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Bill Freehling is a business writer for The Free Lance-Star and Fredericksburg.com. This blog is on Fredericksburg-area business. Send an e-mail to Bill Freehling.

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China, India primed to be economic superpowers

FOR DECADES, the United States has been the world’s unmatched economic superpower.

But that is rapidly changing with the breakneck growth of China and India, writes Robyn Meredith in her illuminating book “The Elephant and the Dragon.”

The book is similar to Thomas Friedman’s “The World is Flat,” as it shows how the global economy has become interconnected and interdependent. But “The Elephant and the Dragon” is more focused, dealing only with the economic and political changes in India and China, the world’s two most populous countries.

China, equipped with a government-funded modern infrastructure and cheap, plentiful labor, has become the world’s factory. More and more companies are turning to China to manufacture their products, allowing consumers to purchase inexpensive goods and shareholders to reap profits.

India hasn’t grown as fast, due partly to the government’s unwillingness to invest heavily in infrastructure such as highways and airports. Yet due partly to its colonial past, India offers a large number of English-speaking citizens who are highly educated. Many U.S. companies have turned to India to provide back office support–writing computer code, providing customer support and more.

Meredith describes those trends with great detail. She also gives a solid overview of the country’s pasts and recent decisions to fully enter the global economy.

China and India have not caught up to the U.S. economy for now. Most of the outsourced jobs are low-level positions. But that’s changing. Trained by American companies, Chinese workers are learning to run businesses. India already boasts some of the most sophisticated technology companies in the world.

The changes have broad consequences. Pollution from Chinese factories has been detected in California. American jobs have been lost. Political and ethnic tensions threaten to destabilize the two nations, whose militaries are rapidly growing. The demand for oil, steel and other commodities has pushed up prices.

Meredith shows it’s too late to turn back now, as the U.S. is interconnected with these growing economies. Rather than push for protectionist tariffs, Meredith advocates that American companies and the nation’s educational system concentrate on innovation. Workers should target jobs that can’t be outsourced.

Investors can certainly glean some lessons from “The Elephant and the Dragon.” Many financial publications have urged investors to buy companies with a high percentage of revenue from overseas sales.

Companies investing heavily in China and India are finding a willing pool of labor that keeps corporate costs low. Indians and Chinese are also increasingly providing cutting-edge research for some of the world’s most sophisticated companies.

As a result of these boom times, many Chinese and Indians are joining the middle class. This provides multinational corporations with hundreds of millions of consumers to purchase their lattes, hamburgers, blue jeans, and iPods.

Meredith predicts that in the next few decades, assuming peace and economic detente prevail, India and China will be among the world’s three largest economies along with the U.S. The era of America as the world’s lone economic superpower seems to be drawing to a close.

Investors looking to profit from this seemingly inevitable trend, as well as anyone interested in global politics and economics, would be wise to read Meredith’s book.

Permalink: http://news.fredericksburg.com/businessbrowser/2007/12/09/china-india-primed-to-be-economic-superpowers/

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