China and India, with their huge populations and rapid economic growth, are quickly gaining ground as world economic powers. In the 17th century, the combined GDP of these two countries was more than 50% of the world’s total, making them an unparallelled presence at the time. Whether history will repeat itself with China and India becoming superpowers once again remains to be seen, but the defining moment which will determine their future courses is now.
China and India’s current growth displays two major trends. The first of these is industrialization. China has reshaped this field. In China, growth is primarily attributable to efficiencies and low costs which have enabled them to have an advantage in 20th century industries, particularly manufacturing. The wave of industrialization that began with the Industrial Revolution resulted in rapid economic development of the West. In the latter half of the 20th century, Japan, West Germany and other late bloomers used advancements in efficiency and technological innovations to usurp US manufacturing prowess and secure economic prosperity. This model was subsequently adopted in Korea, Taiwan and other East Asian nations. Now China has taken the helm as the world’s manufacturing superpower.
The second major trend is the shift from analogue to digital technology and the resulting transformation of the manufacturing process. Efficient manufacturing during the analogue era was based on vertical integration where companies aggregated all of the necessary labour and other resources in-house and products were made through a process of transforming inputs into finished parts. In this model, master craftsmanship that created superior product quality became the differentiating factor. In a digital era, however, products are made by simply assembling components that could be made anywhere, reducing the need for an in-house skilled labour force. China, with its high rate of investment enabling massive scale and its large and very low cost labour force, is well suited to take advantage of this era and has developed a system of large-scale factories for EMS (electronic manufacturing services) for the world.
In India, on the other hand, the economy has grown supported by the growth of tertiary sector industries as advances in IT capabilities have driven the trend to offshore software development and large scale outsourcing of services to Indian companies. Both countries have been able to identify their specialized roles in increasingly globalised industries and supply chains that have driven their economic growth.
However, there seems to be a limit to the economic growth possible under these models, as can be seen by Western countries’ shift in recent decades from manufacturing to finance led economic models. Should China and India continue to pursue the same extension-of-the-past development paths, they, too, will reach the limit of their economic success. To avoid this, China and India must create new economic models based on innovation, not something copied or adapted from the West, but something uniquely Asian in nature.
Innovation cannot simply be derived from the status quo. Creating innovation requires going beyond just learning from others and then making only incremental improvements to the status quo. It requires a breakthrough in the conception of the world such that one sees something different and new. Obviously, this is an incredibly challenging task that requires bringing together vision, societal needs and the means to crystallise ideas (seeds) into form.
Asia in the 21st century has a clear need for innovation to address one of the biggest challenges facing the world today: urbanisation. By 2050, the world’s population is projected to reach 9.2 billion. Of that, more than 5.3 billion will live in the urban areas of the newly emerging countries. The movement of people will be particularly notable in already populous India and China. In India, there are currently 42 cities with populations of more than 1 million people, expected to increase to 68 cities by 2030. The urban population of India is projected to reach 590 million, roughly twice the current population of the United States (Institute, 2010). Clearly, the task of creating the required urban environments is huge. It would be no exaggeration to say that in both India and China, there will be a need to develop a new city of more than 1 million people nearly every two weeks for the next 35 years.1
Given these circumstances, rather than pursuing conventional urbanization models, both countries should develop a new vision that defines the shape of 21st century urban development. This vision will greatly influence the nature of the resulting “societal environment”; the structure, infrastructure, culture, economy, politics and technology of the new urban society. The world’s great cities were in Europe (London, Paris) and then sprang up in the United States (New York, Los Angeles) and then in Japan (Tokyo) and today are developing in China (Shanghai). To create new cities that are not just copies of these existing cities, a new common “operating system” must be created for advanced transportation, information, power generation and transmission and other city infrastructures. Just as all computers need an operating system, all cities would need an operating system for its infrastructure. This operating system will need to be a comprehensive system that integrates in one package state-of-the-art power and transportation infrastructures that coexist with existing electric and water infrastructures.
Numerous smart city projects are being undertaken in China and India. For example, the International Eco City project in Tangshan, China, is massive in scale. But there has been no effort to date among various smart city developments to create a common infrastructural design incorporating our collective learning. Given the scale of urbanization that is now emerging, the most successful countries need to design an operating system that encompasses existing infrastructures with those that will be needed in the future to support the rapid organic growth of their urban populations. Beyond creating infrastructure based on a common operating system, future cities will also require an urban plan that implements unique characteristics at the “application level” to bring out a city’s distinct character. This urban plan will determine how the city needs to look, feel and operate at the functional level, based on both physical factors like topography and climate as well as intangible factors like culture and a city’s underlying economic drivers. For example, in a country like India, with its complex socio-cultural structures, the success of such urban plans will be key to creating productive and cohesive societies that promote societal stability as increased stresses are placed on the cities as population booms.
Many new technologies will be needed to create urban operating systems and the individual urban plans to create the cities of tomorrow. Europe, the US and Japan have already developed many technologies that can act as seeds for such an operating system. For example, many Japanese firms have developed superior sensor technology. Sensor technologies will likely be required for a range of applications from monitoring traffic congestion or precipitation levels to indoor climate control. Urban planners will need to leverage the best of what is available today as well as driving the development of new technologies, matching the available seeds to their specific needs. Beyond the individual components, however, the real need is for a packaged infrastructure that allows for cost effective and rapid development of urban environments while providing enough customization options to allow for the creation of cities with unique character.
Who will take the lead in creating a common packaged infrastructure and matching seeds with needs is a key point. If India and China can achieve this, the two countries will once again regain their status among the group of leading powers in the 21st century. In addition, if these two countries, with their different demographic compositions and government systems, can effectively complement each other, then they will be able to build a powerful, mutually beneficial relationship, bar none.
Nobuyuki Idei is the founder and CEO of Quantum Leaps Corporation, an entrepreneurial advisory and investing organisation based in Japan. He was formerly the Chairman and Group Chief Executive Officer of Sony Corporation. He is a director of Accenture (since February 2006), Baidu (since June 2007), Freebit Co., Ltd. (since June 2007) and Lenovo Group (since September 2011), and serves as Professor of Overseas Education College, Shanghai Jiao Tong University.
Creating Prosperity for a Billion People: Re-architecting the System of Wealth Creation