Friday, February 08, 2008
"Chindia" rising: A short note on the differences between Asia's giants
I was interested to read this bit from a review of Tarun Khanna's Billions of Entrepreneurs: How China and India Are Reshaping Their Futures--and Yours
Khanna sets out to demystify many of the questions that confound foreigners: Why is China so much more open to multinationals than India yet vastly less hospitable to its own private entrepreneurs? Why do Indian companies have a far deeper pool of world-class managerial talent than China? Why does the state pervade Chinese business even in the smallest towns, while the key economic catalysts in Indian villages tend to be grassroots self-help groups? And why can Beijing ram through sweeping free-market reforms while New Delhi is unable to do so?
To understand China's corporate scene, Khanna explains, one can't underestimate the lasting damage from Mao Zedong's Great Leap Forward of the 1950s and the decade-long Cultural Revolution (1966-76), which wiped out several generations of managers. When Deng Xiaoping ushered in reforms after Mao's death, China had to rebuild its corporate sector from scratch. Deng provided incentives to lure investment by multi- nationals and by the ethnic Chinese in Hong Kong and Southeast Asia. And he greenlighted hordes of Communist Party cadres to go into business.
China still lavishes favors on foreign investors, especially those bringing high technology. But there is almost no way to sidestep the state. To succeed, most multinationals play ball by cultivating top leaders and spending lavishly on programs to help China develop high-priority industries such as software and life sciences. Government bodies and officials have key stakes in virtually all important Chinese corporations. Even among the many small and midsize enterprises that superficially resemble private outfits, "the Party apparatus is never far behind." To raise funds from banks or equity markets, entrepreneurs often join the Party and dole out stakes to local governments and officials.
India also had its period of socialist excess, stretching for decades after independence. But entrepreneurs persevered, "when necessary ducking and weaving away from the state's predation." They made do with limited capital, and often focused on offshore customers. Moreover, most multinationals did not abandon India, even during periods of stifling state controls and the antiforeign campaigns that ousted Coca-Cola (KO) and IBM (IBM) in the '70s. That partly explains India's wealth of managerial talent.
Without having read Khanna's book, I'm going to guess that the answer to the reviewer's first question -- "Why is China so much more open to multinationals than India yet vastly less hospitable to its own private entrepreneurs?" -- has everything to do with their different political systems. Multinationals can be controlled, and are unmoved by patriotism, nationalism, a yearning to live free, and other such extraneous emotions. Moreover, if they do get out of line they can be expelled at any time. Entrepreneurs, on the other hand, grow organically within any sufficiently creative society and are, besides, inherently subversive -- they succeed only when the conventional wisdom is that they will not. Entrepeneurs, in the end, are an example of the possible, and that makes them far more threatening to dictatorships than democracies.
2 Comments:
By 
Christopher Chambers, at
Sat Feb 09, 05:10:00 PM:
China represents more of a threat to us and our "way of life" than any distant group of silly mullahs or brainwashed Arab students. Sorry. You all love them (and India) because it's all about the bucks, not patriotism.
By Unknown, at
Sat Feb 09, 06:13:00 PM:
I'll answer the second part. The reasons that India produces managers and China doesn't are language and literacy. It's darned hard to become really literate in Chinese, something beyond reading street signs, your name, and maybe a simple newspaper. That narrows the field quite a bit.
And many Indians understand English, one of India's official languages. Since despite our current problems English remains the language of business, that gives Indians a leg up.
