Govindraj Ethiraj: Learn, & then co-operate with China

DOUBLE EDGE

Radhu Phulwani, a large China-based textile trader whom I've referred to in earlier columns, told me a few days ago how he would now visit India more often. It's like this. Three weeks ago, he brought a delegation of seven Chinese mill owners to India. They wanted to set up a representative office and move a few Chinese staff members here. So they did the rounds, from Delhi to Surat, Rajkot and of course Mumbai.

At the end of it, they told him they were fascinated with India. It's a great country, the people are warm and "we" would like to do more business, they said. However, they were not comfortable with the quality of infrastructure, whether it was roads, airports or even the office buildings they visited. So they would not set up a local office with their own people. Instead, they asked, would Phulwani's firm become their India outpost?

Phulwani told me he was happy because it was good business. After all they represented giant Chinese textile mills that would supply cloth to hungry Indian garment manufacturers. But, he said, he was not pleased with the way it came to him. "I don't know how to say it. It's embarrassing when someone tells you, in effect, that your country is not livable."

Obviously, the likes of ZTE, Hutchison and Huwaei have stronger stomachs and longer visions, so they would not bow out of a race so easily. The point is something else that has jumped out in my conversations with Indians who deal with Chinese businessmen. It is that the Chinese are just too pragmatic for us.

That form of pragmatism and our general friends-with-all approach don't mesh. Attempts to do so will only backfire on us, as it has in the past. Contradictory and simplistic as it sounds, I would advocate our leaders are better off focusing their energy on learning from China than thinking about engaging with it. And see how best we can apply those learnings in our context.

This does not mean Indian businessmen and entrepreneurs should not do business with their Chinese counterparts. That's already happening and will continue to, at all levels, though it is my belief that traders in Crawford Market and Palika Bazaar understand China better than most China experts.

Nor does it mean India should shut the door on Chinese companies. Because it's a dampener on economic relations? No. Because I think it's a pathetic display of our own insecurities.

I visited Shenzhen for the first time in 2001, having driven across from Hong Kong on a Chinese visa that was issued, by the way, in exactly four hours. For the first time, I saw the hundreds of factories that made up the special economic zone. This was just like our own industrial estates I thought, I mean in look and feel""countless 'galas' and sheds lined up as far as the eye could see.

The highway was new and good but the roads that went off were average. Some companies had spruced up their exteriors with gardens, fountains and parking lots, but most had a rudimentary, functional feel about them""most HQs were back in Hong Kong. You opened the gate, walked through grease-stained lobbies and reception areas smelling of freshly moulded plastic or oil and into air-conditioned offices and conference rooms.

The difference was in scale. The biggest industrial estates I know of in India span a 10-minute drive end to end. Here, it went on for miles. The average factories were larger. Most of them here, particularly the ones I visited, were into light engineering and appliances. And yes, most factories had dormitories alongside for their workers (mostly from the Chinese hinterland), with their washing fluttering away on the windows. I still think back of the day, driving around on a warm, dusty day through Shenzhen and wondering ... was this all that took to create a global manufacturing miracle?

I visited Shanghai in later trips and was of course captivated, like many, by the skyscrapers of Pudong. And by the 14-km-long flyovers that sailed across the city like expressways. Over time, I concluded a few things. Shanghai was the dream; this was what we might become someday. But it was a largely futile pursuit. On the other hand, the special economic zones or China's massive manufacturing successes were reality within reach.

And why can't we do it? I don't know. I mean I do but the reasons sound so silly. I look at our own hapless attempts at special economic zones. We have made it so complex and so riddled with holes that it's not even a joke. And worse, I don't think it will even serve the original economic and social purpose. If ever there was one.

Do we have a choice but to follow the China example? Well, I can't think of any other way you can create 100 million jobs where none exists. And feed a few more hundred million mouths. Or any other process by which you can bring the world's economic superpowers to their knees. If you have a solution, do tell me.

China has scale problems, including of rural poverty. It's fighting them with mighty moves, like ensuring economic distribution through massive road-building programmes. India too has scale problems but we've not showed the capability or desire for scale responses. China is far from solving its internal imbalances. So are we.

Learning how China is addressing these issues""from poverty alleviation and education to health and of course infrastructure""is what the leaders and future leaders of India should focus on. That's what would help us. Not $40 bn of trade or general political bonhomie. That we could do with lots of folks. Tough? Well, all you have to see is how the Chinese acknowledged their weakness in IT services and set out to learn from India. Now, will we wait for the full-fledged Chinese cricket team?

govindraj@business-standard.com