05-11-2008, 04:18 AM
http://www.businessweek.com/magazine/conte...34/b3948401.htm
While China's big state-run R&D institutes are close to the cutting edge at the theoretical level, they have yet to yield many commercial breakthroughs. "China has a lot of capability," says Microsoft Chief Technology Officer Craig Mundie. "But when you look under the covers, there is not a lot of collaboration with industry." The lack of intellectual property protection, and Beijing's heavy role in building up its own tech companies, make many other multinationals leery of doing serious R&D in China.
China also is hugely wasteful. Its 9.5% growth rate in 2004 is less impressive when you consider that $850 billion -- half of GDP -- was plowed into already-glutted sectors like crude steel, vehicles, and office buildings. Its factories burn fuel five times less efficiently than in the West, and more than 20% of bank loans are bad. Two-thirds of China's 1,300 listed companies don't earn back their true cost of capital, estimates Beijing National Accounting Institute President Chen Xiaoyue. "We build the roads and industrial parks, but we sacrifice a lot," Chen says.
India, by contrast, has had to develop with scarcity. It gets scant foreign investment, and has no room to waste fuel and materials like China. India also has Western legal institutions, a modern stock market, and private banks and corporations. As a result, it is far more capital-efficient. A BusinessWeek analysis of Standard & Poor's (MHP ) Compustat data on 346 top listed companies in both nations shows Indian corporations have achieved higher returns on equity and invested capital in the past five years in industries from autos to food products. The average Indian company posted a 16.7% return on capital in 2004, vs. 12.8% in Chin
SMALL-BATCH EXPERTISE
The burning question is whether India can replicate China's mass manufacturing achievement. India's info-tech services industry, successful as it is, employs fewer than 1 million people. But 200 million Indians subsist on $1 a day or less. Export manufacturing is one of India's best hopes of generating millions of new jobs.
India has sophisticated manufacturing knowhow. Tata Steel is among the world's most-efficient producers. The country boasts several top precision auto parts companies, such as Bharat Forge Ltd. The world's biggest supplier of chassis parts to major auto makers, it employs 1,200 engineers at its heavily automated Pune plant. India's forte is small-batch production of high-value goods requiring lots of engineering, such as power generators for Cummins Inc. (CMI ) and core components for General Electric Co. (GE ) CAT scanners.
While China's big state-run R&D institutes are close to the cutting edge at the theoretical level, they have yet to yield many commercial breakthroughs. "China has a lot of capability," says Microsoft Chief Technology Officer Craig Mundie. "But when you look under the covers, there is not a lot of collaboration with industry." The lack of intellectual property protection, and Beijing's heavy role in building up its own tech companies, make many other multinationals leery of doing serious R&D in China.
China also is hugely wasteful. Its 9.5% growth rate in 2004 is less impressive when you consider that $850 billion -- half of GDP -- was plowed into already-glutted sectors like crude steel, vehicles, and office buildings. Its factories burn fuel five times less efficiently than in the West, and more than 20% of bank loans are bad. Two-thirds of China's 1,300 listed companies don't earn back their true cost of capital, estimates Beijing National Accounting Institute President Chen Xiaoyue. "We build the roads and industrial parks, but we sacrifice a lot," Chen says.
India, by contrast, has had to develop with scarcity. It gets scant foreign investment, and has no room to waste fuel and materials like China. India also has Western legal institutions, a modern stock market, and private banks and corporations. As a result, it is far more capital-efficient. A BusinessWeek analysis of Standard & Poor's (MHP ) Compustat data on 346 top listed companies in both nations shows Indian corporations have achieved higher returns on equity and invested capital in the past five years in industries from autos to food products. The average Indian company posted a 16.7% return on capital in 2004, vs. 12.8% in Chin
SMALL-BATCH EXPERTISE
The burning question is whether India can replicate China's mass manufacturing achievement. India's info-tech services industry, successful as it is, employs fewer than 1 million people. But 200 million Indians subsist on $1 a day or less. Export manufacturing is one of India's best hopes of generating millions of new jobs.
India has sophisticated manufacturing knowhow. Tata Steel is among the world's most-efficient producers. The country boasts several top precision auto parts companies, such as Bharat Forge Ltd. The world's biggest supplier of chassis parts to major auto makers, it employs 1,200 engineers at its heavily automated Pune plant. India's forte is small-batch production of high-value goods requiring lots of engineering, such as power generators for Cummins Inc. (CMI ) and core components for General Electric Co. (GE ) CAT scanners.