The China chief executive of India’s largest wind turbine maker, Suzlon, likes to emerge from his glass-walled cabin and show off to visitors the company’s latest acquisitions in Beijing: goldfish, the traditional Chinese symbol of fortune, and a Ganesha idol flown in from India.
Behind such harmonious scenes in cubicles manned by Indian and Chinese staff, seasoned chief executives and managers of India’s best-known brands from software services to wind turbines are on edge as they grapple with the looming challenge of breaking into the world’s largest market, where a global track record does not guarantee success, big bids are released secretively to a clutch of predominantly domestic players, business opportunities depend on forecasting government policies and cut-throat counterfeiters threaten to hijack your product.
The legendary China price advantage has also faded after the global economic slowdown. Manufactures and service providers say they have no choice but to absorb the cost of Chinese wages that are rising with inflation and property prices, costlier raw materials and a domestic customer who prefers low cost over high quality. Indian IT in China aims to localise with Chinese staff, but English-speaking experienced managers in China’s urbanising interiors are so exclusive that they demand higher salaries than Bangalore techies.
India Inc has trickled into China over the past decade. In the past three years the number has remained constant at around 250 companies. They came to a state-controlled marketplace that does not recognise Indian brands, even if they may be selling in more than 50 nations. India is now trying to break through that wall to expand from serving merely multinational clients based in China. Survival in the world’s second-largest economy now depends on bagging contracts from local governments and state-owned companies.
“In the Western context, everything is black or white,” Suzlon China CEO He Yaozu told HT in a recent interview. “In China, it is predominantly grey. Opportunities come and go fast and are government policy-driven.”
Suzlon, despite its 32-nation presence, is still expanding slowly in China and knows its future depends on outsmarting the cut-price Chinese competition and breaking the stronghold of state-owned companies over large projects. “The market share of all multinationals in China is shrinking,” He Yaozu said, “because Chinese competitors are expanding so darn fast. It’s a level playing field but extremely competitive. Five years ago, nobody in the wind industry wanted to believe that things could grow that fast in installed and manufactured capacities in China.”
Sitting in his Beijing office in the world’s largest wind market, he points out emphatically that India, in contrast, is a sure bet despite trailing China as the fifth-largest wind market.
“Everyone wants to enter or get back into India,” he said. “India is one of the most profitable wind markets. In terms of favourable government policies for renewables, India is a showcase.”
In China, on the other hand, manufacturers of ships to earthmoving machines are gate-crashing the hi-tech business. This year, hundreds of turbines crashed the grids in some locations, sparking safety concerns.
Indian IT is competitive everywhere in the world except in China, India’s envoy S Jaishankar repeats at several bilateral business forums. The dozen-odd Indian IT companies, dominated by TCS, Infosys and Wipro, are still less than eight years old in China compared with the two-decade headstart of the Western brands. They are the great unknown in a vast market where internet firewalls and language barriers limit information.
Asked for his advice to Indian IT players in China, Jiren Liu, founder chief executive of China’s largest IT major Neusoft, recently told HT in Dalian, a seaport in northeast China, that Indian IT should come to China prepared to learn from the ground up, like “start-ups.”
“The Chinese hesitate to do business with an unfamiliar player even if the Western multinationals quote higher prices than Indian IT,” said an insider. “Unless you get Chinese business you don’t have a demonstration model to expand.”
The entry of Indian pharmaceuticals is limited by Chinese rules that demand local clinical trials and drug approvals even for products with existing international approvals. Drug trials are entangled in red tape and indefinite delays enhance the risk of patented formulae leaking into the market.
While the Chinese sell India tractors and fertilisers, over a dozen Indian agricultural products are still awaiting Beijing’s market approval, since 2002.
And the Chinese buy their mangoes from Pakistan.