world trade grew from 0.5 to 0.7 percent, while China’s share rose steeply from 1.8 to 4.0 percent. In 2001, China’s total exports were 259billion,comparedtoIndias259 billion, compared to India’s 40 billion. China’s fixed-telephone and PC pene-tration rates are over four times greater than India’s, and cell phone penetration is over 13 times greater (see table 1). Yet China has failed to catch up with India in one area: commercial software. This indus-try is very important for developing countries such as China and India because it can be started with much less investment than manu-facturing industries. The gap between the two countries ’ soft-ware industries is substantial. India’s software exports exceeded 12billionin2003,comparedtoChinas12 billion in 2003, com-pared to China’s 2 billion. Global software industry analysts disagree, however, as to this gap’s future direction. Some, including the president of India’s National Association of Software and Service Companies (NASSCOM), believe that China lacks the skills and man-power it needs to catch up in the race.17 An-other school of thought maintains that China’s status as a regional and potentially global eco-nomic superpower and its leadership in the electronics industry will help to close the gap. A Gartner Group study, for instance, suggests that by shifting technological gears, China could catch up with India in commercial soft-ware by 2006.18 What will be the magnitude and the direc-tion of the gap between the two nations ’ soft-ware industries in the future? Given that China and India account for two-fifths of the world population and are among the few de-veloping countries that have established good track records in exporting high-technology products, this question is important. While featur

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