Chindia: Stonger Ties Between China and India

Robert Hsu, May 23, 2008

During my recent trip to Asia, I gained a lot of insight on the increasing cooperation between Asian countries. I was particularly impressed with the developments taking place between China and India -- the two most populated countries in the world. Between the two countries, they have 2.5 billion people. That's over 40% of the world's total population and more than twice as many as the U.S., the E.U. and Japan combined.

And with China and India both taking great pride in their long history and age-old civilization, it only makes sense for the two to strengthen their ties and profit from each other's economic growth. This is especially true now that there's an economic slow down and structural demographic problem in the U.S. and Europe -- emerging Asian economic powerhouses need to cooperate with one another.

So let's take a look at what the stronger ties between the two -- coined as "Chindia" -- mean for both counties and what this means for investors. Here are some of the key resources that each country has that compliments the other:

People: Both China and India's economies are benefiting from the same and most valuable resource: Their people. However, the difference between India and China is the huge number of young people in India. This is especially impressive compared to developed countries. By 2025, India will have more people under 30 years old than all the developed economies of the world combined.

And although China has a lot of young people right now, its demographic structure will change rapidly after 2020, as a result of its one-child policy that came into effect in the late 1980's. So starting from 2020, with strong ties between the two countries, China can benefit from its neighbor's vast young population.

Infrastructure & Manufacturing: India excels in areas that are less labor and infrastructure intensive, such as IT services. So it will benefit from China's excellent infrastructure and manufacturing expertise, which give the country an edge in creating things.

Land & Water: China has a shortage of arable land and water, while India has a vast supply of both. But it is short on capital and technology to make good use of them, while China, as noted above, has the technology and funds to farm the land. So with cooperation between the two countries, both will be able to prosper from the available land and water resources.

In conclusion, I think that the increasing collaboration between China and India will be one of the most important economic themes in the 21st Century. Multinational firms and sovereign wealth funds that understand how to create synergistic benefits from China and India will stand to reap enormous profits in the coming years.

To find out more about how China and India are working together, join Asia Edge today.

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