Indian Army Chief of Staff General Joginder Jaswant Singh, upon returning from China where he met with his Chinese counterparts at the end of May, announced that China and India would hold the first ever joint army exercises between the two nations. At the time, this was seen as a clear step forward for two nations that went to war over border issues in 1962 and to this day disagree on the exact boundaries of the two countries. That step forward may have been a half step however, as the Indian foreign minister was quoted as saying that “India has told China that it will not part with portions of the state of Arunachal Pradesh to settle a decades-old border dispute.”

Just a few weeks ago, it was all looking so promising when The Jamestown Foundation reported on the announced joint exercises in their biweekly China Brief:

Given China’s concerns regarding the separatist activities in Xinjiang and Tibet, the Chinese military has expressed interest in learning from their Indian counterparts who have had significant experience in counter-insurgency operations in the Kashmir region and in the northeast. While China and India have viewed each other with suspicion since the 1962 border war, the joint exercise reflects the ongoing efforts by both countries to improve the bilateral relationship. (more…)

New Delhi is set to host a grand prix in 2009 after the Indian Olympic Association announced a preliminary deal with formula one boss Bernie Ecclestone. IOA president Suresh Kalmadi confirmed at a news conference that the agreement was conditional on having a venue approved, and that a suitable location around New Delhi is being sought.

In a letter to Kalmadi, Ecclestone said: “I am writing to confirm the basis of our common understanding on the way forward to bring to fruition our shared aim that a Formula One Grand Prix of India event be staged as a round of the FIA Formula One World Championship.”

Formula One reported that the plan gained traction after India opted to build a track near New Delhi rather than push ahead with their original plan for a street race; F1 obviously worried about the competition New Delhi’s tuk tuks would give to the McLarens and Ferraris. The IOA is set to promote the race and money will be raised through the government or private funding, giving the Indians 24 months in which to raise the money and construct the track, not exactly an easy task. (more…)

“China produces so much junk” - this is probably the most common phrase I’ve heard since living here for the past 5+ years and though you’re probably sick of stories about all the crap that this country makes (but which we all need of course - tooth brushes, socks, bras, ball bearings, pens and whole lot of plastic garbage), check out the article that Peter Hessler (author of “Oracle Bones” and “River Town”) wrote in National Geographic on the cranking-out of rubble in factories scattered throughout towns in Zhejiang.He says:

“One supercharged province (Zhejiang) cranks out light bulbs, buttons, and bra rings, as well as instant cities for the factory workers” and His descriptions of the people who work in the factories are as riveting as facts about the towns and plants themselves: “Wuyi manufactures more than one billion decks (of cards) a year. Datang township makes one-third of the world’s socks. Songxia produces 350 million umbrellas every year. Table tennis paddles come from Shangguan; Fenshui turns out pens; Xiaxie does jungle gyms. Forty percent of the world’s neckties are made in Shengzhou.” (more…)

A recent post from http://www.chinaeconomicreview.com/editors/ with looking at Chinese stock ownership and the volitility of the market.  Read on:

Chinese investors on average hold a stock for just 62 days compared to an Asia ex-Japan figure of 124 days. Remove China from the calculations and the average shoots up to 249 days, although, as the analysts at Citigroup who put together this research point out, length of ownership is falling across the region.

The China figure speaks volumes for the volatility of the market, which, in turn, goes a long way towards explaining the turbulence of the last few days.

By comparison, during the last big Chinese bull market in 1997, the average stock holding period was 56 days. The bull before that – 1994 – saw length of ownership hit 51 days.

Don’t forget the subsequent market slumps and vanishing liquidity, though. In 1995, the investors that hadn’t already cut and run were left holding stocks for an average of 486 days. In 1998, it was 249 days. Then the truly dark times towards the end of 2002 and the beginning of 2003 saw ownership periods in the 488-548 day bracket – people just didn’t want stocks (which, let us not forget, were headed towards an eight-year low).

Obviously it is the brokers who have gained from the shorter ownership periods: the more investors buy and sell, the more money brokers receive in commissions. No wonder the financial results for last year published by China’s brokerages look so rosy when set against the challenges of 2005 (official figures for the sector were never revealed, supposedly because they were so shockingly bad).

Now they just need a way to make money when the market is down and the investors shy away. Bring on financial futures.

Friend of and contributor to 2point6billion, Shantanu Bhagwat of global themes blog, shares his friend’s article on contentions with the concept and methodology behind Goldman Sachs’ bundling, comparing and projecting futures of the BRIC countries.

An incredibly though-provoking piece here which deserves our readership and contemplation - take the time to read through this and grateful to hear your thoughts…

—

From Shantanu:

My good friend Tosh (author of “The Rising Elephant“) sent me one of his recent articles last week titled, “Eye On The Tigers” which makes the point that putting the all the BRIC countries in one basket may not only be unwieldy but also confusing and possibly inconsistent.

Excerpts:

The BRICs report published in 2003 by Goldman Sachs – which foresaw the rise of Brazil, Russia, India and China as global economc powerhouses, has acquired the aura of a Delphic Oracle.

Nevertheless, it remains confusing with regard to some key assumptions and conclusions, particularly for policymakers.

The first problem is the heterogeneousness of the BRIC membership. Demographically, Brazil and Russia have a combined population of just 330 million – against 2.4 billion for India and China.

Russia, by many accounts still a nuclear-armed superpower, is essentially an exporter of com m odities to the West and of arms to China and India - which, in some cases, its own armed forces cannot afford.

Russia is also ageing fast: 15 percent of its population is over 65 years old,against a mere 5 percent in India.

For its part, Brazil’s growth is three to four times lower, and its income distribution far more skewered, than India and China.

Indeed, the lack of a meaningful middle class is one reason for Brazil’s stagnation, while its presence in India underpins the surprising spurt in its GDP growth.

More perplexing is Goldman Sachs’s faith in the three-fold gap between Chinese and Indian GDP lasting for the next 25 years.

India has been far more efficient than China in moving up the global value chain.

Its telecoms market is now the w orld’s fastest grow ing.Outbound Indian acquisitions, ahead of China in both quality and scale, are another example.

… All this may be overlooked.

What cannot is the report’s unquestioning faith in the continuity of the current global order.

To show precedents for the BRICs, the Goldm an Sachs team turn to Japan and Germany’s rapid growth after World War II.  Such straight-line insight may well apply to Japan and Germany, or Brazil and Russia…

To imagine this is true for India and China, inhabited by a third of the w orld’s population (and sometime soon, half its workforce), is curious.

…Devoid of the yardstick of the dollar,  things look quite different . Both within the BRICs,and for the world outside.

For in purchasing power terms, China’s econom y is over tw ice the size of India’s,  while India’s is larger than those of Brazil and Russia combined.

More dramatic is the fact that the Indian and Chinese econom ies are together already equivalent to those of the U S or the EU.

(Above middle: Her Excellency, Indian Ambassador to China, Ms. Nirupama Rao; right: Dr. Anil K. Gupta, Ralph J. Tyser Professor of Strategy and Organization, Smith School of Business, University of Maryland; left: Mr. Christopher Devonshire-Ellis, Founding Partner, Dezan Shira & Associates).

Last night we had the wonderful opportunity to have present at our 2nd (montlhy) China-India Working Group Session:

Her Excellency, Ambassador Rao, who gave an honerable and inspirational opening remark on India and China’s blossoming bilateral relationship and parallel movements in growing their economies and seeking harmony in their aims to develop their societies.

Dr. Anil K. Gupta gave a lecture on ‘How to Get China and India Right’ and the importance of China AND India (rather than China Vs. India).  Much of the points Dr. Gupta made in his speech can be read in his co-authored piece for The Wall Street Journal that appeared as a full-page article in the US, Asia, and Europe editions on April 28th at: http://online.wsj.com/article/SB117735342493979298.html; you may also find interesting two video and audio interviews that WSJ conducted with Dr. Gupta at: http://online.wsj.com/article/SB117735342493979298.html and at: http://link.brightcove.com/services/player/bcpid572031310 and at: http://podcast.mktw.net/wsj/audio/20070426/pod-wsjgupta/pod-wsjgupta.mp3.

Mr. Devonshire-Ellis also spoke on Indian Special Economic Zones.  His presentation can be viewed at: http://www.2point6billion.com/India_SEZs_Introduction.pdf.

Special thanks to Ambassador Rao and Dr. Gupta for their though-provoking and inspirational talks.

Thanks also to the Capital Club for hosting our 2nd China-India Working Group Session.  We will be holding our next session in July and will keep you informed once the subject and date is firmed-up.  We welcome any interested professionals to participate and/or join us in delivering a talk on an issue of business, economic and social importance relevant to these two vast countries.  Feel free to submit your suggestions, share an idea or express interest in participating in our 3rd session in July - send an email to: editor@2point6billion.com

The theme at hand is extremely controversial in terms of what the world thinks about a country that is ‘going global’ to a different place; a not-so-convenient place where nothing, yet everthing is as it seems…  China’s works in continential Africa regardless of intentions (and unexpected consequences) are certainly a phenomenon to be watched closely.  A history in the making?

The link brings us to perceptions - a bit negative (but which may represent the world’s thoughts on what China is doing in Africa. At large).  Have a peek: http://www.spiegel.de/international/world/0,1518,484603,00.html

But more interestingly, I’m curious to hear what you all have to say about what India is doing in Africa, that is, in parallel to the scale of China’s influence there…

Grateful for your thoughts.

Sumita