labour efficiency is combined with India's capital efficiency.

In 2004, for example, China's GDP per worker was about 55 per cent higher than that in India. On the other hand, capital efficiency in India is estimated to be around 45 per cent higher than that in China.

"Their combination is therefore an unbeatable formula," Hedrick-Wong said.

A closer look at the benefits of collaboration between both markets shows tremendous scope for mutual benefit.