China + India: The Power of Two

China and India are burying the hatchet after four-plus decades of hostility. A few companies from both nations have been quick to gain competitive advantages by viewing the two as symbiotic. If Western corporations fail to do the same, they will lose their competitive edge--and not just in China and India but globally. The trouble is, most companies and consultants refuse to believe that the planet's most populous nations can mend fences. Not only do the neighbors annoy each other with their foreign policies, but they're also vying to dominate Asia. Moreover, the world's fastest-growing economies are archrivals for raw materials, technologies, capital, and overseas markets. Still, China and India are learning to cooperate, for three reasons. First, these ancient civilizations may have been at odds since 1962, but for 2,000 years before that, they enjoyed close economic, cultural, and religious ties. Second, neighbors trade more than non-neighbors do, research suggests. Third, China and India have evolved in very different ways since their economies opened up, reducing the competitiveness between them and enhancing the complementarities. Some companies have already developed strategies that make use of both countries' capabilities. India's Mahindra & Mahindra developed a tractor domestically but manufactures it in China. China's Huawei has recruited 1,500 engineers in India to develop software for its telecommunications products. Even the countries' state-owned oil companies, including Sinopec and ONGC, have teamed up to hunt for oil together. Multinational companies usually find that tapping synergies across countries is difficult. At least two American corporations, GE and Microsoft, have effectively combined their China and India strategies, allowing them to stay ahead of global rivals.