China is showing signs of opening its domestic market to international investors and has published a pipeline of more than 2,000 public-private partnership (PPP) projects. And internationally, China is shifting from bilateral (government-to-government) deals to instead start competing in open market tenders. Chinese companies are becoming more acquisitive as they seek to compete in international markets and Chinese technology is gaining traction and meeting quality thresholds. The Asian Infrastructure Investment Bank (AIIB) and the “One Belt, One Road” project have the potential to be game changers.
India, following the election of Modi, is also becoming a force to be reckoned with in the global infrastructure market. Yet while India is the fastest growing large economy in the world, it is also 142nd in terms of ‘ease of doing business’. Positive change in this measure would be transformative, particularly because, by 2025, a quarter of the world’s working age population will be located in India and this workforce is well educated, multi-lingual, highly skilled and lower cost. Already, India is proving to drive innovation on a world-scale.
Interestingly, China’s shift towards a developed economy is largely being driven by the country’s corporate sector: China’s companies (both state-owned and private) have rapidly adopted the technologies and approaches of others to quickly build their capabilities. In India, however, the shift is being driven by entrepreneurs: no longer mere subcontractors to ‘western’ services firms, the country’s entrepreneurs increasingly play the role of principal. In particular, we expect growing influence from India in the provision of professional services, leveraging its low cost base and access to skilled people.
While this story is only just formulating, it seems clear that the center of gravity in the global infrastructure market is fundamentally shifting towards the East. Today, companies from India and China successfully compete on par with Western competitors and both markets are generating new ideas, products and value at an unprecedented pace. Over the long-term, expect more and increasingly sophisticated competition from these markets.