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A reverse colonization

September 20, 2010

The recent financial crisis has reversed colonization, or as long term historians would like to put it, has put the record straight again. India and China are re-emerging to dominate trade, acquiring masses of wealth and generating innovative, educated talent.

Owning to lower valuations of foreign companies and higher domestic forex reserves, an increasing number of Indian and Chinese companies are buying out established, first world companies to bolster their product portfolios and enhance productivity. In the recent past, several India and Chinese firms have acquired British companies. Tata’s bought Jaguar and Land Rover three years ago, last year, Ningxia Zhong-yin Cashmere Company, a cashmere supplier, bought Todd & Duncan, a specialist maker of finished cashmere yarn and three years ago China National Blue-star, a large Chinese, state-owned chemicals business bought a factory in Grimsby that was formerly part of Courtaulds, the chemicals business.

More recent examples include an Indian buying the East India Company which controlled India’s trade with Britain and Chongqing Machinery & Electric Company purchasing Precision Technologies Group a British  machine tool manufacturer in April for US$31 million.

A century ago, Britain dominated both China and India, is responsible for getting the Chinese addicted to Indian opium, bringing tea from China to India, controlling and profiteering from the trade routes that existed and has build some of the best infrastructure that the two nations have till date, amongst many many other deeds and vices.

In acquiring British companies, both Indian and Chinese firms seek to gain access to improved technology, bigger markets, better brand portfolio’s,  and improved management skills. “My Chinese colleagues know that – with present levels of technology – they would be unable to make in China machine tools of the same level of sophistication that we are now producing in PTG’s British plants,” Tony Bannan, PTG’s chief executive told the Financial Times.

However now the tables are turning again, for the first 1,500 years of the past two millennia, India and China dominated the world’s economy. Around the time William The Conqueror was taking over England, more than half of the world’s GDP was being produced by India and China. However as the UK and US rose, India and China lost their share twenty years ago, China and India generated just 10 percent of the world’s economic growth, a decade ago, they generated 18 percent of the world’s growth. Nonetheless, coming a full circle, analysts predict China and India to rise again. A World Bank analysis predicts that both China and India could almost triple their economic output in the next 10 years or so. By the late 2020s, China can possibly overtake the U S as the world’s largest economy, followed by India as a close second. By 2030, India is expected to overtake China.

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