chindia alert: you'll be living in their world very soon

Chindia Alert UnlimitedZhang Chia-Hou FBCS CITP

Chindia Alert:You’ll be living in their world, very soon

14 April, 2014

22 ©2014 Chindia Alert Unlimited2

What’s the big attraction?Huge land masses, large populations, with high and growing GDP

By land:1.Russia2.Canada3.USA4.China5.Brazil6.Australia7.(EU)8.India

By population:1.China2.India3.(EU)4.USA5.Indonesia6.Brazil7.Pakistan

Rank Country2012 GDP (millions of USD)

— The World 69,899,225

— European Union

17,610,826

1 United States 15,653,366

2 China 8,250,241

3 Japan 5,984,390

4 Germany 3,366,651

5 France 2,580,423

6 Brazil 2,425,052

7 United Kingdom 2,090,314

8 Italy 1,980,448

9 Russia 1,953,555

10 India 1,946,765


Can you spot the difference?


Someone said of China: “Let the dragon sleep. For when she wakes, the world will tremble”

• If you do not pay attention to key factors about China and India,

you will suffer the consequences

• What are these factors and what are the implications?


1947 to today: (except 1977-80 and 1998–2004)

Largest federal democracy, but ...

1949 to today:Largest ‘centralised’

autocracy, but ...

1. Political factors: New eras started soon after World War 2


2. Economic factors: Both benefited from end of Cold War and globalisation

1978 / 1989

Reforms started in …

1991 / 2004

Hence the expression: “India is China 15 years ago”

A deregulating Planned EconomyA centralist Market Economy


90 GW added in 2008UK capacity – 83 GW

China focuses on infrastructure …

3 Gorges Dam - $35b

Electricity – 900 Gigawatts (coal, hydro, nuclear, wind, solar)


… and more infrastructure

• 90,000 km of highways

• 100,000km railways

July 3, 2006: “After crossing 4,000 km, the first train to travel from Beijing to Tibet pulled into Lhasa today, inaugurating the world's highest railway. The last link took five years and around $4 billion.”


200,000 in 2008

$200,000 exported to US in 2005

… and manufacturing

• Huge investment in manufacturing - No 1 or 2 in practically everything


China: is taking climate change and environment very seriously


China’s economic reform:

1. Securing food supply and food safety.2. Changing industrial structure from investment in

manufacturing and infrastructure to consumption, services and innovation.

3. Managing local government debt ($3trn).4. Coordinating development between different

regions (and between urban and rural areas).5. Improving people’s livelihood and boosting

employment.6. Spurring international financial cooperation.

China’s economy will grow at 7.5 percent.


China’s manufacturing versus India’s services

India• Home to not only call

centres, BPO• But also IT centres of

excellence, pharma, auto, etc

• Past 12 months:• Inward investment

increased to $20bn• $billionaires up to 46• 140 SEZs!

• 40% of top 340 multinationals plan to manufacture by 2012

Indian companies are ‘sounder’ than Chinese companies and they’re starting to speed up.

1313 ©2014 Chindia Alert Unlimited©2013 Oaksmill Associates

India is more diverse: • Ethnic groups – 72% Indo-Aryan• Languages - Hindi 41%, Bengali 8.1%, Telugu 7.2%, Marathi 7% ...• Religions - Hindu 80.5%, Muslim 13.4%, Christian 2.3%, Sikh 1.9%

3. Social and cultural factors

IndianIndian ChineseChinese• Spiritual * Materialistic• Intellectual * Pragmatic• Transcendent * Down to earth

China is more homogenous: • Ethnic groups and language – 92% Han,

single written language• Religions – mostly atheist,

with Tao-Buddhism cultural background

1414 ©2014 Chindia Alert Unlimited

India – more ‘western’ with 250 years of colonial legacy

• Conducts secondary education in English for ‘upper class’

• Is more fluent in English generally• Is more open and very warm • Dwells as large ‘joint’ families • Has more ‘ultra’ poor• Has rigid caste system, but significant positive

discrimination


China is more closed and ’face’ is very important

• Larger population: 1.3b; but slowing down with one-child policy

• Has 100 cities > 1m, 51% live in towns• Believes in education and primary school is compulsory• Higher literacy, especially amongst women• Middle class of 500m, high saving but also spending!• Home ‘ownership’ from 0 to 70% in 20 years• Over million $millionaires, with conspicuous consumption


Similarities in cultural norms

China and India in common:• Both are hierarchical and deferential.• When they nod (esp Chinese) when you say

something don’t assume they are agreeing. • They don’t like to ask questions (esp Indians)• Very literal when answering questions. No attempt

is made to try to understand the ‘real question’ even if it is often quite obvious.

• They tend to follow conventions and traditions.• Finally, they tend to be collective (esp Chinese);

taking a ‘safety in numbers’ approach. The more controversial the more collective the stance.


4. Technology & industry factors

Are you aware of the vast body of Chinese invention, including: Paper, printing, gunpowder, compass, suspension bridge, fishing reel, stirrup, crossbow, parachute, paper money, playing cards, decimal system, seismograph, negative numbers, brandy, rudders, cranks, movable type, matches, steroids as drugs, propellers, biological pest control; and many more?

China (and India) is following path proven by Japan in 60s & 70s and South Korea in 80s & 90s:

• Cheap adequate ‘copies’• Low-cost good-quality substitutes• High-quality originals through indigenous innovation - eg

SunTech Power, one of top 3 solar voltaic cell firms


… and as producers for Information Technology

• China for hardware, but moving into software ($2trn)• India for software & services, but moving into

hardware ($270bn)• Both have other technology industries; pharma,

biotech …• Both turn out huge number of science and engineering

graduates


… and as users of IT

India:• Joint families often mean one PC or port per household• Rural poor have limited telecoms access• Indian farmers sell their produce through a shared intranet

service provided by ITC, major agri-business firm ($3bn)• Bureaucracy slowly being beaten by Internet offices run by

graduates for free• Street letter-writers being replace by mobile phones

China has more users


5.1 China’s tensions & challenges

• Social unrest: corruption, sex disparity, aging population; social media enables public to communicate, despite efforts to control and censor

• Economic disparity: migrant workers, high inflation, have’s and have not’s

• Technological issues: high-speed train crash, mining accidents, pollution

• Ethnic strife: Tibet and Xinjiang• International issues: trade-skirmish with US; Taiwan, maritime

disputes; siding with loner states, Iran, North Korea, Syria


5.2 India’s tensions & challenges

• Religious strife: Hindu-Muslim, anti-Christian• Social-political strife: Naxalite insurgency; urban middle class

feel disenfranchised by rural poor• Economic unrest: corruption at all levels, have’s and have not’s;

less welcoming of FDI• Technological-industry issues: lack of infrastructure• International issues: Pakistan/Kashmir and China/borders


5.3 Implications for Western execs

• What is your value proposition?• Be prepared to conform to local practices, but be alert to UK

anti-bribery laws• Best to engage via established ‘middle-men’; for China,

possibly Hong Kong-based• Be prepared to invest a lot of effort and, more importantly,

time; ‘quick-wins’ are unheard of• Prepare well before making trip – see

http://www.knowledge-must.com/en/resources/our_guide_books.html and www.ChindiaAlert.org or read http://www.amazon.co.uk/Chindia-Alert-Hidden-Crouching-ebook/dp/B00AQ29ASK


5.4 McKinsey: All you need to know about business in China

http://www.mckinsey.com/Insights/Winning_in_Emerging_Markets/All_you_need_to_know_about_business_in_China?cid=other-eml-alt-mip-mck-oth-1404

Chindia Alert UnlimitedZhang Chia-Hou FBCS CITP

Chindia Alert:You’ll be living in their world, very soon

14 April, 2014

chindia alert: you'll be living in their world very soon

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