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Appreciating New China
Indian business has much to learn from China, much to fear and a great deal to gain
Photo Credit : PTI
The indifference of most Chinese business leaders to India is almost understandable. In terms of GDP per capita, China has outperformed India by a factor of five in my adult life, so a certain self-satisfaction is natural. The reciprocal ignorance is much harder to comprehend.
Indian business has much to learn from China, much to fear and a great deal to gain. Sun Tzu wrote in the Art of War, “If you know the enemy and know yourself, you need not fear the result of a hundred battles.” That is not to say, notwithstanding geo-strategic tensions, that China is an enemy. But it is a formidable competitor and will increasingly shape much in the global economy.
Indian ministers have tended to dismiss any comparisons with China with irritation, often pointing out that India’s slower pace derives from its democratic process. Indian business has been in awe of the cost competitiveness of Chinese exports enabled by the extraordinary build-out of world class infrastructure. Few Indian companies have set out to engage deeply with China; the Tata Group, with revenues from China in excess of $10 billion, is very unusual in seeing China as an opportunity for both sales and sourcing.
China’s transformation in the past thirty years has been fueled by export-oriented manufacturing. By contrast, unable to compete internationally selling scale-assembled products like garments, iPhones or telecom hardware, India has excelled in knowledge-intensive industries and services: IT, pharma, Bollywood and high-end engineering. Now, however, as domestic costs and the currency rise, China is rapidly undergoing a second transformation away from low-end export-led manufacturing towards domestic consumption and value-added, knowledge-based sectors.
A few numbers illustrate the scale and speed of the new knowledge-oriented China. In 2015, Chinese researchers filed 1.5 million patents, compared with 589,000 in the US and 45,000 in India. China spends 2.1 per cent of its GDP on R&D, compared with 2.8 per cent in the US and 0.8 per cent in India. China now has two of the top universities globally, while India has none.
India has celebrated its technology pioneers, whether TCS and Infosys, or Flipkart and Ola. Yet Vijay Shekhar Sharma of Paytm told me that “If you want to see what is happening in technology and especially mobile Internet in the world, you don’t go west, you go east. There is no better place than China.”
China is rapidly becoming a crucible for Internet-enabled business rivalling the US. In 2016, $7.7 billion was invested in fintech ventures in China, $6.1 billion in the US and $1.7 billion in India. Out of the 216 unicorn companies globally, 55 are from China and only ten from India. Led by the big three, the “BAT” of Baidu, Alibaba and Tencent, Chinese tech companies are now globalising fast and increasingly stand comparison with Amazon, Facebook and Uber in their scale and impact.
India has been a beneficiary with some $3 billion of FDI from China flowing into Indian tech companies including big investments from Alibaba (Paytm, Snapdeal), Tencent (Practo, Hike), Didi (Ola) and CTrip (MakeMyTrip).
The current second wave of change in China presents Indian business with huge issues to ponder but also great opportunity. Complacency, ignorance, protectionism and denial are no bases for competitive success. Indian business needs to understand better what is happening in China and develop strategies to benefit from it.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.