•	China is focusing more on stimulating domestic demand and reducing its reliance on exports and foreign direct investment to drive growth.
•	India must deal with structural problems such as poor infrastructure, deregulation and bureaucratic tangles that could hamper its ambitions to achieve growth at par with China.
•	Retail and manufacturing sectors are in need of attention.
•	Failure to address obstacles to sustainability, stability and global integration will not only set China and India back but will also aggravate global imbalances.

That China and India have emerged as drivers of global growth is nothing new. These economies each with one-billion-plus populations are set to grow by over 6% and 8% a year respectively for the near to medium term. China is already an integral part of the global supply chain; India has become a dominant player in outsourcing services.

Participants went beyond conventional wisdom to consider long-term problems for China and India that require innovative solutions, namely the quality and sustainability of growth models, creating jobs, maintaining stability, eradicating corruption and better integrating into the global system.

These issues are closely connected. Better integration with the rest of the world will enable both to achieve more balanced, diversified growth and transform them into more efficient economies, more inclusive societies, and more responsible and responsive members of the international community. Adopting sustainable development policies to promote social equity, a cleaner environment and economic stability will naturally deepen their integration with the global economy. “China cannot achieve development in isolation of the rest of the world, and the world needs China for development,” said China’s Vice-Premier Zeng Peiyan. His statement (webcast) could equally apply to India.

Comparing China and India, however, pits apples against oranges. Yes, they have similarities, but there are even more crucial differences that are widely recognized – the makeup of their economies; depth of integration with global supply chains; share of global trade, notably exports (see Figure 1);

and workforce skill levels, not to mention obvious and significant divergences in their political system, rule of law, infrastructure and level of development.

In China, domestic consumption must increase; China must lower its reliance on exports and foreign direct investment (FDI) to drive growth. Chinese officials including Vice-Premier Zeng emphasized that the new five-year plan to be approved in March should set a "moderate" growth target of 8% to allow for greater focus on social programmes and initiatives for sustainable development.

India's delegation delivered its own stark message: While India has arrived on the world stage, it has a raft of urgent problems to tackle, including poor infrastructure, widespread poverty and widening income disparities particularly between urban and rural areas, limited manufacturing capabilities and deficiencies in education. The self-styled “fastest growing free market democracy in the world” is proving that pluralism and growth are compatible. “Democracy is going to be a source of competitive advantage for us,” predicted Nandan M. Nilekani, President, Chief Executive Officer and Managing Director, Infosys Technologies. Indian Minister of Commerce and Industry Kamal Nath added: “As the world’s perception of India changes, India’s perception of itself changes. The Indian electorate is realizing more and more that a more liberalized economy is what is driving growth.”

The complacent and fearless may cling to one-dimensional high-growth stories. But it is time to take in the bigger picture. The tricky shifts that China and India are trying to pull off as they implement complex reforms will prove more painful than anything they have so far achieved. Turning an economy driven by exports and FDI into a consumption-led one cannot be easy for a society still nominally steeped in central planning. Moreover, China must create a system of rationally allocating finance (i.e. reform the banking system) so long constrained by political interference. As Morgan Stanley Chief Economist Stephen Roach said, “switching from an investment-led economy to a consumer-led one is more art than science. A consumer culture is the DNA of market-based capitalism and this is not in the experience set of China’s macroeconomic managers.” While China must balance bold structural reforms with statist controls to avoid destabilizing social tensions, India inches forward gingerly, its revolutionary reform ambitions tempered by a much admired, yet constraining devotion to democracy and social heritage. Bridging significant gaps of poverty, empowering women through education and addressing infrastructure deficiency are enormous tasks that lie ahead.

All this suggests that China and India could each hit a wall, forcing them to scramble to generate new models of growth. And in the case of China, we need no reminders that not a single country in the post-World War II period has undertaken banking reform the likes of which China is attempting absent a significant financial crisis. There are many plausible negative scenarios: rising protectionism stemming from disillusionment with multilateral trade negotiations, social tensions resulting from rising expectations and uneven development, disputes with rivals over natural resources, diplomatic friction over ties to potentially destabilizing regimes such as Iran, and falling FDI due to frustration with the shaky rule of law and thin profit margins in China or India’s infrastructure deficiencies and bureaucratic bottlenecks. Business must consider the implications of the transformations underway and adopt risk strategies accordingly. At the same time, Chinese companies are venturing overseas to acquire management expertise, technology and brand-building savvy to apply them at home. Boardrooms in Europe and the US are having to consider new potential emerging competition. Chinese and, to a lesser extent, Indian firms are building resource supply networks and strategic business relationships in Africa, Latin America and other emerging markets. Global companies that source products from China and India are beginning to apply environmental best practices standards to suppliers. Companies are bolstering the rule of law by asserting their commercial rights including intellectual property protection through available legal channels, adhering to transparent and ethical conduct, and requiring the same of partners and contractors. The leaderships of both countries are struggling to stay far enough ahead on the reform curve to prevent human resources and infrastructure constraints from damaging critical labour cost advantages.

China and India’s developments are unparalleled transitions with profound consequences and opportunities for the world at large. Conditions change quickly; objectives once considered incongruent can swiftly turn into complements. Environmental protection and economic growth are a prime example. As US architect William McDonough, Chairman, William McDonough + Partners Architecture and Community Design / MBDC, who is designing cutting edge ecofriendly cities in China, concluded: “The Chinese have the ability to go to scale with velocity.” While India may move more slowly, its impact on the global economy is likely to be as great as China’s, particularly as life sciences and other services are outsourced to India. As many participants put it, as go China and India, so goes the world.