ISAS Working Papers

Recent news reports have frequently described India and China as "rivals and partners." 1 India and China are today experiencing some of the fastest rates of economic expansion in their recent histories. The two countries are often seen as rivals, racing with each other on the basis of their most visible source of competence: abundance and low cost of labour.2 However, economic advantages arising out of low labour costs are ephemeral, likely to last only until snatched away by a competitor country offering still lower wages. The real source of competence in the world economy lies in innovation. Therefore, for both India and China, performance in technology-intensive or knowledge-intensive industries will be the crucial test for long-term success.