The ties that brought China and India together were religious and intellectual, as well as economic.

Few people outside China and India are aware that by the end of 2007, China had become India’s number one trading partner.

As illustrative examples, consider the following. Buddhism was founded in India around the fifth century B.C.E. and then made its way into China. In the eighth century, an Indian scientist was appointed by China as the president of its Board of Astronomy.

And the famous 15th-century Chinese admiral Zheng He (who reportedly had a more impressive fleet than that of Christopher Columbus) visited India often and played an important role in expanding trade links between the two countries.

In modern times, the period from 1949 to 2000 could be seen as the dark ages — an era of almost complete economic isolation between the two countries. Bilateral trade and investment came to a halt and was essentially insignificant.

The current decade, however, has seen a near-complete transformation of the economic relationship between China and India.

The primary driver of this transformation has been the fact that starting in the 1990s, both countries have become increasingly outward-looking in their economic policies and thus embraced a deepening of their economies' integration with the rest of the world. Importantly too, both China and India are now fellow members the World Trade Organization.

It is clear that the economies of China and India are becoming rapidly intertwined. In the current decade, trade between the two countries has grown twice as fast (about 50% annually) as each country’s trade with the rest of the world (about 23-24% annually).

Few people outside China and India are aware that by the end of 2007, China had become India’s number one trading partner. From China’s side, India is now one of its top ten trading partners.

Also, China’s trade with India is growing far more rapidly than its trade with the other nine. Thus, India is rapidly becoming an increasingly important trading partner for China too.

Trade between the two countries has grown twice as fast (about 50% annually) as each country’s trade with the rest of the world (about 23-24% annually).

Even if the growth rate in India-China trade slows to 25% annually from the current rate of 50%, bilateral trade between them will be almost $75 billion in 2010 and $225 billion in 2015 — as large as China-U.S. trade just three years ago.

These are very large numbers. Political and business leaders need to start getting ready now for this radically different world.

Trade is only one of the two major economic ties that bind nations. The other is investment. We predict that the investment links between India and China are likely to grow even faster than trade links.

This would be an important development, because investment links imply much deeper integration than trade links.

At present, investment links between the two countries are relatively modest. Haier in home appliances, Huawei in telecommunications equipment and Lenovo in PCs have a significant presence in India.

Similarly, some Indian companies such as Bharat Forge in auto components, Suzlon in wind turbines, and Tata Consulting and Infosys in IT services are building a presence in China.

These types of greenfield investments will continue to grow. However, the quantum leap will happen as some of the bigger companies from India and China acquire third-country companies that already have a large presence in the other country.

Consider, for example, Tata Motors’ recent acquisition of Jaguar and Land Rover from Ford Motor Company. Given Jaguar and Land Rover’s positions in the Chinese market, Tata Motors now finds itself with almost $2 billion in revenues from China.

Following its acquisition of Jaguar and Land Rover from Ford Motor Company, Tata Motors now finds itself with almost $2 billion in revenues from China.

This is a large number and will have a significant impact on the centrality that Tata Motors accords to the Chinese market. Also, given Tata Group’s trend-setter status in India, its strategic moves and mindset shifts are likely to have spillover effects on the rest of Indian industry.

Obviously it is hard to predict who will buy whom over the coming years. However, it is certain that over the next five to ten years, the world will see a growing number of foreign acquisitions by Indian and Chinese companies.

As these acquisitions materialize, it is inevitable that investment linkages between India and China will grow rapidly.