Titans of the East

From war to business

In 1962 India and China were fighting in the North Western part of the Himalayan Mountains, in the Province of Kashmir. Since then, the potential of another war between these two Asian giants has always taken into consideration.

Despite the rivalry between them, the two nations have managed to keep the borders quiet, knowing that another conflict between them will do nothing but damage to both sides.

Recently though, they've found many mutual interests. The population in both combined countries is nearly 2.5 billion, about a third of the world's population. Both enjoy fast economic growth at a pace of almost 10 per cent per annum. Which is why these neighbours have decided to hold hands and step forward to prosperity.

$100 billion market

In 2010 the trading volume between India and China is expected to be $60 billion. By 2015 it is expected to be no less than $100 billion.

China understands the Indian potential of production. Relatively low Indian and Chinese wages and low delivery costs due to the closeness between them will make it attractive for large scale business.

China is very much interested in the Indian agriculture products. The warm Indian south provinces of Kerala and Tamil Nadu are considered as the barn of the huge Asian Sub-Continent. India is interested in the Chinese technology, especially massive industrial production and high tech.

If the Indian-Chinese plan will work it may be a big problem to the west in the long term..

How can it affect the West?

Someone said not long ago that the west is rich, spoiled, small and lazy. The east is poor, rough, big and hard working.

Why should China and India buy products from North America and Europe for expensive money and in addition pay for cross pacific expensive transportation?

Both countries are looking to reduce costs and in the long term the following western sectors may suffer:

a.Shipping Companies.

b.IT and high-tech exporters.

c.Heavy Industry machinery manufacturers.

d.Agriculture sector (grains, fertilizers).

What should Canada do?

2.5 billion people are really a challenge for a 35 million people country. Canada should look at its relative advantages, offer them to the Asian giants and try to ease the trading with China and India by relieving the trade regulations and make its product relatively cheap when comparing them to European or American alternative products.

As we speak, the Canadian Dollar is a strong currency. The exchange rates are 6.62 Chinese Yuan (CNY) and 45.22 Indian Rupees (INR) per one Canadian Dollar. Weakening the local currency can do miracles to Canada's export to Asia.

Increasing the basic interest rates in Canada does not support that goal.

This article does not recommend investing in the capital market