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|The rise of Chindia will redefine capitalism and democracy|
|Monday, 18 July 2011 20:42|
I BELIEVE the rise of Chindia is not only inevitable, but it will be beneficial to the world economy.
With 40% of the world's population, China and India (Chindia) are steadily rising towards becoming world-leading economic powers. Three hundred years ago, the two countries represented 50% of the world's wealth. They are rising again to dominate the world's economy.
As Chindia becomes the largest economy of the world, its geopolitical and cultural hegemony will expand. I firmly believe that the G-8 (Group of 8) Forum will invite and integrate China and India to become the G-10 Forum for its own relevance and survival. Similarly, most world forums (from Davos to climate change) and world agencies, will encourage significant involvement of bureaucrats and professionals from China and India. This includes the World Bank, IMF (International Monetary Fund) and various UN agencies such as the World Health Organisation, International Labour Organisation, United Nations Industrial Development Organisation and United Nations Educational, Scientific and Cultural Organisation. Again, Indian professionals are more likely to be invited and encouraged to become leaders and advisors of the world bodies due to language, culture and political compatibility compared to Chinese professionals and bureaucrats.
On the other hand, China's growth will be proportionately more domestic and only on a selective basis through global acquisitions. This is due to several reasons.
First, China has begun to focus on domestic demand especially in consumer markets such as consumer electronics, appliances, automobiles and financial services. It has the physical infrastructure as well as large scale domestic state-owned enterprises such as Haier, Lenovo, China Mobil, Petro China and China Development Bank to capitalise on domestic demand.
The advanced world seems less willing to sell their assets to China (especially technology assets) due to what I believe are myopic misperceptions about the peaceful rise of China (in contrast to rise of India). For example, Chinese oil company, CNOOC Ltd's attempt to buy Unocal as well as Haier's (the largest Chinese appliance company) attempt to buy Maytag Company in the United States met with political resistance. The obvious exception is IBM's sale of its PC business to Lenovo. But it is more an exception.
Consequently, Chinese enterprises that have the scale and incumbency advantage to dominate the domestic Chinese markets will end up expanding globally by first going to other emerging economies such as countries in Africa, Caribbean, Latin American and the Asean as well as in Central Asia and India, both through trade as well as foreign direct investment (FDI). In addition, despite history and current uneasiness of rise of China, it is inevitable that both Japan and South Korea will quickly integrate their economies with China, just as what Taiwan has already done. This will result in rapid growth in bilateral trade as well as reciprocal foreign direct investment between China and Japan and China and South Korea.
Consequently, the largest trading bloc will be Asia especially with free trade with India. This will require the formation of a new currency comparable to the euro; and it will become the dominant currency of the world similar to the rise of the dollar as a global currency after World War I.
All this will generate unprecedented innovation, probably more dramatic and breathtaking than the first Industrial Revolution, by making existing technologies more affordable and accessible and by inventing or discovering ways to replicate natural resources. Both the advanced countries and the emerging economies will rapidly learn to innovate for conservation, sustainability and cloning of nature's resources.
Unlike the first Industrial Revolution which garnered the industrial age at the expense of the environment, this second industrial age anchored to emerging economies will be wiser and more experienced to manage economic growth conservation through breakthrough innovation and cloning of natural and biological resources.
Cloning of sheep, chicken, and other living organisms is now a routine science. And just as in the last century substituted plant, vegetation and animal based medicine with modern pharma and biotech and bioengineering technology, we will innovate to preserve and duplicate nature's resources. At least this is my hope in addition to my forecast.
Prog Jag Sheth is an award-winning Kellstadt Professor of Marketing at Goizueta Business School of Emory University. Also a prolific author with over 200 books and papers, he advises many governments and corporations on relationship marketing, competitive strategy and geopolitical analysis. He will be in KL on July 25 to talk about Chindia Rising.