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Great Call Of China
Indian entrepreneurs are eagerly joining the swiftly growing queue to set up shop in China.
The land once considered forbidden has suddenly become
the hottest destination for Indian businessmen.

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BUSINESS: OVERSEAS INVESTMENT

Great Call Of China

A land once considered forbidden has suddenly become the hottest destination for Indian businessmen

By V. Shankar Aiyar

Guanxi. It's an omnipotent Chinese phrase. It means networking, contacts, connections-things that businessmen thrive on. It's a phrase that is also rapidly gaining currency among Indian entrepreneurs joining the lengthening queue to set up shop in China.

Last year, when a delegation of officials from the Chinese province of Guangzhou visited Mumbai to seek investment, the Bombay Chambers of Commerce managed to fit the proceedings in its conference hall. But last week, when the province's Vice-Governor Tan Bing Quan led a team to the city, it had to book the Ball Room at the Taj Mahal Hotel to accommodate over 200 eager-beaver businessmen-all looking at opportunities in the once-forbidden land.

Sure, not all of them wanted to set up plants. Many were seeking marketing tie-ups to tap China's low-cost manufacturing ability. Some were looking at exports or technology exchange while others were simply sniffing around. Big-ticket investment is just a trickle right now. But the rush is clearly on-and in the pipeline are big plans by such names as Bajaj Auto and, in the it sector, Tata Consultancy Services and Infosys Technologies.

Dinesh Patnaik, head of the economic wing at the Indian Embassy in Beijing, confirms the trend: "The number of Indian businessmen scouting for opportunities in China is on the rise." But is it just China's low-cost manufacturing ability that is attracting them? Patnaik believes otherwise. According to him, China currently imports goods worth $230 billion and by next year the figure is likely to touch $300 billion. But India's share is just $1.35 billion (Rs 6,200 crore). Hence it's a huge opportunity. Also as Srinibas Swain, chief representative for the State Bank of India at Shanghai, points out, "There is a lot that Indians can learn from the Chinese in terms of economies of scale, cost-effectiveness and adherence to time frames."

The power of the pro-business environment has got many plugged in. Pharma major Dr Reddy's Laboratories has staked its expertise in branded formulations and set up the Kunshan Rotam Reddy Pharmaceuticals. Ranbaxy has set up a unit in Guangzhou and introduced 11 brands in China. Aurobindo Pharma has branched out as Aur Bindo Tangling (Datong) Pharmaceutical Co Ltd in Shanxi. Also wired into China are computer education majors NIIT, which has centres in Shanghai and Pudong, and Aptech, which has set up over 45 centres inthe country since February 2000.

The lure of China is manifold. Says Satish Reddy, managing director and chief operating officer of Dr Reddy's: "It is a question of using our expertise and reputation in finished formulations and reaching out to the global market. China is among the top 10 markets we needed to tap." For Bajaj Auto, it's an opportunity to introduce its three-wheelers. It also wants to tap the low-cost Chinese advantage in components and gearless scooters.

For many, the Chinese option is a defensive move. The low-cost economics offers many Indian manufacturers a way to cut costs by outsourcing. China also offers a chance to do what they couldn't do back home in India's cramped business environment. The biggest draw is China's attitude to investment, an area in which Reddy feels India has a long way to go. In China, he explains, powers are delegated to local provinces, investment decisions and approvals are local and only exceptional cases are referred to the Centre. "They are very pro-business, you don't have to deal with a hundred different windows," he adds. Pramod Khera, Aptech's executive director and CEO of its education and training division, agrees. "We looked around for a partner for about six months but once we signed a deal, things moved very fast." And this despite a bureaucracy.

Clearly, it's not just Guanxi at work. It's a passion that is difficult to quantify. Baron India CEO Kabir Mulchandani relates an anecdote which might help. Over dinner, when a corporate lawyer asked a visiting Chinese official what made the country tick, his passion impressed everyone. "He had all the details on his finger tips," recalls Mulchandani. "He knew the business plan of every company for the next five years."

MetroScape

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The Madhya Pradesh governor orders a CBI inquiry into a land allotment by the chief minister to the Nai Duniya group, kicking off a constitutional crisis. INDIA TODAY Special Correspondent Neeraj Mishra reports in
Conflict Of Interest.