When Anil Ambani announced his $8.3 billion deal between Reliance Power and Shanghai Electric Group Company, demonstrating the potential for India-China win-win business ventures, eyebrows were raised around the world. Is China really willing to invest big in India? Can Indian and Chinese companies really work together? Will joint ventures (JVs) work? Will their varying corporate cultures mix and match?
The debate will go on till more projects take off and more case studies are available for concrete analysis, but the idea of Sino-Indian business co-operation has taken off. Bharti Airtel last week announced a new model for partnering in business.
Rubbishing the forecasts made by strategic analysts in both countries and in the West about an India-China rivalry in Africa, Sunil Mittal’s Bharti Airtel has teamed up with China’s telecom technology major Huawei in Africa in a $400 million deal to modernise and expand Airtel’s 2G and 3G network infrastructure in African countries. This follows an earlier such partnership in Sri Lanka.
The agreement will enable Huawei to design, plan, modernise and expand Bharti Airtel’s network in Africa. Huawei will also manage infrastructure operations and maintenance.
Explaining the partnership, Bharti Airtel Joint Managing Director Manoj Kohli told the media, “This partnership takes us one step closer to realising our vision of making affordable and world-class telecom services available to Africa. It will allow us to focus on delivering better customer experience as we leverage the global network management expertise of Huawei.” What Mr Kohli did not add was that this would also change the paradigm of Sino-Indian business relations in Africa.
Huawei Technologies’ India head Yao Weimin (who has very cleverly adopted the nickname “Rajiv”) says it is time to stop viewing India-China business relations only through the binary prism of competition or co-operation. “The reality is that Sino-Indian business relations will be marked by ‘co-opetition’,” Mr Yao told a gathering of strategic policy analysts in Beijing last week. The key word is “joint ventures,” said Mr Yao, emphasising the growing interest of Chinese companies in direct investment in India.
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At last year’s meeting of the India-China dialogue, convened jointly twice a year by Beijing’s China Reform Forum and New Delhi’s Aspen India Institute, the chairman of Baosteel reported his company’s interest in setting up steel plants in India, partly as a way of responding to India’s concerns about exporting iron ore to China and importing finished goods from there. This year Mr Yao spoke about similar ventures in more high-technology sectors like biotechnology, pharmaceuticals and information technology. “You are world class in software, we are now world class in hardware. It is not enough that we remain where we are. We must become world class in combining the two. So China-India joint ventures is the route,” he said.
Though the Bharti Airtel-Huawei deal is not a regular JV, it shows that partnerships can be established not just in each other’s country but also in third markets. In fact, third markets may be the way to go for building synergies. Indian companies feel disadvantaged in China, given the close and non-transparent nexus between government and corporations, while Chinese companies, much like foreign investors, have the usual complaints about operating in India — poor infrastructure, excessive red tape and bureaucracy.
While Chinese business leaders complain about India’s still pervasive “control-permit Raj”, an Indian website familiar with India-China business relations offers a word of caution about doing business in China. “While India-China relations remain sweet and sour, few joint ventures between the two countries have done well. After four years of experimenting, learning and adapting, Bharat Forge has finally managed to come out of the red in China. India’s biggest automotive forgings maker has a Joint venture with FAW, one of China’s four largest auto makers. The joint venture based in Changchun is 52 per cent owned by the Indian company and although it posted a loss of Rs 315 million ($7 million) in 2009, the JV expects to be profitable this year (2011)” (inchincloser.com/2011/01/12/profiteering-from-an-india-china-jv).
Moreover, given the persisting mutual suspicion, Indians and Chinese might find it easier to work together in third markets. In many sectors, Chinese companies bring better technology, cheaper finance and the ability to implement projects in time, while Indian companies bring better managerial and marketing skills.
India-China joint ventures are the way to go, says Atul Dalakoti, who has represented the Federation of Indian Chambers of Commerce and Industry in China for over a decade, and is now China Country Head of the Anil Dhirubhai Ambani Group. Mr Dalakoti went to school and college in China, speaks fluent Mandarin and is au fait with China’s rapidly changing government and business culture.
Mr “Rajiv” Yao and Mr Dalakoti belong to a new, as yet minuscule, tribe of Chinese and Indian executives who have demonstrated the ability to work in each other’s country and build bridges, relationships and business. They are the pioneers in what is likely to be an increasingly important world of India-China business-to-business (B2B) co-operation.
If they succeed, the resultant B2B links will help reduce, though not altogether eliminate, the trust deficit in the government-to-government (G2G) and people-to-people (P2P) relations. Such a deficit can be eliminated only when the two countries settle their long-standing disputes and differences. Till then it is B2B joint ventures, like the Airtel- Huawei deal, that will act as a bridge of “co-opetition” between the desire for co-operation and the impulse for competition between the two Asian giants.
The writer was in China as a participant in the China-India Strategic Dialogue as a guest of the Aspen India Institute