Neither India nor China are equipped to lead the Global South

Henny Sender is the founder and managing partner of Apsara Advisory, a strategic consultancy for financial services companies. She was previously a managing director at investment company BlackRock.

There was a People’s Bank of China gathering last spring in Hangzhou commemorating the 80th anniversary of the Bretton Woods gathering where the victorious allies mapped out an international financial framework for the postwar years. It was, however, anything but a celebration.

Institutions such as the International Monetary Fund represent the interests of a narrow group of Western nations, say officials such as the Texas-educated Xuan Changneng, the newest deputy governor of the PBOC. Voting rights have long ceased to reflect the reality of a world in which the Global South represents over half of the world’s gross domestic product and yet has far less representation than a handful of developed nations, Xuan (accurately) noted.

Meanwhile in numerous international gatherings, India’s External Affairs Minister S. Jaishankar has spoken out against the West for its assumption that only developed nations can be democracies, or that the West’s most narrow concerns are made the object of worldwide attention at the cost of issues that are of more urgent concern to emerging nations. Such observations also resonate with less developed nations.

The two Asian giants are contesting for the hearts, minds and leadership of the Global South. As they do so, they bring contrasting strengths and very different templates for growth. Their narratives share common grievances — such as the inequitable distribution of the most effective mRNA vaccines during the COVID-19 pandemic — yet differing visions.

China’s model is by far the more compelling one. No country has ever lifted itself out of poverty with the speed of China. Since the 1980s, the majority of people in the countryside have left subscale farms to work in urban factories. There, in their hundreds of thousands, they make goods for both the local market — where per capita income is now over $12,500 — and for the rest of the world. Production has steadily moved up the value-added chain, attracting affluent buyers across the globe who seek both quality and affordability. Mainland scale is such that no other nation can compete.

An employee watches over an assembly line at a manufacturing plant in Chongqing municipality, China.   © Reuters

Moreover, today, only China has the technology to manufacture for tomorrow’s world. If conventional vehicles are becoming obsolete (however uncertain the timetable), mainland companies have the technology to build the batteries at the heart of the value-added electric vehicles. It can easily jettison the legacy know-how of the internal combustion engine.

Even though technology means that over time job growth will inevitably slow, China’s manufacturing-heavy model is still far better than any other path to upward mobility. For example, in Bangladesh, the biggest source of private sector jobs is Seoul-based Youngone, which has over 70,000 staff sewing the highest value-added winter wear in its export processing zones for brands such as Patagonia and The North Face. Their children, though, plan to attend medical school. Youngone and its peers are a big reason why Bangladesh will become a middle income nation next year, the World Bank calculates.

Meanwhile, India has built its economy on services. Given the technology that increases productivity and by definition eliminates jobs, it is too late for India to shift. Foxconn will never again build factories employing 300,000 people as it has done in China. Today, India lacks both scale and productivity when it comes to making things and can’t compete with China in what will matter tomorrow. And in some cases, perhaps it shouldn’t even try. Making solar panels, for example, is worker-light and capital intensive. It makes far less sense for India to aspire to do so, given its high cost of capital. Its priority should be to create jobs for its vast pool of unskilled youth.

The world may not have taken notice but many Indians did when Jaishankar occupied a first-class seat at U.S. President Donald Trump’s inauguration in January — even though he was not assigned to sit there and declined to move. By contrast, China’s vice president was seated at the back.

Also, India has a huge advantage in that it understands soft power — Bollywood movies and music have worldwide audiences.

China, though, does not bother with understanding soft power. Movies are subject to strict censorship, resulting in happy messaging that in many cases destroys any attraction even for (or maybe especially for) local audiences. It is impossible to get a movie past censors if it dares to mention COVID-19, according to the CEO of one major film studio in the country. Any appeal a movie may have outside its own borders is based on pragmatism and a possible shared interest.

Moreover, there is still a huge gap between how China sees itself and how the rest of the world sees it. Its self-image is that of a besieged nation that lacks both food and fuel independence and lives in an implacably hostile world. To be fair, China is trying to adjust to the reality that most nations do not see it quite that way and expect it to do more to help its neighbors, such as Indonesia. Rather than just buying their commodities and raw materials, processing them at home and then selling them back with accrued value added to the Chinese, it is trying to partner to add more value locally. Yet, many of its neighbors think it could be doing far more.

India, meanwhile is only beginning to repair relations with smaller, weaker neighbors such as Sri Lanka.

Here’s the bottom line: Given the toxic geopolitics and rising protectionism in today’s world, the hope that either of the two giants will do much for others in the Global South is likely to prove an illusion. Self-reliance is a more realistic strategy.

The article appeared in the asia.nikkei