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China, India and the Future

Tarun Khanna closes out his book on China and India with a tantalizing section called "The Future." Who doesn't want to know what's going to happen with these two countries? Unfortunately, we don't really find out much about the future that he hasn't already suggested.

Thus this final section winds up as the least satisfying part of "Billions of Entrepreneurs." Perhaps my expectations were to blame -- I thought I Khanna would speculate on whether India's promising domestic economy, with its well-defined capital markets, effective financial system and burgeoning class of entrepreneurs, will outstrip the pragmatic neomercantilism of China. Or that he might predict that India's tyranny of the minority and its maddeningly inconsistent legal system will derail its long-term potential.

Instead, this section on the Future feels like an extension of the second section, on Enterprise. There's more on politics, centered on China and India grappling towards better relations with each other, trying to overcome the awkwardness of their skirmish in 1962 (India lost, and Khanna says the country 'is still recovering'). Much of this centers on how the two have related to Burma (now Myanmar) since the 1940s, with India at first dominating the relationship, only to have China muscle it aside and place "a bamboo curtain". There are parallels in how the two behave in the world economy today. As Khanna shows, China is an effective user of hard power â€" it has military power and money and will invest no strings attached even in a pariah nation like Myanmar. India is better at soft power, using Bollywood to spread its culture. China's muscle seems more beguiling that India's charm, a likely reason why we in the U.S. pay so much more attention to China than we do to India.

In fact, Khanna makes the point that the Chinese today sound much like Mao in the early 1950s: the leaders say all the right things in international forums, but its actions and investments belie its words. In the 1950s, China bulled its way into Tibet and Korea while spouting peaceful rhetoric at the 1955 Bandung Conference. Now, it again speaks of harmony while operating in troubled parts of Africa and other such regions.

Perhaps the most telling thing about the future comes from Khanna's assessment of the past. He notes of the missionaries and other waves of foreigners who came to China expecting to change the place. Instead, he quotes from the historian Jonathan Spence:

"It was the Chinese who had gained from the exchange. They had used the Westerners' skills when it suited them, and paid a fair price, but had offered little else in return. What did not concern them they had shrugged aside."

The warning for modern business is obvious: China will exploit your corporation before you figure out how to exploit it.

He does hold up an exception: General Electric. His final chapter is an extended look at how General Electric seems to have managed to do well both in China and India, apparently without giving away all of its know-how. He cites GE as unusual in being effective in both India and China, and for its ability to integrate its operations so they benefit each other. GE is the model he thinks Western companies should follow. But most companies are not GE.

It would seem that the future remains one in which India and China challenge, baffle and occasionally dazzle the West -- and each other.

UPDATE: See the Big Think Breakdown on this book here: China and India Don't Need Us