At Davos, China and India Make Deals While Europe Reels

The Alpine talkfest begins with a surging China, a rising India, emboldened bankers, and very worried Europeans

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DAVOS, Switzerland -- A year ago, when the annual conclave of the world's political, financial and business elite known as the World Economic Forum met in this Alpine ski resort, the mood was as gloomy and overcast as the weather.

Bankers were literally ducking for cover, fears of a double-dip recession were rampant, and distrust of China was palpable. Europeans brushed off the mounting Greek tragedy as a one-off debt crisis that couldn't possibly affect anyone else across the eurozone.

On Tuesday, the five-day forum begins with 2,500 participants -- including 1,400 top business leaders and 35 heads of state -- tackling (or at least talking about!) the world's problems. The weather and the overall climate of the meetings should be a bit sunnier for all involved. Except for Europe.

That, at least, is the forecast of seasoned Davos-watchers, who have begun trudging up the mountain again for a gathering that has taken as its theme this year the notion of "shared norms for a new reality."  Or, as Klaus Schwab, the redoubtable founder and executive chairman, said of the 41st meeting: "The shifts of political and economic power from west to east and from north to south, as well as the speed of technological innovation, have created a completely new reality."

CHINA AND INDIA RISING

The world's biggest shift of power was on display just a few days ago during the state visit to Washington by China's President Hu Jintao. So it is no coincidence that China is fielding the biggest delegation in Davos history this year. India is not far behind, and both of the world's new and rising economic superpowers will also dominate the cultural mood with soirees and entertainment as well as hard talk on and off stage.

Watch out for Susilo Bambang Yudhoyono, the shy but smart president of Indonesia, and Russia's Dimitri Medvedev

The hundreds of Western business leaders, an army of middle-aged white guys who make up the majority of attendees here, now appear less interested in hand-wringing over China's rise, and more intent on scoring as many contracts as possible with Beijing. And China, armed with its $2.85 trillion of reserves and a 10% growth economy, seems keen to continue using its financial clout to buy friends and influence.

India, by contrast, has a more subtle approach to the Davos crowd, and the country is at pains to stress its message of "Inclusive India" -- a variation on the "Incredible India!" motto that won so many hearts when India made its first big splash here five years ago. Billionaire tycoons Mukesh Ambani and Anand Mahindra and veteran cabinet minister Kamal Nath are plugging their nation of 1.1 billion for both the go-go growth of their neighbor and rival China and a more rules-based system based on democracy.

In short, China and India see Davos as place to pitch the Fortune 500 crowd, while Americans and Europeans see Davos as a talky ideas conference.

EUROPE'S TALK THERAPY

The Europeans meanwhile, will be out in force, with big speeches from Germany's Angela Merkel, Nicholas Sarkozy of France and David Cameron, the new kid on the block from Britain.

Merkel -- the self-appointed guardian of the euro, paymaster of Europe, and disciplinarian of Europe's wayward PIIGS -- can be expected to be her usual stern, dry and impressive self. Europeans are very, very worried about the euro-zone crisis, and none of them can afford to be complacent. Their biggest macro-economic challenge is that Germany is roaring ahead at a growth rate of more than 3% (thanks of course to the fact that everyone, especially high growth Asia and Mideast customers, want their machine tools, and their Audis, Porsches, Mercedes and Volkswagens), but the rest of Europe is still in a fragile semi-recovery or non-recovery.

And that places the most talented central banker on the planet today, Jean-Claude Trichet of the European Central Bank, between a euro and a hard place. If he hikes interest rates to dampen inflation in Germany, he could kill other European economies' recovery. What to do? This is possibly the single most concrete issue that will be talked about at Davos this week.

Presented by

Alan Friedman, a longtime Davos attendee, is chairman of FBC Media, a public relations and communications firm whose roster of clients includes foreign governments. He has worked as an economics columnist for the Financial Times and the Wall Street Journal. [This bio was amended to reflect the nature of FBC's work.]

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