cover story far 27 06 06.qxp 03/806 11:10 AM Page 12

12 cover story far 27 06 06.qxp 03/806 11:11 AM Page 13

Cover Story All set to flower Relationships between India and China are reaching a new high. Together, they can ensure that this will be an Asian century.

An India Now report. Photographs by Palashranjan Bhaumick

hen history is relegated took place. It has happened so to the history books, unobtrusively that most Indians in geography maps the China don't notice the difference. It takes future. India and China an outsider, visiting China at two different W are neighbours. They points of time, to realise the have shared glory together; in 1500 AD, transformation. both India and China had 25 per cent of the "It's a natural progression," says S.S. world's gross domestic product (GDP) Naik, the chief representative of Reliance each, making them the richest countries of Industries in Shanghai. But his job profile the time. They have faced disaster togeth- has changed somewhat. From a very large er; in the last decades of the 19th century, exporter, Reliance is today thinking of millions died in both the countries because moving into acquisition mode. of famines. One catalyst for the new awareness "Now we are facing the future togeth- could be the ramp up in trade. India's total er," says Zhao Gancheng, director of the trade with China in 2005-06 was $18.7 Institute of South Asia Studies at the billion, up from $12.1 billion the previous Shanghai Institute for International Studies. year. Given this growth rate, China will "The two countries share lots of common soon replace the US as India's largest trad- interests and views on issues of bilateral, ing partner. "Trade between the two coun- regional and global relevance." tries will touch $100 billion by 2005," says "This is the India China Friendship Yu Ping, chairman of the China Council for Year," says India's ambassador to China the Promotion of international Trade, who India's second largest trading partner. India Nalin Surie. "The response to some of our was recently in India at the head of a is however, 15 to 16 in the list of China's programmes has been fantastic." Chinese business delegation. trading partners." Barely 12 months ago, India didn't India is also trying to promote more Exports and imports don't directly enjoy such a high profile. The man on the value-added items in its export basket. impact the man on the street. So one has street in Beijing or Shanghai associated the Today, exports are largely restricted to pri- to look for other reasons to explain the country with IT (information technology) mary articles such as iron step-up in awareness. It helps that the and Awaara (the 1951 Raj Kapoor hit). ore. "We need to focus politicians have been making all the right Today, at the Little Wild Goose Pagoda in on this area," says noises. India's Defence Minister Pranab Xian, a tourist guide did entertain us with a ambassador Surie. Mukherjee recently returned from a visit version of Awaara Hoon. But in "China is to China very upbeat about the future. Shanghai's Xintiandi, a night mar- "The Asian space is not limit- ket and outdoor bar area, they ed," he said. "They are play- are belting out Dil to Pagal Hai. ing their role; we are play- Foreigners and Chinese alike ing ours." are jiving to the beat. Says Want another example Manoj Srivastava, who works of political compli- with ExxonMobil at the Fujian ments? At a seminar on refining and ethylene project: India China Bilateral "They are singing our song." Economic Cooperation in No one can quite put a finger in March 2006, on when exactly this change China's Commerce Minister

BLOOMING AGAIN: The India Pavillion at the International Horticultural Exposition in Shenyang 13 cover story far 27 06 06.qxp 03/806 11:11 AM Page 14

COVER STORY

Bo Xilai told the gathering: "India's power decades. In the first quarter of this calen- a price. (The PetroKazakhstan deal was is infinite." Ambassador Surie is trying to dar year, India had a GDP (gross domestic struck at a 21 per cent premium over the arrange a visit by a top Chinese politician product) growth of 9.3 per cent. China's market price.) to mark the India China Friendship Year. growth in the corresponding period was The two are now going it together. In There will be another occasion for such 10.3 per cent. December 2005, they won a joint bid to effusion. From competing in the global arena, the buy Petro-Canada's 37 per cent stake in "Politicians are facilitators," says two countries have moved to cooperation. Syria's Al Furat oil fields for $573 million. Srivastava of ExxonMobil. "The relation- It was different even last year. In August ONGC and CNPC are now planning to ship is really being driven by economic 2005, PetroKazakhstan accepted a $4.18 make a joint bid for other energy assets in issues. Indian companies are coming to billion offer from China National Petroleum Kazakhstan. "It's a win-win situation," China; Chinese companies are going to Corporation (CNPC). India's ONGC Videsh says an energy analyst. India. There is a good deal of crosspollina- Ltd (OVL) had been in the race. In tion." September, a Chinese consortium bought t's not just in energy. Last year, Union It helps that the world has started talk- Canadian oil firm EnCana's assets in IMines Minister Sis Ram Ola and China's ing about the two countries in the same Ecuador for $1.42 billion. OVL withdrew Minister of Land and Resources Sun breath. Today, they are considered the from the race after showing interest Wensheng signed a memorandum of twin engines of growth, which will drive initially. Analysts say that the Chinese understanding in to set up joint the world economy for the next few companies have ended up paying too high ventures (JVs) in third countries. In IT,

"THE REAL RUSH IS YET TO COME"

The Indian Ambassador in Beijing — Nalin nies are not going to India, that they lack Surie — is a very busy man these days. interest in the country. That is not true. This is the India China Friendship Year, They are going in the areas of their and he has his hands full. The day India strengths. They are participating in a big Now met him, he had flagged off a way in infrastructure-related projects. 10-day cultural programme at the Beijing They are not so much in consumer areas. University. In the afternoon, he They are not so visible. inaugurated the first-ever office of an in Beijing. "I have worked On the perception that even a single two-and-a-half years to get Indian bank- large US MNC would have invested ing into this area," he said. And there more than all the Indian companies was more lined up for the evening. Amid put together. this busy schedule, Surie found time to It's the wrong way of looking at it. It share his views with India Now. depends on the area of operations and the Excerpts: objective. Indian companies invest abroad in a big way where necessary. Look at the On the India China Friendship Year. Tatas; they are putting in $2 billion in The response we received this morning . (at the Beijing University) was fantastic. There are so many Chinese students There are more than 100 of them now. On whether this will be a Chinese wanting to know more about India and Earlier, it was quite an event. Today, it century or an Indian century. participate in these events. doesn't create such excitement. I think this whole business of an Indian It's not just students. We have an elabo- century or a Chinese century is a media rate schedule throughout the year for eco- On the scale of Indian operations in creation. Yes, it is true that India and nomic, cultural and social events. The China. China are growing economic powers but response has been phenomenal. This will You can't expect to have very large-scale so are several other countries, particularly take us several steps forward in India- investment and operations overnight. in Asia. China relationships. Most Indian companies are still testing the It may be more meaningful if you talk waters. The real rush is yet to come. about an Asian century. A century is 100 On Indian companies coming to years. There can be several cycles. The China. On Chinese companies investing in Indian media may be talking about an Everyday, we get information that a new India. Indian century. But remember that there company has started operations in China. People seem to feel that Chinese compa- are 94 years left.

14 cover story far 27 06 06.qxp 03/806 11:11 AM Page 15

COVER STORY

everyone is talking about Indian software expertise joining hands with Chinese A BOUQUET OF BANKERS hardware skills. The combination could be formidable. The State (SBI) "India and China have the longest histo- opened its representative office ry of civilisation," says China's consul in Shanghai in August 1997. It general to India Song Deheng. "We are the was the first Indian bank to set two biggest developing countries; we are up shop in China. Since then, neighbours. Friendship and cooperation is several others — ICICI Bank, inevitable. If we join hands, we can make , Canara this the Asian century. But others would Bank and , to like to abet the rivalry between the elephant name a few — have taken the (India) and the dragon (China) to check plunge. But they have all each other. Cooperation is the desirable stayed in familiar waters — blueprint; confrontation is a nightmare." Shanghai and Shenzhen. The Cooperation is growing. Last year, the latter is a stone's throw from Chinese government, Tata Consultancy Hong Kong. Services (TCS) and Microsoft set up a It was only on 22 May this year CAPITAL QUEST: The inauguration of the first three-way JV. TCS will spearhead the that Beijing was added to the Indian bank in Beijing operation with a 65 per cent holding. map when Bank of India (BoI) Microsoft and three Chinese companies flagged off its representative office. year, he offered such help to a congrega- designated by the National Development Under the system in China, a bank has to tion of Chinese bankers. and Reform Commission will share the maintain a representative office for two CMD of BoI M. Balachandran says that remaining stake. "When Microsoft agrees years before it is allowed to start normal his bank has always led from the front. to be the junior partner, you sit up and operations. SBI and BoI's Shenzhen "China is now the second-largest trade notice," says John Shen, a hospitality sec- branch have qualified. Others will get the partner of India," he explains. "BoI would tor entrepreneur in China who runs several green signal soon. The Reserve Bank of like to tap the immense potential of the Indian Kitchen restaurants. "TCS — and, India (RBI) has also okayed the China growing India-China bilateral trade." therefore, India — has been upgraded on plans of three other banks — Allahabad Meanwhile, Chinese banks are also plan- our radar screens." Bank, UTI Bank and UCO Bank. ning India forays. Industrial and V. Rajanna, till recently head of Tata What explains this scramble? Of course, Commercial Bank of China, the country's Information Technology (Shanghai) Co Ltd, there is business to be done. But, surely, biggest bank, has had talks with the says that the company has recently set up there is not sufficient business for more Reserve Bank of India on opening a a new software development centre in than a dozen Indian banks? branch in India. The Singapore-based S.R. Doddappagoudar, Beijing chief repre- United Bank of China has also made an sentative of BoI, explains that most of the application. banks are simply following their cus- The fact that so many Indian banks are tomers. If they don't go to China, some already in China and not one Chinese other Indian bank will take over their bank has started operations here is no clients' business here. "You can leverage reflection on interest levels, say that into capturing some of the business observers. First, there are many more back home in India," he says. Indian companies in China than Chinese For the first two years as a representative companies in India. In terms of total office, the Indian banks are anyway cost investment, however, the two countries centres; they can't perform most of the have probably put in the same amount of normal banking functions, so they can't money in each other. make money. The acid test will come only Second, most traders have historically after some time. been Indians; at the other end are Besides, the banking system in China is Chinese public sector companies. It need- a bit of a black hole. Nobody quite ed Indian banks in China to service this knows how sound it is. Experts say that sector. Chinese banks in India would the non-performing assets (NPAs) have have no role to play. mounted to $673 billion. Some Indian Tomorrow is another story. "The banking banks feel that they can lend their expe- sector is buzzing," says M. Arunachalam, rience to help their counterparts climb until recently chairman of the Indian out of the mess. When Chamber of Commerce, Hong Kong. You SIGN OF THE TIMES: McDonald’s is all over chief M.B.N. Rao visited Beijing last can be sure there is action ahead. the place in China

15 cover story far 27 06 06.qxp 03/806 11:12 AM Page 16

COVER STORY

LEARNING TO MAKE FRIENDS

THE FUTURE BECKONS: Indian medical students in Suzhou in China

You can't teach an old dog new tricks. The students don't have to register at the $6,000. By contrast, in India, if you don't Translated, it means that, if you want to Indian embassy or consulate. So, once qualify on merit, you may have to pay as change mindsets, you have to catch them again, there is a dearth of validated num- much $50,000 for admission alone. young. Indeed, that is what is happening bers. But the consulate in Shanghai esti- Everything else is extra. in the India-China relationship. mates the figure at "several thousand". M. There is a reason for this, of course. In Over the past year, some 50 Indian com- Antony of the Indian Kitchen group, who India, market forces decide the pricing of panies (there are no accurate numbers) runs canteens for Indians at several of private education, after the basic school must have started their China operations. these colleges, says the numbers are rap- levels which are free. Medicine is a lucra- In most cases, they initially send a point- idly increasing as more students join and tive profession. Private colleges charge man to explore the possibilities. The num- more colleges start specialised courses for much higher fees for medicine than for ber of Indians moving to China as a result Indians. other courses. In China until recently, a would not be more than 100. Add to this These specialised courses consist of get- carpenter would get the same pay as a already existing Indian companies expand- ting teachers from India too. In fact, the doctor. The average student would rather ing operations, and you will end up with representatives of these Chinese universi- learn carpentry than medicine. Thus, the another 100. "We are hiring Chinese soft- ties in India put together a team of stu- demand for medical courses is actually ware engineers," says V. Rajanna, till dents, a professor or two, a matron (near- less than that for carpentry. recently the man in charge of TCS's China ly 50 per cent of the students are But are these Chinese degrees recognised operations. "There is a high cost attached women), a cook and what have you. back home in India? According to the to getting people from India." When everything is in place, they head for Medical Council of India, they are on a par Contrast these numbers to the Indian stu- China. The course starts independently of with medical education in other foreign dents going to study medicine in Chinese the semesters but gets integrated later. countries. The graduates will have to pass colleges. "There are several thousand of What's the attraction of Suzhou, an examination in India before they us now," says Khuram Malik, a student at Xinxiang, Nanjing, Chongqing and their are allowed to practice here. The first Suzhou Medical College, a short distance ilk? The answer is cost. The tab for the batch of students is yet to graduate from down the expressway from Shanghai. first year, including boarding and lodging, China (medical education is a very recent "And the numbers are increasing rapidly sundry expenses, the initial commission to phenomenon). So the answers on the as the education becomes more accept- the middleman and even the cost of the quality of the education will have to wait able in India." ticket back home to India, is around till then.

16 cover story far 27 06 06.qxp 03/806 11:12 AM Page 17

COVER STORY

REACHING FOR THE SKIES $ million Year Import Export Total % of India's trade 2000-01 1,502 831 1,333 2.45 2001-02 2,036 952 2,988 3.14 2002-03 2,792 1975 4,767 4.18 2003-04 4,053 2,955 7,008 4.94 2004-05 6,769 5,344 12,113 6.39 Note: Total trade in 2005-06 was $18.7 billion Source: Ministry of Commerce, Government of India

Shanghai. With the Hangzhou centre and "China doesn't need engineers; IITians the Microsoft JV in Beijing, "we have a very will not make waves here as they have in good footprint", he adds. Rajanna is now the US," says Naik of Reliance, who is leaving China to take up a bigger assign- both an engineer and an alumnus from IIM ment in the . Bangalore. "But there are IIM grads every- Rajanna says that even a couple of where." years ago, if you saw an Indian-looking face Jagdish Acharya, regional vice-presi- in a supermarket, you would go up and say dent (China, South Pacific and Australia) of hello. A new arrival created a buzz in the Berger Paints, is from IIM Calcutta. He has community. No longer. "Even local Chinese recently moved base from Australia to companies have started hiring Indians," Shanghai. He agrees that management is a says Rajanna. "They are discovering ways critical input that China needs. And Indians to get over the communication problem." are well placed to provide that. MNCs in China have always had Indians Acharya's involvement with China is in senior positions. For instance, Atul accidental. took over Berger Singh, head of Coca-Cola in India, arrived internationally and Berger Paints (China) here from a stint in China. Indian compa- came along with that. It was a closed unit. nies, of course, take some Indians along It has been put partly on track again. But when they set up shop. "But it's very much more needs to be done. "Our compa- The next area is apparently engineering. expensive," says Ashwin J. Laddhaa, head ny is different," explains Acharya. "Most Again, there is a demand supply imbalance (international business) of Sterlite Optical Indian companies here are looking at the in India. China has capacity to spare. "By Technologies. "Schooling at an internation- export market or sending their products the turn of the decade, there will be more al school costs a bomb. A bachelor life, back to India. It makes no sense to export than 10,000 Indian students in China," with your family back in India, is not every- paint. We have to compete in China says Partha Sarathi Ganguli, CEO of the body's cup of tea." -based SaraswatiOnline, one of the Even then, the Indians are coming. GROWING PRESENCE many companies that organises such med- M. Antony, a Macao-based businessman ical packages. who runs a chain of Indian Kitchen restau- Indian companies in China As yet, there is no significant reverse flow. rants all over China (see box "Mergers on But the Saraswatis of the world are explor- the menu"), was recently in India to recruit ing that too. India has more than 1,000 b- at b-school campuses. He was successful. A. Birla Group Larsen & Toubro schools, many of them desperate for stu- "There are four of us here," says Aptech M&M dents. China needs managers. The Great Pragnya Priyadarshini, global manager at Essel Propack Reliance Lake Institute of Management in Chennai Shang Hai Spices Centre, one of the com- Hexaware SBI has started a course in Mandarin. The panies in the Indian Kitchen group. "He ICICI TCS Indian School of Business in Hyderabad made us an offer. China was too interest- has tied up with Beijing's Cheung Kong ing to turn down. We just packed up and Graduate School of Business for a student came." Chinese companies in India exchange programme. They evidently have their ear to the ground. oes she know Chinese? Not as yet. Geeta Mathur (name changed), another DShe moves around with Lilly, who student at Suzhou, sums it up: "I came interprets for her. But the language skills Baosteel Konka here to become a doctor and to see the will come. What is important is that she China Eastern Lenovo world. I now know fluent Chinese. I have a has a b-school background. China lacks Haier Shinco lot of Chinese friends. Who knows, I may managers and the Priyadarshinis are more Huawei Sinosteel even settle down here. Our countries have than welcome. In fact, there are several Jianshu ZTE so much in common." dozen Indian Institute of Management (IIM) alumni in China. An indicative list. Source: www.indiansinchina.com

17 cover story far 27 06 06.qxp 03/806 11:13 AM Page 18

COVER STORY

MERGERS ON THE MENU

WAY TO A MAN’S HEART: Taj Pavilion general manager M.H.Pastakia and Indian Kitchen group’s managing director M.Antony with their wives

IF food were truly the way to a itinerary. person's heart, Indians and The obvious assumption Chinese should have been deeply would be that these restau- enamoured of each other by rants serve mainly Indians. But now. Chinese food in India is, of that's not true. It starts off course, ubiquitous; in the cities, that way. "But Indians bring chicken chow mein vies for pop- Chinese guests and they start ularity with tandoori chicken. It is enjoying the food," says a different matter that the Pastakia. "Soon they start Chinese would never recognise coming on their own." At the the fare that is passed off in India Indian Kitchen outlets, only 10 as Chinese food. It has been per cent of the customers now Indianised and mangled into are Indians. At Tandoor, where something totally different. classical Indian dances are part Although purists and tourists of the ambience, there is an have complained, the same is not added attraction for the really true of Indian food in China. The next two months. "In Shanghai alone, Chinese. problem is different. There is often a six new Indian restaurants have started If the restaurants are doing their bit to mixture of cuisines. What's more, the in the past six months," he says. There promote cultural confluence, some of sequencing of the courses can border on is obviously huge demand. the restaurateurs are doing even more. the absurd. You can get prawns with In Beijing, general manager of the Taj The two most successful Indian restau- payasam (rice pudding) or kababs served Pavilion, M.H. Pastakia, is also thinking rants in China are Indian Kitchen and Taj after the kulfi. "We give our customers expansion. But he prefers to own his Pavilion. By coincidence, both the pro- what they want," says Madhu Sudhan, outlets; Antony has opted for the fran- moters are married to ethnic Chinese. who runs Tandoor restaurant in Beijing. chise route. So he is proceeding careful- One reason may be that they have been Others get indignant when accused of ly. But he too agrees that demand is in China longer than most other Indians. such culinary confusion. "I am bringing growing rapidly. Pastakia first went to China in 1991 to Indian food to China," says M. Antony, The tribe is also spreading across run a restaurant styled Omar Khayyam. managing director of the Indian Kitchen China; they go where Indian companies Antony set up Indian Kitchen in main- group. "In that sense I am an ambassa- go. At Hangzhou, TCS set up shop in land China in 1992. (He had started dor of India. I can't serve some mish- 2002. Very soon there was the Haveli. operations in Macao several years earli- mash." Even in distant Xian — a two-hour flight er.) Antony has four strapping sons. Antony has a franchise network of from the coast towards Central China — These are the joint ventures that will more than 24 Indian Kitchen restaurants you can get Indian food if you search for deliver better results than the corporate in China and is adding two more in the it. Indian tourists have the city on their variety.

18 cover story far 27 06 06.qxp 03/806 11:13 AM Page 20

COVER STORY

China doesn’t need engineers, but it lacks managers. There are several IIM alumni in the country.

gets." The company has tied up with Whirlpool and and more strategic alliances are on the cards. "By 2010, Haier aims to be among the top three brands in the Indian market," says Banerjee. "The experience so far has been extremely exciting." It's been just as fast paced for Sanjay A SHOPPER’S HAVEN: Streets like these are a common sight Kumar, director (marketing), Huawei against several thousand Chinese compa- completed a decade a short while ago. "It's Telecommunications. Huawei's sales rev- nies." Asian Paints will decide very soon been quite an experience," says group enue has recorded a 186 per cent jump whether to continue in China or not. But managing director R. Mishra. Orind is prac- over the previous year; in the past three Acharya says that the decision is likely to tically a case study for Indian companies years, it has notched up a cumulative be more than a purely economic one. planning to enter China (see following turnover of $300 million. The company Adds he: "There are other reasons to be story "Hot stuff in a cold climate"). With has already invested $100 million and in China." the China success under its belt, Orind is plans to pump in $150 million more. "If you are to be a global player, you now heading back home. It has set up a Interestingly, it is setting up an R&D cen- have to be in China," says Mahesh J. new unit in Bhuj (Gujarat), bought another tre and campus in Bangalore where it Paleja, chief executive of Larsen & Toubro one from the Birlas, and is reviving a sick plans to employ 2,000 Indian software (Wuxi). The Indian engineering giant has unit which belonged to another branch of engineers. What TCS can do in China, just set up this unit, two hours by road the promoter family. Huawei can replicate in India. from Shanghai. It is operating out of a tem- While Orind is returning home, are Huawei, strictly speaking, is not in the porary factory. Chinese companies also coming to India in consumer space. China Eastern Airlines is. Larsen & Toubro is a recent entrant. a big way? The common perception is Chief representative in India Edward Zhu is There have been many more before it, all that they are dragging their feet. just as upbeat. "We are planning to ambassadors for India. The Tatas are here, Ambassador Surie, however, says that increase the number of flights and the des- of course. So are the Birlas ("We have the reality is different. "That is not true," tinations," he says. "India is a huge mar- been very busy setting up capacity. It's he explains. "They are going in the areas ket. We are very keen on it." Adds Zu: "We complete now," says T.K. Chatterjee, pres- of their strengths. They are participating have already hired 14 Indian airhostesses." ident of Liaoning Birla Carbon, an Aditya in a big way in infrastructure-related proj- The day the airhostesses arrived in Birla Group company.) Then there is ects." (See Interview "The real rush is yet Shanghai, it was a wonderful photo oppor- Reliance, India's biggest private sector to come".) tunity for the local media. The Shanghai exporter. The Mahindras have a tractor JV Chinese companies are present in the Daily played it as a six-column picture at Nanchang. Videocon has two units consumer space too. But they are taking across Page 1. Jostling for space were located at Dongguan and Foshan, thanks care to be not so visibly Chinese. One rea- reports on the visit of Indian Defence to its takeover of the picture tube opera- son for this is that China is associated with Minister Pranab Mukherjee, who was in tions of Thomson SA of France. , the cheap goods that have swamped the Beijing at that time. Even the editorial page , Satyam... The list goes on (see market. had an analysis of India-China ties. chart "Growing presence"). The banks Haier had set a turnover target of $65 It was not just the Indian airhostesses have followed their customers and are also million last year. Says T. K. Banerjee, who flew into Shanghai that day. They out in full force (see box "A bouquet of President & CEO, Haier Appliances took with them the hearts of India. As bankers"). (India): "2005 was the very first year of Indian Kitchen franchisee John Shen put it: One of the oldest Indian companies in our pan-India operations and we were "If these are the fruits, I am certainly all for the country is Orind Refractories, which quite successful in achieving our tar- cooperation."

20