The biggest factor in India's rise is whether the country can seize the opportunity and turn demographic dividend into real technological strength.
Editor's Note: The following is a translated excerpt from Jim Li's blog on EE Times China and is based on his recent experiences in India. His post, while originally meant for the audience in China, is an interesting perspective from across the border.
How do Indians view the Chinese coming to invest in India? Of course, they are very welcoming because the investors bring capital, technology and job opportunities. But we can also see from the nation’s new policies that, in fact, India is hoping to introduce technology while still strongly supporting local brands in countering the invasion of Chinese brands. This is a rather contradictory relationship between competition and cooperation.
Figure 1: Indians welcome Chinese investors who bring capital, technology and job opportunities to the country.
But there are also quite a few traps for Chinese investors in India. I met a Chinese lawyer who had been in India for many years, specialising in assisting Chinese enterprises to bring lawsuits to Indian courts and facilitating relationships with the government. He told me that every year, he takes on many cases involving Chinese companies that have been cheated or extorted in India. Chinese enterprises will always be disadvantaged in Indian territory no matter what, unless they are giants like Foxconn, ZTE or Huawei that have strong enough relationships at higher levels. Otherwise, they must cope with government officials finding fault with them on a daily basis in search of favours, which exhausts your energy.
I also met Mr. Huang, who was in India doing import, export and customs declaration services. He told me that he had been in India for many years yet did not earn very much money. He had run into unexpected trouble a number of times and doing business with the Indians made him very tired. Huang could be considered a real “India expert:” he spoke authentic Indian English and also knew a few words of Hindi. He even believed in Hinduism.
During our private chat, he told me with emotion that he felt that Indians were generally a little short-sighted in their pursuit of immediate interests and lacked a long-term vision.
For example, doing business with Indians often gets off to a good start; they always use a big order at first to attract you, but essentially very few really come through. When the time comes for the actual deal, they may use an excuse to cancel the transaction. Then they send another person to negotiate with you again. When doing business with Indians, they push the price very low so that you have no profit margin. Many Chinese foreign trade enterprises generally believe that Indian customers place more emphasis on price than on product quality and are dishonest. Huang told me that if Chinese small and medium enterprises want to come to India to seek their fortune, they need to stick together and help each other because it is difficult to survive alone in India. Chinese enterprises in India, therefore, need to pay attention to changes in policy at all times. In addition, because India has 28 states, each state is like a small country with different legal and tax policies.
Even the Indian central government’s policies are not necessarily truly effective in all states. The real masters of the Indian economy are those family businesses and large oligarchs. It is said that the entire economic lifeline of India lies in the hands of two dozen or so families. Under such circumstances, rather than painstakingly establishing relationships with each local government, it is sometimes better for Chinese companies to seek out one or two family enterprises for long-term cooperation.
Figure 2: Coolpad press conference in India
How do India’s young people view Chinese companies and Chinese brands? In Delhi, I took the opportunity to attend a Coolpad new product press conference in India. During the press conference, I met a young local who was savvy in technology and “self-media.” The young man was still in college and was a loyal fan of Chinese mobile phone brands. He was very familiar with Chinese brands like Xiaomi, Meizu and OnePlus. He told me that, in recent years, e-commerce has developed rapidly in India and young people all buy electronic products online because things are cheaper and of better quality there. During our chat, he mentioned that China’s mobile phone brands are more popular among young people in India but still cannot replace Apple and Samsung. After seeing the iPhone in my hand, he told me that in India, only people with high status would use an iPhone, which surprised me a bit.
The effects of religion
Figure 3: Religious statues in Indian cities. This one is the Hindu god Shiva.
In fact, this kind of hierarchy surprised me more than once in India. Although our tour guide told me that the Indian caste system has been abolished by law, this class concept still exists everywhere. In India, you can roughly figure out a person’s social class based on their name, skin colour, clothing and conversation style. At the mobile phone manufacturing plant in Noida, a local production supervisor told me that, while Indian workers have low wages, their efficiency is low, and they do not want to work overtime. Generally, when they have free time, they engage in religious activities. Due to the long-standing influence of religion, most Indians are generally vegetarian and do not pursue wealth in this life, but rather happiness in the afterlife. Such a religious culture is actually detrimental to the development of a country.
An obvious example is Turkey. When its secular regime moved to reduce the role of religion, the country developed very rapidly. The Modi government of India is also pursuing secular policies and downplaying religion. A secular India could truly achieve modernisation. The burden in this regard was much lighter for China in implementing its reform and opening policy because thousands of years of feudal hierarchical concepts and religious ideas had already been thoroughly cleared out. Truly realising the future “Indian Dream” depends upon whether Indians in the middle and lower classes can genuinely become rich, prosper and change their destiny.
China vs India?
A very hot topic in China is whether Indian manufacturing will replace Chinese manufacturing. In the mobile phone industry, for example, on the surface, a mobile phone assembly plant moves to India, but behind the move is the entire mobile phone industry chain. Many people worry that after China’s manufacturing moves out, it will impact employment and economic development in China. Once ODMs moving to India reach a certain magnitude, the supply chain will also certainly set up factories in India. Indian manufacturers will then bypass Chinese solution providers and ODMs to discuss prices directly with the component manufacturers and will talk directly with them about certification. If the proportion of SKD reaches 10%, chip suppliers will consider coming to India to establish factories.
Figure 4: Assembly-line production equipment in Indian factories directly takes up our outdated production capacity.
But I personally think that, although this process can be expected, it will not happen that quickly. At present, Indian manufacturing still advantageously complements Chinese manufacturing rather than replaces it. For example, what we saw in the Indian mobile phone manufacturing plants were the Chinese feature phone production lines of several years ago or even ten years ago. It is the equivalent of India taking up our outdated production capacity. Of course, this gives the Chinese manufacturing industry a sense of crisis, leaving us a short time window. We need to seize this precious time to achieve transformation and upgrade of the supply chain. In the past, we performed low-end manufacturing. Now we must engage in precision manufacturing and move the high-end industrial chains of Japan, South Korea and Europe to China. Chinese manufacturers must also accelerate their own brand-building.
Figure 5: In a typical Indian offline mobile phone shop, there is almost no more room for the billboards of represented brands.
In particular, with companies like Gionee, OPPO and Vivo that have successfully replicated their own offline outlets in India, we can see the outdoor advertising and chain stores of these Chinese mobile phones everywhere in the streets of Delhi. A brand like Coolpad has more than 1,500 offline sales personnel in India alone. I heard that even mobile phone channels like D.Phone are actively exploring the India market. In view of the Indian government’s policies, however, Chinese enterprises that purely engage in trade and have no manufacturing capacity possess no great advantage. It is difficult to compete with Indian sales channels.
Figure 6: Billboard in the haze.
Figure 7: An Indian child following the vehicle to beg.
Finally, I will just say that, in the end, a country’s development is dependent on its own efforts, but the course of history must also be considered. The biggest factor in the rise of India is its demographic dividend. Now the key is to see whether India can seize the opportunity and turn this demographic dividend into real technological strength.
Jim Li is based in China and writes and edits for EE Times China.