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Can the Indian Elephant compete with the Chinese Dragon?

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    Can the Indian Elephant compete with the Chinese Dragon?

    Can the Indian Elephant compete with the Chinese Dragon? It's good that India and China are competing on business field than battle field. India displaced Pakistan in 1994 to become China's largest trading partner in South Asia and, last year, China displaced Japan as India's largest trading partner in East Asia.


    Elephant and dragon learn to tango

    The Himalayan War of 1962 has become a motif of relations between India and China, but trade is creating a friendlier frontier. A sad Latif surveys the new border.

    INDIAN business executive S. S. Naik had to get used to the stares before he could settle into China.

    It took him some time to realise that the stares were not meant for him or his wife but for their two children.

    'It was embarrassing initially when people looked at us in admiration as we walked around,' says the 44-year-old chief representative of Indian corporate giant Reliance Industries in Shanghai. He arrived in China about a year ago and is in charge of his company's polymer exports there.

    'They viewed two children per family as a real blessing or some kind of special status,' he tells The Sunday Times.

    At the back of the stares lay, of course, China's one-child policy.

    While Mr Naik's children were impressing the Chinese, China was impressing a new generation of Indians back home.

    In an Internet discussion of China's economic impact on India, an Indian averred that the Chinese could produce even the moon competitively because of cheap electricity and patriotic citizens. 'Hats off to China,' he declared, calling on his countrymen to emulate their northern neighbours. 'Jai Hind' - Victory to India - he added.

    Invoking China's name to proclaim India's victory would have sounded sacrilegious till recently, given the mistrust left behind by the 1962 war between the Asian giants. The war ended a period of political flirtation popularly christened 'Hindi-Chini Bhai Bhai' - Indians and Chinese are brothers.

    Today, India and China are drawing close, not as brothers but as traders and business partners.

    The two sides' views of each other are no longer blocked by the Himalayan War, although the reverses which India suffered in that conflict have scarred its national psyche.

    Comprehensive information on the Indian presence in China is still scarce, and likewise that on the Chinese presence in India.

    According to a China Daily report displayed on the website of the Chinese Embassy in India, about 50 Indian companies currently operate in China, with a total investment of around US$300 million (S$510 million). The Indian Embassy in Beijing estimated last year that there are about 700 Indians in China, most of them business executives in Indian companies or multinationals, while others are traders or chefs in Indian restaurants.

    Indians are found mostly in Beijing, Tianjin, Guangzhou, Shenzhen, Qingdao, Liaoning, Shanghai, Zhejiang and Jiangsu.

    These figures, while still small, are no doubt set to grow.

    Shanghai city and Jiangsu and Zhejiang provinces in east China alone host about 30 companies dealing in pharmaceuticals, software, petrochemicals and consumer electronics, according to the website of the Consulate-General of India in Shanghai.

    But there are many small businessmen in addition to the larger Indian companies there. The Shanghai Indian Business Association estimates that there are about 400 Indians in the Shanghai area, including traders.

    The interest in this part of China is natural given that, in 2001, the total GDP of Shanghai, Jiangsu and Zhejiang was US$230 billion, almost half of India's GDP. Their exports amounted to US$70.51 billion, almost twice India's exports, the consulate-general says.

    The need for Indians to look at China seriously is obvious. After all, brisk economic relations between the two civilisations are nothing new.

    Mr Prem Kishore Sharma, who was an Indian Home Ministry official in the north-eastern state of Sikkim from 1977 to 1983, remembers thinking about the famed Silk Route trade that once linked China and India.

    Spring breaks out in the 68-year-old's voice as he looks at China today. The secretary of the India China Trade Centre in New Delhi, which provides businessmen contacts and other information which they need, is hopeful that the best is ahead for the two countries.

    'We are coming closer by the day,' Mr Sharma tells The Sunday Times.

    That is exactly what Dr Jiang Yili wants as well. The director of the political section at the Chinese Embassy here, her job is to look after regional and international political issues, including Asean's links with India.

    She is upbeat on Sino-Indian ties. 'Our ancestors braved hardship, climbed mountains and crossed rivers along the Silk Road to promote exchanges between the two civilisations,' she says, as she tells The Sunday Times about her stint at Delhi University from 1990 to 1993, to earn a doctorate in Buddhist and Hindu philosophy.

    Today's Indians still know very little of China's dramatic transformation, she avers, while Chinese know only India's 'dances, songs and success in software'.

    But some of that will change, she adds, with the opening of a Chinese cultural centre in New Delhi this year.

    It is about time that New Delhi and Beijing came closer, led on by Mumbai and Shanghai, the two economic capitals.

    India became independent in 1947 and China did so in 1949. Both embarked on planning and protecting their economies. The results were remarkably similar.

    According to the New York-based Asia Society, the two countries were almost on par in terms of growth till about the mid-1970s. A study of the distribution of world income based on purchasing power parity shows that in 1952, China claimed 5.2 per cent of world income and India 3.8. In 1978, the figures were 5 per cent for China and 3.4 per cent for India.

    But in 1995, China enjoyed a 10.9 per cent share and India only 4.6 per cent.

    What had happened was that China decided in 1979 to open up its economy.

    So spectacular was its take-off that it provided a wake-up call to India, which realised that in order to play ball with China, it needed to be in the same economic league. That meant letting the rest of the world in, as China had done. India began to liberalise its economy in 1991.

    More than a decade later, the question remains: Can the Indian Elephant compete with the Chinese Dragon? Some Indians are not certain that it can.

    Writing in India's prestigious Economic and Political Weekly last month, former senior civil servant Ramaswamy R. Iyer said: 'China has raced ahead and is continuing to do so, whereas India is lumbering along a long way behind and will continue to do so.'

    Mr Iyer had visited Beijing in November as part of an international project on rural development known as the Dragon and the Elephant. He was mesmerised by the changes that had occurred since his previous visit in 1986. 'The Chinese do nothing by halves,' he wrote. 'The spirit of the Great Wall is present in the Three Gorges Project and in the splendour of Beijing.'

    He is not alone in his fears. They are shared by Indian businessmen who worry about the more competitive Chinese invading their domestic markets.

    But sharper business minds think otherwise. Precisely because Chinese are competitive, opening trade borders would help Indians to learn what makes their neighbours succeed. Letting in Chinese exports is one way; better still, hop on to the fast-crowding fast boat to China.

    This is what some of India's most visionary companies have done, particularly in software, where India has a global edge. In many ways, software is writing the future of Sino-Indian co-operation.

    Going Chinese

    A good example is Infosys, a leader in India's software market. When former Chinese premier Zhu Rongji visited Bangalore, the company's headquarters, in 2002, he was so impressed by its enthusiasm that he granted it approval on the spot to start a facility in Shanghai.

    Today, Infosys has a wholly-owned subsidiary in China. It offers end-to-end software services to domestic and multinational companies there. It will also serve as a hub for software services in the Asia-Pacific region.

    China is a potential competitor, acknowledges the Infosys spokesman in Bangalore, but it is also a source of IT talent. Indian IT companies seeking to globalise their operations should leverage the opportunities which China offers, she tells The Sunday Times.

    Infosys may well benefit from its prescience. According to estimates, the size of the Chinese software development market is expected to grow from US$1.8 billion in 2002 to as much as US$27 billion in 2006. This offers opportunities to India, which has an information technology base of 550,000 professionals against a demand for 450,000 - compared to China's base of only 150,000 against a demand for more than 350,000, according to a report by the Confederation of Indian Industry (CII), India's apex industry group.

    India's desire to tap into China's potential instead of fighting shy of it has already produced startling results, and not only in software.

    According to Chinese statistics cited by the Indian Embassy in Beijing, bilateral trade from January to September last year reached US$5.3 billion, an increase of almost 55 per cent over the same period in 2002.

    While Chinese exports to India in the nine months increased by almost 30 per cent, Indian exports to China galloped by more than 85 per cent. The trade balance, in India's favour, amounted to US$584 million.

    India's trade surplus confounds doomsayers who thought that China would rise at India's expense. Ignoring the pessimists, the two countries are merrily trading in iron and steel, ores, plastics, organic chemicals, cotton, mineral fuels, hides and skin, and machinery, electrical machines and - yes - silk.

    Their trade figures are not mind-boggling by global standards, but they are significant. Bilateral trade flows, which were a miserly US$350 million in 1993, are projected to reach US$20 billion by 2010.

    India displaced Pakistan in 1994 to become China's largest trading partner in South Asia and, last year, China displaced Japan as India's largest trading partner in East Asia.

    Economic ties are on the upswing, but what are the problems of doing business in China?

    Mr S. K. Misra from the CII's East Asia Representative Office in Shanghai prefers the word 'challenges' to 'problems'.

    It is that oft-heard tale: companies need information on the sourcing of products and markets, business rules and regulations, and parameters on standards. 'Sometimes it takes time to understand expectations,' he tells this newspaper.

    The CII helps its member-companies by compiling and providing information with the help of industry organisations in China. Sometimes, 'handholding' is required, adds Mr Mohammed Saqib, the secretary-general of the India China Trade Centre, a non-profit organisation which has a representative office in Beijing.

    He gives the example of an Indian light engineering company for which the centre identified five potential business partners in China. It organised a visit there, the Indian company selected two firms, and the centre found their backgrounds sound after a search.

    It also helped the company to register itself in China, open a branch office, locate a warehouse for its goods and find staff.

    Humdrum things - but they are what set the wheels of commerce rolling.

    What keeps them rolling is human energy. Mr Misra mentions patience and trust as the key to a long-term relationship with the Chinese.

    And a sense of propriety, adds the CII report on doing business with China. Example: In the midst of a detailed analysis of Chinese trade and investment rules, and surveys of the information technology, drugs and pharmaceuticals, and biotechnology industries, it adds a few cultural tips.

    'Anger, if felt, is expected to be concealed.

    'Shanghainese spit, belch, pick their teeth (and so on) quite openly. However, visitors are advised to tolerate but not emulate this.'

    In other words, when in China, don't do as the Shanghainese do.

    But whatever you do, remember that you are a guest and do not be too judgmental, whether about the Shanghainese or others.

    Ties and spies

    Respecting the Chinese for what they are is a highly commendable virtue.

    The Lotus Connection - the lotus is a symbol shared by China and India - is a newsletter published by Changsha Consulting, a boutique business consulting firm based outside Boston in the United States. It explores business opportunities in growing links among India, China and America.

    'Understanding the history and culture of another country is a prerequisite to being successful in business,' the newsletter declares. 'Foreign businessmen and women have never been able to change China, successful entrepreneurs have only been able to participate.'

    A telling example of participation is Mr Prakash Menon, the 40-year-old chief executive of NIIT China (Shanghai), who has been in the country for six years.

    He not only speaks Chinese but has also given himself a Chinese name - Po Kai Xuan - that sounds like the Indian original and means 'Victorious', he tells The Sunday Times from Shanghai.

    NIIT Ltd, India's largest technology training firm, has certainly made a name for itself in China.

    It teaches 25,000 Chinese students computer engineering and software development at 120 training centres in 58 locations. It is training Chinese to develop Chinese-language software for the sprawling domestic market.

    'When people ask me when China's boom will end, I tell them that it will be the day after the (2008) Olympics,' says Mr Menon, roaring with laughter. He has great confidence in China, adds the president of the Shanghai Indian Business Association.

    Slowly but surely, Indians are participating in China's growth, learning the ropes as they go along. Mr Misra is upbeat.

    'The atmosphere in both China and India is conducive for business,' he tells this newspaper.

    None of this suggests that the ancient Silk Route is going to reappear any time soon. Suspicions still block the way.

    A Business Week article in 2002, for example, reported a rumour that Beijing had dispatched 100 female spies to India's tech centres 'to entice local programmers to surrender their code'.

    Such concerns are not unnatural. 'It is the duty of security establishments to visualise worst-case scenarios,' says Mr Iyer.

    'It is for the political leadership - and top civil servants, including diplomats - to influence public opinion and build relationships. I think that the two governments have been doing this,' he tells The Sunday Times from New Delhi.

    What is helping them is trade, which may change the rules of the game even when it comes to spying.

    According to a news item in 2001, Indians once took to studying Chinese primarily to qualify as spies for their country, unless they wanted to lecture in little-known colleges. But then came globalisation and, with it, companies that were willing to pay for translators. And translation is much less taxing than spying.

    How trade is changing the business of being Indian and Chinese can be gleaned from a June 2002 report on co-operation in software. Looking at the possibility of war between India and Pakistan, it noted that Indian IT companies could set up development centres overseas, including in China, 'to limit their risks geographically'.

    In other words, China - which fought India in 1962 - could provide some succour for Indian business hedging against the risk of conflict in the sub-continent.

    The Dragon and the Elephant may well keep each other closer company in this new era.


      India Is Becoming Powerhouse; Growth Expanding Middle Class

      Fri Feb 13, 9:58 AM ET

      By Marilyn Alva

      Move over, China. Here comes India.
      With a population of 1.1 billion, the second most populous nation after China is becoming the next emerging economic powerhouse.

      Job growth in tech services is already fueling a rapidly growing consumer class much like China's economic miracle is minting a new yuppie class. Sales of autos, computers and cell phones are mushrooming.

      More than 2 million cell phone connections are sold every month, making India the second fastest mobile phone market after China. And the mobile phone penetration rate is still below 3%. Car sales are tracking to hit 1 million a year by 2005, thanks in part to low interest rates.

      If you follow the money, a lot of it seems to end up in India these days.

      Foreign direct investment alone totaled $6 billion in 2003, says David Darst, chief investment strategist of Morgan Stanley's individual investors group. That compares with an average $2.5 billion a year from 1995 to 2002.

      India's arrival as the developed world's biggest back office isn't the only reason it's coming on so strongly.

      Robust growth in other sectors such as manufacturing, agriculture and consumer goods are fueling strong GDP (news - web sites) growth - an estimated 8% this fiscal year, which ends in March. GDP might slow to 6.5% next year, but it's still among the top growth rates worldwide.

      And this is just the start. A widely touted report by Goldman Sachs says India will eventually become the world's third largest economy after China and the U.S.

      That might not happen for a few decades, but as Ashish Thadhani, senior vice president at Brean Murray & Co., put it, "There is a sense that this is a very sustainable upswing."

      Goldman Sachs says India's GDP growth starting in 2010 will equal and then surpass China's, which is now a sizzling 8% to 9%, but is expected to eventually slow. India's population also will likely pass China's.

      India is still largely a nation of have-nots. Average per-capita income is $500 a year. About 35% of the population live in poverty.

      But because of its enormous population, India's growing middle class assumes formidable weight.

      "Even if the middle class is just 5% or 10%, any percent of a billion is substantial," said Michel Leonard, chief economist of Aon Trade Credit, which maps risk for companies that want to do business in foreign countries.

      Government Reforms

      Like China, India's government is making strides to improve creaky infrastructure and privatize government-dominated industries.

      The government plans to soon sell off in an initial public offering about 10% of its oil and gas giant, Oil & Natural Gas Corp. The deal, valued at nearly $3 billion, would put it in the same ballpark as last year's biggest IPO: China Life Insurance Co.

      "It would be a landmark offering," said Darst.

      If demand is brisk, he says, it could lead to more government-sponsored IPOs.

      In a recent report, he estimates the government owns $50 billion in listed holdings as well as stakes in several large unlisted concerns such as National Thermal Power Corp. and Life Insurance Corp. of India.

      Foreign institutional investors own 17.5% of the top 50 Indian companies and 31% of the top 10, writes Darst. Capital inflow the last 12 months is 50% higher than any other 12-month period in India's history, he contends.

      India's stock market rose about 80% in 2003. Some sectors with the best returns: auto, steel and financial services.

      Of the hundreds of Indian public companies, only 10 trade in the U.S. via American depositary receipts (ADRs). But more are expected to list this year.

      Indian ADRs include two banks, HDFC Bank Ltd. and Icici Bank; a telecom services firm, Videsh Sanchar Nigram; and generic drug maker Dr. Reddy's Laboratories. Three are software outsourcers: Infosys Technologies Ltd., Satyam Computer Services Ltd. and Wipro Ltd.

      India's foreign exchange reserves mushroomed $30 billion in the last year to $100 billion, leading Moody's Investors Service in late January to upgrade India's long-term foreign currency ratings to investment grade for the first time.

      Insular India is giving rise to an open India. Over the last decade, India's unwieldy democratic government - with its socialist bent - has gradually loosened its grip over business and industry, easing regulations and opening its doors to foreign investors.

      The government lowered import tariffs and granted tax breaks to outside investors.

      Just recently, India agreed to ease foreign ownership limits in some sectors such as oil.

      The government also is addressing infrastructure problems, such as poor roads and power outages. After the government decided last year to reform its power markets, foreign investors have been building several hydraulic electric plants.

      New gas discoveries in the Bay of Bengal by India's Reliance Industries will likely help fuel what could be the world's largest power station, to be located in the poor northern state of Uttar Pradesh.

      "Government efficiency and infrastructure in the last four years has gone from a level four to a level six on a scale of one to 10," said Partha Iyengar, vice president for Gartner India, based in Pune, India.

      "Right now it's a good period to go into India," said Aon's Leonard. "People are making money in India. There are few people that have made money in China yet."

      Morgan Stanley projects that leading Indian companies will post earnings growth of nearly 25% in fiscal 2004 ending in March, but slow to 14% in fiscal 2005. Darst cites slower industrial growth and a widening trade deficit.

      Business process outsourcing is India's fastest growing industry. It's no secret that India's large pool of educated and English-speaking professionals make India the preferred low-cost outsourcing destination of American companies for an ever-expanding list of services, from call centers to strategic solutions.

      Leonard says 90% of Aon's clients who want to outsource services consider India first. China, he says, is fourth on the list.

      Despite the euphoria over India's prospects, some experts are starting to raise caution flags. They fear India's financial system won't be able to handle all the money that's flowing in.

      "India has liberalized its trade before it's liberalized its capital markets," Leonard said.

      He added, "There's been some stock market reform, but buying and selling stocks is still archaic, about 20 years behind."

      Leonard notes the political situation is less volatile than in previous periods and that tension with Pakistan has recently eased. But those problems won't disappear.

      He compares India to China, which opened it borders to foreign direct investment before it had liberalized its capital markets.

      "(China) is trying to get its books in order and make it more appealing to investors," he said. "Whenever you have a liberalization, the banks are the last to go."

      Economists believe India's banking system is in better shape than China's, especially in terms of non-performing loans and modernizing various transactional systems.

      "This was an agricultural and cash-based economy," Darst said. "Large advances have been made with the deepening of the middle class."



        Outsourcing To India Vs. China
        Aude Lagorce, 02.16.04, 7:00 AM ET

        Jobs may not be growing fast enough in the U.S., but they are multiplying elsewhere. Over the next 15 years, 3.3 million U.S. services industry jobs and $136 billion in wages will desert the country, according to research by Forrester. Although a flurry of low-wage countries will benefit from the trend, China and India have so far scooped up most of the jobs and they are now home to the biggest overseas operations of some U.S. companies.

        Why are jobs being farmed out to these two destinations in particular? Both countries offer cheap labor rates and have different areas of expertise. The cost of an entry-level programmer in China is 30% to 50% less than one in Chicago. Additionally, a combination of factors like standardized business application, better online cooperative tools and increased bandwidth have recently precipitated the rise of off-shoring.

        Of the two countries, India remains the No. 1 choice for many U.S. companies because of the maturity of its outsourcing market and its telecom infrastructure. But China is quickly imposing itself as a cheaper alternative, especially attractive to companies eager to explore its huge local market. Other countries like the Philippines, Singapore, Russia and Ukraine have lately surfaced as interesting alternatives to the two giants. But they lack experience and, in some cases, political stability.

        In the upcoming years, expect India to continue its move up the food chain and take on some of the more complex outsourced tasks while more back-office jobs move to rock-bottom wage countries such as Vietnam and Uruguay.




            Well man, IMO China's economy is like a tiger. they pick up very fast, they have better management of things. But yet they take pause very often.
            And India's economy is like an elephant (as you pointed out earlier), it moves with slow and steady pace. it might be slow but it will not have breaks. It is a constant pace which will show results after few years.

            {Plus china, started economic reforms 20years before india did. So they do have an upper hand.
            but you have to consider few other factors, like china's relations with usa. no matter what but still the usa is the biggest factor in your economic development.
            plus indians have advantage over china in english. I have been to china and people there dont speak english et all. they cant even understand simple "Yes" or "No". hjere i am talking about educated people and govt officers. they have theri own name for international stuff/products like chips, fries, coke, coffee etc. basically they dont appritiate foreigners, they are too proud of themselves. they call foreigners as "Devils". so if you dont open your market for others then it is hard for you to develop.
            Tu bhi villain ban sakta tha, "BILLA" ban sakta tha.....



              Reliance profits cross $1 bn

              PTI[ THURSDAY, APRIL 29, 2004 03:28:11 PM ]

              MUMBAI: Reliance Industries on Thursday became the first private sector company in India to make $1 billion net profit, recording a 29 per cent surge in its 2003-04 consolidated net profit which stood at $1.18 billion (Rs 5,169 crore).

              Mukesh Ambani and Anil Ambani

              "Reliance Industries has become the first company in private sector to cross the billion dollar milestone by recording a consolidated net profit of Rs 5,169 crore ($1.18 billion)," a Reliance official said, announcing the results here.

              The board which met on Thursday recommended a 52.2 per cent dividend of Rs 5.25 per equity share of Rs 10 each, involving a payout of Rs 825 crore.

              Consolidated total income for the year under review increased to Rs 53,183 crore compared with Rs 46,796 crore in the previous fiscal.

              The company during the fourth quarter ended March 31, 2004 reported a 29 per cent rise in its net profit of Rs 1,419 crore as against Rs 1,101 crore while the total income grew to Rs 14,585 from Rs 13,081 crore posted during the same period previous fiscal.

              On standalone basis, the company posted a 26 per cent rise in net profit at Rs 5,160 crore for the year ended March 31, 2004 compared with Rs 4,104 crore in the previous fiscal.

              Total income in 2004 rose to Rs 52,940 crore as against Rs 46,899 crore, he said.
              Tu bhi villain ban sakta tha, "BILLA" ban sakta tha.....


                very informative. i have not read all of it. but i will

                thanks for posting


                  Namskar Marathi maanus,

                  You have posted a very intersting topic. I was bashed by many Pakis when I suggested in another thread that India and Pakistan will be good trading partners one day. Surely animosity between India and China is at least as great as that between India and pakistan if not greater. If India can be China'a best trading partner in South Asia then there is hope for better India/pakistan trade,.

                  A message in Marathi : Post uttam aahe.



                    Spreading India's Uneven Wealth
                    To U.N. economist Santosh Mehrotra, the biggest challenge for the new ruling party will be lifting 650 million Indians living in poverty..




                      Originally posted by Arvind:
                      Namskar Marathi maanus,

                      You have posted a very intersting topic. I was bashed by many Pakis when I suggested in another thread that India and Pakistan will be good trading partners one day. Surely animosity between India and China is at least as great as that between India and pakistan if not greater. If India can be China'a best trading partner in South Asia then there is hope for better India/pakistan trade,.

                      A message in Marathi : Post uttam aahe.

                      Hell you forgot all the politicians in india and pakistan are decendents of the victims of partition.... this is not the case in india an china.. so unless india and pakistan's new generation grows up in a different atmosphere this will never happen.
                      I have started a site in the hope that indians and pakistani children study together in philippines and learn to love and depend on each other.
                      wat say?



                        Re: Can the Indian Elephant compete with the Chinese Dragon?

                        Tsunami relief effort will hinder India's progress


                          Re: Can the Indian Elephant compete with the Chinese Dragon?

                          ^ Rubbish. It will enhance India's image as a caring and able nation. More business will come India's way.
                          " Judges give justice, not interviews" - Rana Bhagwandas, 21 March 2007.