China, India and the World

WSJ writes that “competition from China and India is changing the way businesses operate everywhere.”

China and India — two of the world’s hottest economic powerhouses — are rattling businesses around the globe, in very different ways. The boom in China’s world-wide exports — up 125% in four years — has left few sectors unscathed, be they garlic growers in California, jeans makers in Mexico or plastic-mold manufacturers in South Korea. India’s punch has been far softer, but the impact has still altered how hundreds of service companies from Texas to Ireland compete for billions of dollars in contracts.

The causes and consequences of each nation’s surge are somewhat different. China’s exports have boomed largely thanks to foreign investment: Lured by low labor costs, big manufacturers have surged into China to expand their production base and push down prices globally. Now manufacturers of all sizes, making everything from windshield wipers to washing machines to clothing, are scrambling either to reduce costs at home or to source more of what they make in cheaper locales. Some of the braver small fry are even setting up factories in China despite huge cultural and logistical challenges.

India, too, is prompting a massive rush east by many U.S. and European service providers. But, unlike the manufacturers that headed into China, service companies didn’t go to India until cheaper and increasingly sophisticated Indian enterprises invaded their territory. Bangalore-based consulting and information-services firm Infosys Technologies Ltd., for example, nearly tripled its overall revenue from 2000 to 2002, in large part thanks to surging sales in North America.

U.S. service companies say they have little alternative other than to confront Indian competitors on their home turf: For many of these companies, the price of manpower is king. Consulting and tech-services company Accenture Ltd. plans to have as many as 10,000 people in India by the end of this year, or about one-eighth of its entire work force.

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Rajesh Jain

An Entrepreneur based in Mumbai, India.