It certainly is news when two of the world’s fastest growing economies sit down together and sign agreements. But what interests me most is the possibility of free trade agreements, especially those pertaining to cross-holding in the two countries. Such agreements would directly impact venture funding in Sino-Indian startups, because while several foreign investors want to invest in India or China, it is the slower growth in India or the unpredictability of governmental control in China, that dissuades them. According to the Chinese Venture Capital Institute, venture funding in China is primarily by the government itself (48 % in 2003). This may be good and bad. Governmental venture funding allows access to state-run projects and businesses, which may not be much of a deal in EU/US, but forms a large bulk of the market in China. It is bad, because bureaucracy as part of a startup is not that great an idea. India, on the other hand does not have as large an appetite as China. While, this may reduce its attractiveness compared to our red-feathered neighbor, India is showing signs of a more stable growth. Consider, the Incremental Capital-Output Ratio (ICOR). It denotes the percentage increase in investment (as a fraction of GDP) to produce a single point increase in growth. This means, having a lower ICOR is good for the economy. India’s economy has shown signs of decreasing ICOR, from 4 to 3.6 (for the 10’th Five Year Plan). On the other hand, China’s ICOR has gone up to 5.1 from 4.3 (between 1990-2003). Both India and China have made huge investments in education, especially university level technical education. This provides for a large pool of sufficiently talented people to pick from. Right now, we are running neck to neck in a race for technological supremacy (military and political are not my cup of noodles). But it would be far better if it were easier to run together. China has greater speed in governmental decisions. Its Special Economic Zones are great places to open new ventures. I would say India has better technocrats - we can build and manage equally well (I like to think I’m one of them…only time and my boss will tell..very soon!!). Beijing and Shanghai - two of the places I would definitely like to work. A few years back, I had a mild opportunity to work in Europe. It could have been great, but I could not afford to miss out on the Asian explosion thats about to happen. Anyone interested?

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