 So allow me to introduce the panelists, and they'll talk a bit about their excellent book. Starting, of course, on my far left, many of you know Chris Johnson, who's the Freeman Chair for US-China Studies here at CSIS, and has been spending a nice, strong day on bilateral relationships today. I saw you with the Russia-China earlier today. So on to another. Then immediately, Closer, is Haiyan Wang, who's the managing partner for the China-Indian Institute, served as an adjunct professor of strategy at the NC Business School, and articles published in The Wall Street Journal, China Daily, and The Economic Times. Next is, hopefully on the camera, it shows that indeed it is a different person than me. It's not a double image. I'm your twin brother. Twin brother, Anil Gupta. Anil is the Michael Dingman Chair in Strategy and Globalization at the University of Maryland, and is ranked by thinkers 50 as one of the world's 50 most influential living management thinkers. So it's great to have him on stage. And just immediately to my left is Girajapande, who's the executive chairman of Apex Avalon Consulting based in Singapore. He was previously served as chairman of Asia-Pacific for Tata Consultancy Services. And during his tenure, received the best CEO award from the Singapore Human Resources Institute. So the three in the middle are the three co-authors of the book. So we'll let them tell you a bit about what they have in their findings. And then we'll open it up for some questions. So first off, was Girajapande, do you want to hear? Yeah, great. So as I was building the Tata's business in China, there was always a big issue of will Indian companies be able to do well in China? Will they be able to survive in China? And is it too difficult? And we also were hearing at the same time as the trade and investments were growing, that the Chinese companies were actively going into India. So this was a topic which was obviously getting very, very topical. I met Anil, who was at that time in INSEAD in Singapore, teaching strategy. And we decided, and Anil and Hayaan have both written extensively on India and China previously. And we both decided that we should actually write us a real story about real companies building real businesses in both these countries. I think that's where it started. So let me leave it to Anil Nauru to tell you how we went about it. I mean, I'll just share my perspective on China and India and what got me interested in this book. And Hayaan and I have written earlier. We wrote a book in 2009, Getting China and India Right. But that was actually really targeted at Western multinationals in terms of how to get your strategy for China and India Right. And so that got us deeply analytically into India and China. What is the story? It was interesting and Indian and Chinese writing together because Hayaan made sure that I was honest about our objective about China. And I made sure that we were objective about India. But it also actually, in living in the US, that was very educated because it helps, for me, like it helped me see things about India that, let's say, unless you hear a Chinese perspective on India, you wouldn't necessarily see that. But similarly, of course, on China. It was fascinating that in terms of conversations that at times I would tell Hayaan, which is an interesting thing for an Indian to say, I said, I don't think you understand China. You know? Because she was like a fish in the water about China. So anyway, so, but then as we got deeply, so we kind of started tracking the story about China-India economic linkage. And we basically said that if one was to look at the China-India economic linkage, not from the lens of 2014, but from the lens of 2020 or 2025, this would be a very big story. And so essentially what we said, okay, we know about this subject. We are among the most qualified people, perhaps, to write about the subject. So let's do it. I think when it comes to writing this book, I think Garija and Anil were far more visionary than I was. And they were looking at from the lenses of 2020, 2030. Initially I was looking at it from the lens of 2018. And I was saying, okay, my consulting fees, my speaker fees are paid by big multinational companies. Suppose we sell a ton of books to the Chinese, ton of books to the Indians. I don't see them. So from a market standpoint, are going to be the immediate customer, paying customers. But that aside, I jumped in for heart's sake. Indeed, if we were to look at far ahead, say 2030, and you say who would be the biggest economies in the world, number one, China. And number two, probably US, and number three, possibly it could be India. Neighbors, fastest growing economies, biggest economies, can you imagine that business not being prospering? Can you imagine the trade ties, the investment ties, the people ties not being one of the most vibrant ones? So initially I was not visionary, but it didn't take much persuasion for me to jump on board. Well, looking at that vision, I mean, I remember when I first started working on India business affairs as a young staffer at the US India Business Council 16 years ago, there was still a question, who was going to win? India or China? They thought that it was very much a competition. I remember in 2003, when former Prime Minister Badge by himself traveled to China and saw that indeed, that question, at least in the interim, was a done question, that China had taken a step forward that India just couldn't match. But the question is, you know, that's still, that is today, but it's still evolving right now. I'd ask Chris to tell us a bit, you know, those of us that look at this view, China better at industry, India better at services, natural complementarity, at least they're not messing around in each other's turf. You know, Chris, a lot of discussion though about China moving towards a services economy, things like that, can you give us a bit of a scene set or two and some of the things that are happening in China that might impact this? Sure, sure, absolutely. I think actually the reform process that they've laid out for themselves at Last Fall's Third Plenum, really will shift the direction entirely of their economy and that manufacturing piece, because of demographics, because of markets that it's going to and so on, is declining, they know this, they know they have to transition to a service-based economy, and I think that will have real implications for their relationship with India. I actually think we're in a very interesting period and I'm glad you guys chose to focus on sort of a 2020 or 25, 2030 outlet, because right now, frankly, the dominant view, I think, in China is that they see the Indians as sort of, you know, discombobulated well behind them, quite frankly, in terms of development and not something to be all that concerned about, quite frankly. And with the recent election change in India, there's a lot of talk about what's Modi going to be like. I think there's an innate assumption on the Chinese side that he's dangerous from their perspective and that he might in fact do some things with the economy that will allow multinational corporations to actually be able in negotiations with the Chinese to say, fine, we'll pick up and go to India and actually have it be something that's realistic as opposed to sort of eliciting laughter from the Chinese side when that happens. So I think ultimately the direction they're headed will perhaps reduce a lot of that complementarity that exists now, but I think what's been very striking is over the years how we've watched the Indian side even when there were more moves, say from the USG side to try to at least enlist the Indians in some sort of a soft pincher movement containment, whatever you want to call it, strategy, and the Indians have very deliberately and directly pushed back upon that. I think the Chinese have found that largely reassuring. Obviously, it's interesting to see what the Chinese are doing foreign policy-wise with their neighbors, especially over these territorial disputes on what you might call China's front door, the maritime space. There have been some interesting developments with the Indians along that front. I think there's a lot of strategic concern in the Indian communities that I speak to about what China may be doing there. There's no doubt that they're looking west as much as they're looking east with their foreign policy and economic policy in particular. So I think it's going to be a very dynamic space and something for us all to watch unfold. It'll be very interesting. Well, now you get to see Chris and I, Pepper, our panelists. Of course, you should all pick up their book. It's available outside, but apart from what's merely written in the book, it's time to grill them and see what we can learn as we look at the business relationship between the two most populous countries in the world. So let me kick it off by asking, I guess the big question that hangs out there any time that we talk about India, China, business relations, and I think Anilis might be best for you. India has a massive trade deficit with China in goods trade right now. It's a huge component of their total trade deficit. India's put up some barriers that have, unintentionally we presume, harmed American companies in their trade. Why is this trade deficit quite so high and should India be worried about this, looking forward over this period? Yeah. So, I mean, I would say two things. So number one, the trade deficit is not high, which I'm sure the Indian media would find kind of an appalling statement. If you're tweeting about this, it's CSIS live. Hashtag CSIS live, is that one? Mike, a little attention. And I'll talk about why I say it's not high and second, it's not an issue for India. Okay, which again is sort of counter to I think the mainstream point in India. And the reason why I say it's not high is because ultimately every country, you cannot expect a trade to be balanced with every country. So yes, you want it balanced globally, but not with every country. And if you look at India's trade deficit of about $200 billion, of that, it's only 20% of the trade deficit that is with China. 70% of India's trade deficit pertains to energy. And so if India is concerned about its trade deficit, which it must be, the problem is in China. The problem is energy imports. And so therefore, so that's number one. Number two is that India's trade deficit today is 20% of its total trade deficit. But I looked at the figures, you go back to 2001. It was 30% of India's trade deficit, trade deficit with China. And over the entire decade, the trade deficit has hovered in the 25 plus minus trade deficit with China as a percentage of total India's total trade deficit with the world. So it's not going up, okay? So that's why I say it's not a big issue. In fact, number also is that what China essentially sells to India. It's not in toys and consumer goods. I mean, you see them, but you look at the billions of dollars, bulk of it is capital goods. And so of course, if Chinese capital goods are 30% cheaper and they come with low-cost financing, I mean, I would say more than Marrior. If Chinese want to give it away for free, we should say even better, you know? Because what China is doing is to accelerate India's infrastructure buildup, you know? So that would be my perspective on the trade deficit issue. Also, another thing is that ultimately what India should be worried about is not trade deficit, but what's really good for India. You know, you take China-Japan relationship. I mean, if there was a relationship between any two large economies, that is fraught with tension, you can almost say with enmity, with hatred perhaps, okay? It is that. Despite that, despite the size of China's economy, you know what? China runs a trade deficit vis-a-vis Japan. Japan exports more to China than China exports to Japan. It's not an issue with China, because ultimately what China is buying from Japan is high-end capital goods. So therefore, what one should be doing, what India should be doing is what's good for India and not get caught up in, oh, we have this trade deficit of $40 billion, who cares? So they should increase the trade surplus they have with the United States. That's gonna be painful. Let me add another dimension, which we talk about in the book as well. The Asian supply chain and the Asian manufacturing is all hubbed around China. The supply chain end there, they start there. India has not got into the Asian supply chain. So the apple is picking various components and assembling them, it all happens in Asia without India entering into the picture. So that is because of the lack of export manufacturing. As India is not an export manufacturer beyond a point, it can never get into the Asian supply chain. And as it can't get into supply chain, Asian supply chain, it has landed in normally running trade deficits because we have to import that from Chinese. We don't export anything from India other than either raw materials or intermediates. Not even that too much. So unless the Indian manufacturing is focused towards export manufacturing, you will continue to have what I call the structural deficit in this area. And if you borrow a page from how China boosted its manufacturing capabilities in becoming an export powerhouse, and back in the early 80s, that's when China really leveraged the technology, the equipment, and later on the electronics components from not just Japan, from Germany, from South Korea, from Taiwan, and making China a magnet for attracting all of these foreign technologies manufacturers to build the manufacturing capabilities in China in the same way fast forward today. And China's labor cost is so far more expensive than that of India. I think the moment it has come for India to take this moment to be the magnet for attracting all of these foreign investors, not only from China, but from around the world and build India's global competitiveness. And that's the end game. Well, I think the touches very much on what you just said and also the 2025 kind of timeframe and arc. In the book, you suggest that India-China economic ties could be Asia's best kept secret. How would you describe the relations between the two as compared to say each country's relations with other emerging economies, ASEAN, Latin America, Africa? How do you see that situation? In terms of trade, China is India's largest trading partner. Of course, Anil talked about the trade deficit. And India is China's, used to be China's 10th largest trading partner. In the last two years, trade has come down. Now it's probably the 12s. Relative to the other major trading partners of China's in the EU, the US, the ASEAN. China does a 400 billion trade with ASEAN versus China does about 100 billion trade with Malaysia versus 65 billion with India. So it's a relatively important China, as a trading partner, is far more important for India versus the other way around. But I think that from a 2030 standpoint, the bigger story is really the story about FDI. That when China look at the big market or look at the multiple magnitudes of opportunities in China is that we are the largest market. We're the biggest resources. We're resources in terms of talents. And they look not too far in their neighbor, India. So it's not just a trade story. I think that the FDI story will become far more important to play out. And ASEAN is obviously one of the alternatives as the Chinese competitiveness in terms of both the cost structures and the availability of skills. China has an aging problem before it gets rich, as they say. So there is an availability problem, especially of blue collar workers and the cost that have gone up in the last five years in double-digit terms. With the currency going north and the Indian currency going south, the parity daily tennis to one now. So from that perspective, it makes sense. However, as India sometimes runs an obstacle course for foreign investors, they thought that they would go into Vietnam or Thailand or Indonesia or many of the ASEAN countries. Now, all of them A are smaller markets and they are also export markets. So they don't have a home market which are larger than Indonesia. So ASEAN has a challenge. And then of course with Vietnam you've had a political issue recently. Thailand has had its own internal issues. So India at the moment looks a very stable political setup for the Chinese. The equation, manufacturing equation is right, but the obstacle course remains. And we presume that the Modi government will remove this huge obstacle course that everyone has to run in India before they set up something. And that's where I think the Chinese are hoping because they have seen him in action. They have seen him in Gujarat. And I think that's what they're hoping. Otherwise, India to them becomes a very important market just as a home market. And again, I completely agree. Just to add another spin to it, which is that when I look at trade or not just trade, but economic relationship between two countries, that it's driven not just by what's happening in terms of friction or lack of it or warmth in the linkages between the nodes, but just what's happening at the nodes themselves. So it's like reforms in China or similarly what's happening in India. Now, if you look at India's GDP, roughly about two trillion, which is the same as the whole of ASEAN, slightly smaller than Brazil, same as the whole of Africa. So when the Chinese look around, of course, if you take out Japan or US or Europe, India is a very large economy. And here, it's one economy as compared to 55 countries in Africa or 12 or 13 in Southeast Asia and so on. So of course, if India basically, the direction in which it was going in the last five years, so if India essentially is on a glide path to history, then of course if Indian companies themselves, Tata's and others are not investing in India, why would the Chinese or the Americans, anybody else invest in India? But if the Indian economy from where it is right now begins actually, if Mr. Modi is like a Deng Xiaoping of India, then suddenly in this, the relative interest of one node in the other node changes dramatically. So I see that's the situation. I think I know the answer based on what you've said to that question, but let's hit it specifically. So Narendra Modi elected Prime Minister, best case scenario, India's economy becomes more competitive in the areas that China has been extremely competitive at in recent years. What does that do for the government to government relationship? Obviously there's gonna be opportunities for business, but for government to government, will that trigger a reaction in China? Will they put up barriers potentially? Will they welcome it? What do you think might the reaction be to Modi in a more competitive India? I think certainly the Chinese are looking for a more competitive India from the point of view that their companies can come in and invest, their companies can come in and grow. And as one of the chapters in the book talks about, we've talked about five case studies of Chinese companies who have succeeded in India. And in any new relationship, you need some of these success stories, both sides. And I think, and some of them are SOEs. So when you see that there are success stories happening, then it's the question of asking, if they can do it, why not? I always give this example, when the Japanese came to India in the 80s, they found it very difficult and after some time they gave up effectively. The Koreans came to India and built a huge brand of all their companies. Today the Korean brand, whether it is Samsung, Devu, Hyundai, LG, have just taken the mug. And I say that the same thing to a lot of American companies who have not been successful. How is it that the Koreans in the same structure have done well? So Chinese are actually looking at, they were the Koreans did it. And actually the success of those five companies is exactly ground up hiring local people, getting their expertise or whatever technology they can bring in and succeeding. And these five companies have succeeded. So I think these success stories that are being now written about are the ones which will drive some of these companies in the bigger guys. SOEs want to come in, the petroleum and oil companies want to come in, set up a refinery, the banks want to come in. I mean, these are the big SOEs out of the 300 SOEs China has. Well, in terms of how China, I mean, I don't really know, but from what I can read is, is Chinese government see the India moment as opportunities. And then again and again, the Chinese government emphasize that the China dream is for peaceful development. Both countries are very poor amongst the poorest. China needs to lift up the living standard. India needs to lift up the living standard. So the China dream and Indian dreams are essentially in some way common dreams is to become richer, more prosperous. So that common pursuit of that common dream requires a peaceful coexistence and then become a lot more pragmatic in finding ways to cooperate rather than just focus on the rivalry part. I think that message is far more dominant in the Chinese media, in the thinking of the Chinese government than say rivalry. Perhaps because of that vision that in the premier Lee, first foreign visit was to India. The first foreign leaders to congratulate Moody's becoming prime minister is the Chinese prime minister and inviting Moody to visit China, inviting President Xi to visit India, perhaps later this year. All of this, I think, reflects that vision of emphasizing that common dream. So. Yeah. Also, you know, kind of to look at, as you said, from the bigger government to government relationship perspective, is that unlike, say, the China-Japan relationship, there is much less emotional baggage in the China-India relationship. And also, because of the way both sides have managed the border issue for the last 30 years, as we say in the book, the guns have been silenced. And that while, and leaders on both sides have explicitly stated that we don't know if in our generation we will find a solution, but we will find a peaceful solution, you know, which is not what the leaders say between China and Japan are saying, you know. And so that just to basically say that there is much less emotional baggage in the China-India relationship. I don't think that the relationship will become warm and fuzzy anytime soon, you know. But at the same time, it would be essentially a case of economic pragmatism, you know. That's how I see. And also, kind of just to add another thing is, you know, I mean, just having gone and I'm on the board of a Chinese company and, you know, I've given many talks in China, so kind of my own take based on that is that, of course, if China had its druthers, it would rather be the only superpower, okay? But at the same time, you know, here kind of I'm putting words in quote unquote their mouth is that China has concluded that there is not a whole lot they can do to prevent the rise of India. And particularly now if Mr. Modi plays out as it's hoped for, as it's expected, then in fact, prospects are very high of two things. That would be very interesting. So number one, that within the next five years, we are likely to see, and the papers would be writing about it, you know, Wall Street Journal, page A1 and FD, the front page that India is growing faster than China. Now, of course, you know, India is, you know, a quarter that of China. So it's not that India is gonna catch up with China any time soon, but the fact that India consistently grows faster than China still would be big news. And from a country branding point of view would be important. Number one. Number two is that by 2025, prospects were decent, but now they look more than decent. That India will be the world's third largest economy. And so if it's China, US, and India, as Hyan was saying, and the Chinese can't do a whole lot about it. And you don't have that emotional baggage. Then, you know, pragmatically from China's side, you know, let's figure out, you know, how we make the most of it. I think also there are other forums where the government-to-government relationships are separate from the issues of the border. So if you take the border issue away, which for India is a big issue, but if you emotionally, but from the Chinese side, many people don't even remember the 62 problem as one Chinese friend of mine said, at that time we were struggling with the Cultural Revolution. So we were bothered about what was happening on the border. Whereas India still remember it, and I think that becomes a big issue with the media. So that keeps playing up. But if you look at it, global governance is too, and environmental issues. India and China have common views of this in the global forums. Wherever you look at the, whether it was Copenhagen, whether it was Cancun, India and China have actually worked together very closely on issues of environmental. And what will impact the two countries as they grow. Second on global governance issues, whether it is the UN, whether it is the IMF World Bank, very common views on how global governance should be run. So there are commonalities as they both look globally in their viewpoints. Now, border issue I think has been put away. It's not going to go away in a hurry. There are issues there, but it's quite broader. There's effectively average height is about 16,000 feet. It's not exactly something which everyone's dying to get in there for. So I think that are going to be, these are the mitigating issues, which will drive the commerce. Anil, you said that the relationship is not exactly warm and fuzzy. I think that it's perhaps the Indian's way of looking at the relationship. The Chinese perhaps see the relationship as warm. That reminds me of a Pew survey of the attitude. When they surveyed the Chinese about how the Chinese see the Indian relationships, some 39% of the Chinese survey say the relationship has been cooperative, but only 24% of the Indians has seen the relationship as being cooperative. And if you survey most of the Chinese randomly, anybody in my generation growing up in the 60s and 70s, we were born right around the time when a war happened, most of us couldn't recall. And then, but if you survey the Indians, that's still a bitter memory. So I think that the eyes looking at the relationships perhaps are warmer on the Chinese side than on the Indian side. The loser takes a longer time to forget. I was asked that may have to do with the priorities of the treatment. I did a joint friendship with the main Chinese government. So I used to have a lot of chats at Beijing late at night in the tea shops. And they said to me, oh, but our relationship is like tongue and teeth. You know, we are so old, such a old relationship. And I said, who's tongue and who's teeth? Well, one thing I think that's so interesting about the subject you tackled on it really is a new area is looking at the companies, right? Operating in each other's economy and seeing that dynamism that you guys described in the book. But what would you say you would describe as the harder situation? Is it for Indian companies operating in China or for the Chinese companies operating in India? And to the degree you talk to those firms and so on, how do you advise them to be more successful in the respective economy? Yeah, let me just add one kind of an overview and then kind of, which is not at the more macro level, just building on Chris what you were saying, is that there are two ways in which an Indian company can play in China or a Chinese company can play in India. One way is you go direct. So it's like Tata Consultancy Services going to China and investing and doing business and all of that or Huawei coming to India. The second way, which actually I think over the next 10 years will be much bigger perhaps at the corporate level, is that an Indian company buys a multinational company in Europe or the US or Korea, which has operations in China or a Chinese company buys, you know, because both Indian and Chinese companies are in the global M&A game. And so, you know, if I think about, okay, Jili from China, the car company, you know, what is the possibility that Indians would welcome a car from China? Okay, and branded Jili, the probability as a business strategy person would say zero, right? End of case discussion, let's talk about something else. But, you know, Jili buys Volvo. Now, what is the chance that a Volvo car could do very well in India? The answer is yes, Tata Motors, can you sell a Tata branded car in China versus can you sell a Jaguar Land Rover? So I think what we are likely to see over the coming few, you know, five, 10 years is a lot more of these third country stories. That's a great point. I think building a local brand in my consulting business now, we are at the moment working with a large Indian consumer products company to acquire a consumer product company in China. They already have two or three consumer product companies, small ones, niche ones in South China, want to keep the brand, but because they can't build an Indian brand there, they are coming through Singapore or any other entity and acquiring brands in China. So that's what Anil is saying, that that is going to happen, the third country acquisitions that are going to happen. You look at Chinese companies in India or Indian companies in China, very early stages. Chinese total FDI stock in India, 800 million, 0.2% of China's total ODI stock. Indians FDI stock in China, 500 million, 0.4%. That is hardly anything. So in terms of both countries' companies paying attention to each other, infant stage, very early stage. And then if I have to say at this point of time, which companies are more competitive in the other country? I would say Indian companies tend to be doing better in China than Chinese companies doing better in India simply because Indian companies are more globally competitive. They have been at the journey of globalization much longer. And so their educational level, their skills, their organization capabilities, their management, the leadership vision, et cetera. And I think that have all been far more global and operating a democratic society, et cetera, et cetera. But what Chinese companies do have are the strengths of capital. As Anil said, and Garuja mentioned it as well, if they started to acquire capabilities and use that acquired global capabilities to compete in India, then there was a game to play. One of the things that was covered in the book to some extent, like a lot of times when American companies think about investing in China and even to a lesser extent India, we think, is this the kind of investment the government's gonna like? Will they allow me to do it? Will I be successful based on interactions with the government? And then you read, and this dynamic, where again at CSIS we think of everything through a defense, strategic, you know. And you think India, China, there's some tensions, there's some discomfort with trade. And then you read with the welcoming arms in certain cases that Indian investment was welcomed into China to an extent that was really mind-blowing for me. I wonder, can you touch on that? How is it that in some cases not only were the doors opened and allowed, but in fact, aggressively encouraged in a way that is difficult to comprehend in other markets? So I think the Chinese were very keen on certain sectors from India. And the IT sector was certainly one of them which was targeted that, and they set up an office called Sino-Indian Cooperation Office to attract Indian IT companies into China. So that was one sector where actively red carpeted, and as I belong to the largest one, I benefited from that red carpet. It's not the only carpet they have a line on. No, they had very clearly decided that the Chinese IT industry was way behind and it needed a dose of competition, a dose of consolidation. And if you brought in the Indian, not only technology companies, but also educational companies which create skills in IT. And one of the case studies is NIT, which every year produces 30,000 IT trained people in China, is the largest IT training company in China today. And so they actively kind of wanted us there. And one of the examples I give is we set up in Hangzhou first. We were trying to talk to the mayor. He said to me, anytime you come on a Saturday, Sunday I'll be there, you just open the door. And it was phenomenal what the red carpet that we got. And I initially, we sent about 30, 40 Indians before we started hiring the Chinese. And now of course there are about 700, 800 people there. And I said to him that one of the things that our Indian team is finding difficult is not the language, but they are all, most of them are vegetarians. So what do we do in China? Vegetarian is kind of not known that very well. So the three months later when I went there, the mayor asked me the first question, have you visited our Indian restaurant that we've set up in Hangzhou? And I said, did you set it up? Yeah, your guy's all going there now. So this was the level of red carpet. Now this is not, they do it for many countries and many companies. This is the way the mayors of good provinces and cities have run the red carpet for many things. And that was an experience which was really something to, which I talk about many times when I go to India. Which actually, just to pick up on what Girajal said, is that if we look ahead again, 2020, 2025 perspective and so on, et cetera, is that I tend to take, of course the political leaders talk about it, the kind of nice, warm, good PR words is that we have complementarity, hardware, software, manufacturing services, et cetera. But good chunk of that is just nonsense in the sense that, when we say India is not strong in, India is very strong in IT services, but you look at IT services as a, what percentage of the total service sector or what percentage of the total GDP, it's a niche, right? And so the reason India looks strong in services because India is very weak in manufacturing, okay? And so now, of course, India is likely to go on to basically like a madman, which is good in a good way to become a strong manufacturing power and it will need China's help. Of course, it'll need Japan's and US and it'll need help from every corner of the world. Similarly, China, as Chris, you were saying, major plank of its reform is to go into services and particularly not the low end services, but into high and knowledge intensive services and knowledge intensive services, India is very strong. And so China will need India's help. So therefore, we see kind of this future of there working with each other, but not only with each other, that we are likely to see more convergence rather than complementarity. India becomes strong in manufacturing and of course remain strong in services and similarly China. So your assessment really is that in that kind of manufacturing intensive sector where the Indians do wanna make some breakthroughs, do you think there's opportunities for the success for them in China and sounds like it from your perspective? I think so and then just, and in fact, the other day I had a dream at night, I woke up and I said, which is really okay, so how does India fix its trade deficit with China? Although I said it's not an issue or not a big issue, is that China's manufacturing wages are significantly higher than India's. The problem is that India doesn't have the scale and India has horrible infrastructure and so that eats up the wage advantage. And so that Chinese set up industrial parks in India, right? And as the scale in India begins to increase, that actually Chinese companies start manufacturing in India for the Indian market and to export back to China. So this is an interesting one which actually we talked about in the book as well. So we take in the example of say auto components. So China exports about 100 billion plus, India exports about 19, 20 billion plus of auto components. And we take a case of one of the auto components company which is now in China, the Indian component company in China. If you see all the big OEMs globally are now in China. This is the largest car market. There is no debate, everyone has to be there. So they need their supplier base to come in. So they, all the Indian auto component manufacturers who are sitting anywhere else are also expected to set up there. Now, if India is today 3 million passenger market, everyone expecting it to grow as well in the next five years. So all the OEMs are expected to be there as well. So they're saying, well, the Chinese auto component manufacturers have to also come in. And the Indians are going into the auto component market in China. And we're actually at the moment doing a project where we are comparing the competitiveness of the two auto component manufacturing companies. Funded by Ministry of Commerce. So this is just one of the cases where the OEMs are now, the global OEMs, the General Motors, the Fords, the Volkswagen, they are all in both these economies in large numbers. So they need component manufacturers, tier one, tier two suppliers. And both these are going to be major areas which will drive manufacturing in both countries. And I think Chinese companies also see immense amount of opportunities in infrastructure building. Which country has built the most number of infrastructure in China? Deport, highways, high-speed trains in a city. India wants to build its 100 smart cities, wants to build one of the largest high-speed train networks. And Chinese have the equipment, have the experience to share. And plus, they are willing to provide a low cost of financing. That's a big plus as compared to the European companies and Japanese companies. It's this willingness to go in there with a much longer horizon. Because oftentimes it's a state-owned banks, financing state-owned enterprises. So the horizon could be much longer than the Japanese companies. So I think that when it comes to infrastructure, financing, and building, the Chinese companies would play a bigger role than the Japanese. Yeah. And Japanese even makes most of us in America jealous because they're doing such bigger projects in India than even we are. So if Japan's only middle of the road, then this big infrastructure boom we may see, America may be just a tiny dot. Except that some of the Chinese companies may be partially owned by the American companies. So yeah. Yeah, that is one of the big questions though. So if the Modi government, a big infrastructure buildout to enable manufacturing takes place, where will the money come from? Where will the companies come from to build that out? And Japan's been doing quite a bit already. America, I keep referencing, some of my first work in India was trying to resolve a lot of the contract disputes from the big power projects America companies build in India. I don't know, there's a great appetite to go back in. But how welcomed would Chinese companies and investment be in building critical infrastructure to make this industrial development happen? I think the way I see is that for decades, for centuries, business entities have figured out how to work with each other even though you don't trust each other or you don't know each other. So for example, I just give two illustrative examples of how things can work out. So take high speed trains. Now in the case of high speed trains, obviously there are certain things which are very sensitive from a national security point of view. So that would the Indian government anytime soon allow a Chinese company to actually own a train network and the prospects are zero. But at the same time, could a Chinese company come in and set up a locomotive manufacturing plant, a coach manufacturing plant? Could a Chinese project management company come in to actually lay the tracks? Absolutely, because it's a little bit like buying sanny bulldozers. It's not a national security issue because the bulldozer doesn't know where it is. Kind of thing. So that's one way. Has tag lives, the CSIS live, remember? Bulldozer doesn't know where it is. Well actually maybe, how's Google this, no it does. But another way in which it could play out is for example, large special economic zones. Clearly there is mistrust and you really want Chinese to be owning a huge special economic zone. Probably that will not happen, but what could happen, in fact I'd be willing to say better than 50% chance it could happen, is that a Chinese entity or a Chinese consortium now works with the Tata's or Birla's or Ambani's and set up and it's a joint venture and maybe the Singaporeans come in. And if it's a joint venture like that, who in India is going to say oh, I see security issues there? So I think these are ways in which security concerns and mistrust can essentially, without saying convert mistrust into trust, no, we continue to mistrust each other, but hey, we can do business with each other. I think the Huawei story was the challenge for India which is a challenge for many countries. So I think that has got kind of misconstrued as if every issue will become a Huawei security issue. Having said that, Huawei has sold a huge amounts of telecom equipment to Indian providers and therefore that issue is the security issue which people talk about. I think the other side has not yet. I mean the Indian power plant, think of this, Shanghai Electric and Dongfang Electric have anywhere between 12 to $15 billion of orders from Indian power manufacturing companies, power producing companies. Actually if some of the power orders are canceled from India for whatever reasons, the over capacity in China today will be substantial. And there is no other market which requires power equipment of the capacity that India needs. You don't have to be a genius to realize when you go to India to realize there's a huge need for power capacity. India does not have those power capacity as yet. And the Chinese have been supplying power plants for the last 10 years. Initially they were teething problems, now they're setting up servicing companies, et cetera, et cetera to take away some of the issues that happened with the new power plant. But that's the scale of how they are getting joined at the hip on power plant equipment. Well, we're at about a half hour here left, so one of you have been to a conference that actually ran on time completely. We've done it, so mark this down. We're gonna take questions from the audience. Please let us know who you are. And we should have a microphone, Samir, coming around. Okay, great, please. Just right up to the front here, yeah. Let us know who you are, and if you're addressing it to a specific panel member or if it's gonna be a general question, please keep it brief and keep it to one question. And if we get through the room, then we can have second questions, too. Hi, I'm Dr. Donna Wells. I'm an expert in the Russian language internet. How is India going to overcome its systemic corruption problems moving forward? Thank you. That's a big one to start with. You want me to answer that? We all want you to answer that. I thought we were gonna talk about, I mean, the corruption. Are you trying to compare the two, or are you saying how India gonna solve it? In the last five years, we have seen a transparency in India which has never been seen before. That transparency has come for various reasons, both legally, the Right to Information Act has been implemented. So that is the legal side of it. Increasingly, we have just passed the Lokpal bill, which is the ombudsman, which is an independent body which will look at that. So legally, a couple of things have happened as there has been a huge reaction by the Indian middle class on the corruption issue in India. So it's very much right in center in India. In any newspaper, if you see the headlines are corruption issues. In fact, I always say it's always, whenever you go to India, you read the headlines and you feel very sad. When you go to China, you read the headline, you feel very good. And I'm saying both the countries are the same issues. It's just the headlines which worry, right? So you've got the corruption issue right in the center of the political spectrum. And actually the reason, one of the reasons BJP had such a huge success was around the corruption issue. So I think the system, the democratic system is throwing it up. The politicians are creating the legal frameworks which are available in many countries, independent judiciary, independent investigating agencies, putting resource allocation on some kind of auction system like we have done for the telecom auctions. So I think some of those things are going to really catch up on the crooks who think they can move the system. Now, will it take away all corruption? I don't think anyone is saying that. But I think probably the worst is over in terms of that. Probably India has recognized that as if you go forward, you cannot allow this kind of corruption to prevail. Very strong sentiments being expressed by both sides in the political spectrum. The middle class, which is now nearly two and a half, two and two 53 million people are up in arms. You have seen the reaction that has happened. Very few countries have actually seen such a reaction from the middle class that the whole government has been displaced completely with the result that there is really no opposition today. And clearly the corruption issue was one of the very major issues on this. Just to add another kind of, from a more abstract logic perspective is, but hopefully valid, is that the reason emerging economies are called emerging and they are either low income or middle income is because they have weak institutions. And of course, when you have weak institutions, both political system, weak, bureaucratic system, weak, the market system, weak. So when you have weak institutions, they're going to be opportunities for corruption. And in fact, I don't think one can flip the coin from emerging to rich in one day or institutional weakness, institutional strength in one day. So it takes time. But so the key really, I mean, China and India, of course, we write a lot about China and India. They've been competing with each other in terms of who can be the more corrupt in the world, right? And so, but leaders on both sides are trying very hard. And that's really the goal. You can't go from dirty to clean in one day. We let India win that competition. All the way in the back, he had his arm up the whole entire time. That question was going on, very persistent. Hopefully it's a, yeah, let's see. Hello, my name is Sahan. I'm interning here in Washington, D.C. I'm originally from the University of Iowa from Iowa City. So my question is probably the whole panel could pitch in. In the World Bank, ease of doing business rankings, China and India is actually ranked pretty low. You know, even though they are both rising economies, I was wondering what has the government and both the private sector has done to improve the ease of doing business so that Western companies or even emerging market companies can invest in both in these really growing economies and markets. What has the U.S. government done, or what have their own government done? Indian and Chinese. Sorry, what the Indian and the Chinese government and private sector has done. So if you see the World Bank statistics, India comes around 120th in the ease of doing business and China comes around 60th. So that's the ranking. And clearly they're very poor, both. Chinese certainly are head in ease of doing business and I think this is the obstacle course I was talking about earlier in India that we have to fix in terms of ease of doing business. That is one of the major issues both for domestic investors. They are as much in a fix as a foreign investor. So the argument is that any investment should be smooth and a pro business attitude or to investment and then it needs to be done. And one of the indicators of Mr. Modi's, let's say performance would be five years from now, how has India's ease of doing business ranking changed, for example? The challenges in terms of ease of doing business in China and India are somewhat different. Something common, corruption, but somewhat different. In terms of China, the primary complaint is really about the independence of legal system. And if I have a case, can I go to the local court and trust the local judges that to be fair and independent. And then another aspect is that the competition because the Chinese companies are becoming far more competitive, technology, a brand and capabilities and capital and et cetera. So the competition is a lot more brutal. But in terms of government's preferential policies, rolling out the red carpet, the land, and et cetera, et cetera, I would say that is a very different story from how India is. And primary, the land acquisition in India is a nightmare. I mean, I would just add on the Chinese side that you see the fundamental tension in the reform program on this very issue. So on the one hand, the premier, Lika Chang, has talked a lot about reducing administrative red tape for investments, reducing the number of approvals, all this sort of thing. And they're having some success there. While on the flip side, we see the reemergence of a pretty serious industrial policy that seems designed to make operating capability for foreign companies in particular, at least more difficult, especially where there's an industry where the Chinese are trying to groom their own domestic and ultimately global champion. Let's come over on this far side there. Hi, good afternoon. Adrian Gillum with the American Chemical Society. You had mentioned India's energy production or rather its demands are accounting for 80% of its deficit currently. What are some ways that you see India going forward in five to 10 years? What do you see is some ways that they plan to diversify their energy portfolio? And what are some ways you see China playing a role in that? And what are some other Asian partners, do you think, might play a role in that as well? Yeah, I mean, I talked about the energy, that trade deficit in energy accounting for 70% of India's total trade deficit. So one of course is that Indian government has not been particularly helpful in terms of making it easy for companies to do exploration work. And so policy changes that enable that would help. But in addition to that, in terms of diversification, that India is among the leaders in the world in terms of build up of solar energy. And so because you just look at India in terms of its geographical situation and climate and how much sunlight the country gets. And so solar power has huge opportunity. Nuclear has huge opportunity in India. And on solar side, of course, there are no safety issues, but also as the cost of solar panels is declining, solar power is expected within five years or maybe less by many analysts without subsidies to become very competitive with fossil fuel based energy. So those are the kinds of things that are going on. Of course, the whole US, India civil nuclear agreement was all about diversification of energy, right? The Chinese could play a big role in the solar because China over capacity in a solar panel is production. Japanese companies are very active in exploring nuclear, building nuclear power plants. So I think that the focus might be different. And I think that India in producing coal and thermal and all of the Western technology in clean coal would be needed. I think that it's really European, American, Japanese, Chinese companies could all play their strength into that. One more as well. It's relevant to the United States, of course, which is US LNG, it's been a number of non-FTA. So to get American LNG, you need to be an FDA partner or specific licenses given to non-FTA partners. And if the terminals licensed so far, a couple of them have their export content, at least part of it contracted to India. So there's a backlog of some 28 or 30 other applications pending. So if a good number of those contract with India eventually too, at least for LNG, the United States actually could be a major energy trading partner with India over the five year term that you're talking about. Right next to you, we'll just come back and then come back to the front. Yep. Hi, Lauren Holt, Holt Global Strategies formerly with State Department. I'd like to know what both China and India are doing to enforce intellectual property rights. Thank you. So there's a whole chapter of the intellectual property issue. It is a major issue for both. More for China at the moment as China goes into a very different economy where innovation will drive some of the economy and not just low end manufacturing. So the IP laws and regulations in China have changed substantially over the 10 years that I have seen it. They have moved towards more of the Western style protection. Enforcement may not be as muscular, but remember most of the debate disputes now coming up in the IP courts and the Shanghai and Beijing IP courts are particularly good with the judges who've been trained by EU are from domestic Chinese companies as they compete with each other for creation of IP. So the domestic Chinese local companies are actually fighting the IP battles now, which was earlier fought by largely the American companies and the European companies. So there is a change that has happened. The Indians have accepted the IP protection right from the WTO accepting for the challenges in the drug regime, which has been a bone of contention, especially with the American pharma lobby. And there I think the challenge is not whether the IP protection is adequate or inadequate. It is a question of how do we create low cost capability to provide this huge 1.2 billion people drugs at an affordable price. And China has the same issue on drugs. So on these two issues, I think, if you take away the IP on drugs and pharma, there are no issues with the Indian side. But in the China side, there has been a lot of action happening and it's the domestic Chinese companies who are now actually challenging other companies, imitators in courts in China. So that's the good news. Enforcement is still not adequate. That's the bad news. Let's bring it back to the front here. I'm giving you your exercise, trying to go back and forth. Bill Tucker, this direction is to Mr. Mishang. My firm has done a lot of work in China and India. And your comment about China companies being more willing to go with a much larger timeframe, is that because most of the Chinese companies are owned by the government and they're not private, so they're not risking private funds. I think that, yes, a lot of sectors, if you look at the power equipment, if you look at the players in the infrastructure of building and many of them are state-owned enterprises. And they have the commercial objectives for making money, but they also have the imperatives tied in to the government overall geopolitical agenda, perhaps, that making good relationships with India and et cetera, so it's a much, much longer term perspective. And plus, when you have the state banks and state-owned enterprises talking to each other, there are some common agendas there. But if you look at the private enterprises like Huawei, like Hire, because they don't have the fast turnovers to stakeholders, quarterly profit meetings, et cetera. Because the corporate leadership stays much, much longer terms, so they can look at the five years' plan, 10 years' plan to plan out their games in India. Right next to you. Yep. Thank you. I'm Andre Silverzio, and I'm the Chief Representative in Vietnam for the Interstate Traveler Company in Detroit. Anyway, great discussion. My question is this. And the question is this, do you believe in the panel because you talked commendably about 2020, 2025. But will these business relationships for the reasons that you so eloquently described, can they come to pass if China continues on this now renewed path of raw imperialism, naked aggression against the exclusive economic zones of the Philippines and of Vietnam to name two of the main victims? And it seems that they were trying the peaceful rise bit, but in 2012, they sent this note to Prime Minister Singh, then the Prime Minister, and said, we recommend you don't pursue these contracts you signed with the petroleum company in Vietnam. It could harm their bilateral relationship. Prime Minister Singh, commendably, commendably said. Relatively shorter. Yeah, commendably said. Yeah, thanks. He said, okay, we're gonna go ahead with the contracts. Now we have the oil rig dragged into, and what does it take to stimulate the Chinese pragmatism that this lady talked about so well? And what's it take to make them more pragmatic? I'm not a geopolitics expert. I'm a business professor, but of course, these days of business and geopolitics and politics certainly are so intertwined that you have to, in fact, keep track of. And my own perspective is, and I don't think it's naive, it could be, but I don't think so, which is that there's no easy solution to the China-Japan tensions, or East China Sea tensions. There's obviously no easy solution to the South China Sea tensions. In fact, if anything, those are heating up. And so what China would like to do, and this is where I'm saying I'm kind of going outside my business zone into geopolitics, is that China would like, ideally, for India to play a neutral role. Because it's one thing for China against Japan and the US, and I think China against Japan, US, and India. And so if India stays neutral, and one way for India to stay neutral is for economic engagement to be robust, and for border issues to remain calm, or maybe to move a little bit towards resolution, but to remain calm. In that case, India has no reason to be other than neutral, because India's interests are served the best in playing really a very promiscuous game. Japan and US and Russia and China and Europe, and hey, come and play in my garden. I, to answer the question, I've lived in Asia for over 30 years. I lived in Korea, Hong Kong, now here. My view, I've seen the Taiwan tension in the 80s, and we are now seeing the Vietnam and Philippines issue. The way I have seen it to play out in Asia, if you look back, is that other than North Korea, which kind of goes wild and no one knows where they go, the rest of the players in the economy are driven more by keeping the economy going. I mean, Taiwan and China in the 80s exchanged missiles. There were serious issues, and yet the Chinese and the Taiwanese do excellent business. In fact, too much of it, I suspect. And the same thing with Vietnam. You had a border problem 15 years ago, which got resolved. Again, everything started, and now we see it again. So, my view is that the Asian mindset in that part of the world will find a solution. The Chinese have obviously raised the game by their nine dash line, as they call it. But they will find a solution so that the economies keep going and the border issues are held in a parallel track. The parallel track will be sorted out in its own time, but I don't forecast, because we have seen the same thing happen earlier, that this will just kind of blow up into a major war. That's from my experience in that part of the world. Who can say? I disagree on that part, but. All right, Dan will get good now. Oh, that was good before. I'm glad the Indians find out. And the Chinese remain silent, I'm serving. We've got about five more minutes, so we've got time for a couple more questions. Rain in the aisle here. Thank you very much. My name is Donghui Yu, with China Review News Agency of Hong Kong. And today we are talking about a lot of cooperation between the two countries. But actually many people are talking about the competition between the dragon and the elephant. So the interesting thing is when the Chinese people talking about the economic and social achievement in the past three decades, they believe the Chinese system worked better. But many Western observers believe that they are more optimistic about the future of India than those of China, because India is a democratic country. So what do you think about that? I know this is a very complicated question, but could you please just give us a prediction dragon and elephant who's gonna be leading or who's gonna be the winner in the next three decades? Thank you. I would say two things. So first is that I think competition and cooperation almost always go hand in hand. You look at France and Germany as just one example of that. Or Europe and the US or US and Japan. So I don't think that's an issue. It won't be just one or the other. Over the last 30 years clearly the China model has proven to be far more successful than the India model. However, I firmly believe that if China continues on the path that it has been over the last three decades, China is gonna be in deep trouble. And so therefore the past 30 years are not necessarily a good guide to the next 30 years. Except that the Chinese way is, I think it's sometimes the universal media simplified it, because the Chinese way is really a combination of many ways and the Chinese way is borrowing the best and then making it the Chinese way and crossing the river by touching the stones. So if what has worked over the last 30 years proves to be and they have already recognized not gonna work for the next 30 years. They have already started adjusting it and making adjustment. And I think that ultimately it comes down to the two governments ability to adjust to learn and perhaps eventually they're all race to become the top economies. And then maybe they all converge in terms of that common dream democratic, prosperous and well off and peaceful development. I think that if that's the fundamental directions both are going, they will end up in the same place. I think give it a historical perspective. Korea and a martial law when I used to live there is the most democratic country today. Ditto Taiwan, Ditto Singapore, Ditto Hong Kong. So here we have countries on the periphery of China which over the decades have moved their systems after they have grown in certain, in their economic terms. And that is what everyone hopes that the mothership which is China on that part of the world will also do in its own way. And I think we, I mean, India accepted democracy in right in day one. And there are many people in India who would argue the other way but the fact is that is what happened. And over these years India has struggled with it and come to whatever level we are. But the Chinese way will be the way Asia has done it. We have seen the examples in all these countries. And that is what will happen in the mothership in its own way as high and sex. Girija is not planning to apply for a visa to China anytime soon. I don't know if I'll get up on the side here. Thank you Ernie Preek Manufacturers Alliance. And with all the very positive constructive potential for trade investment in manufacturers, business services between the two countries, a big, you would think trade policy is very important is particularly a more liberal policy in India. So my question is what is shaping up to be or should be the Indian trade policy? And since trade agreements last almost 20 years of regrettably in some ways all been bilateral rather than multilateral, what do you see in particular as possibility of Indian bilateral agreements with China and with the United States? So currently the Chinese are very keen on FTA with India. Currently the FTA arrangements are around ASEAN. So China has a very comprehensive agreement with ASEAN on the FTA. And India has a comprehensive agreement on the FTA with ASEAN. So to some extent the goods can be put through ASEAN countries because both all ASEAN, 10 ASEAN countries enjoy tariff benefits in both these economies. So in fact that is exactly what is happening now because both have signed FTAs with ASEAN. So the India look east policy as we call it is via ASEAN. It is talking about a free trade agreement with Korea and now Japan. So not with the United States as yet but I presume one day that will happen as well. But at the moment it is a look east trade policy around these countries where we already have some arrangements in the past. So India has not been a great trading nation in terms of FTAs. The first FTA was actually signed only in 2005 with Singapore then it got extended to ASEAN and that is where India's FTA is actually it's it's pretty rudimentary from the global perspective. I don't see what's India's incentive to have for you know FTA with China was India to export because India currently export primarily commodities. So I don't see the benefits India will get from having FTA with China. China will just sell hack a lot of manufacturing products to India. So I don't think that is that is the priority for the Indian government. What is the priority could be on the investment front. Exactly. Totally. I mean in fact I predict it's hard to say about FTA with the U.S. but FTA with China, India, China. I put the probability in the next you know at least five years maybe longer as zero. And you know I would hope and I assume that you know when China's foreign minister Mr. Wangi was in India last three days that they spent 90% of the time talking about investment rather than trade issues because that's where the real juice I think is. Well with that I think I'm going to conclude the formal part here. You know I think as we started off with we look at this relationship often times is you know the contentiousness and in fact you know sometimes encouraging that to some extent. We can only talk about India and get people's interest if we talk about it as counterweight to China and I suppose there's a counterargument to be made there too. But this is a much more positive way to look at the relationship and I think too I mean we look at the contentiousness as an inside the bell way and certainly inside CSIS and other type buildings but if you're inside companies in China and India I'm sure the two of them are focusing a lot on the messages that these three brought to us today and then included in the book that's available just outside this office. So I hope everybody will join me in thanking our panelists and also to Prené from the Embassy of India for joining us. Thank you.