Notes on: Billions of Entrepreneurs: How China and India Are Reshaping Their Futures-And Yours

An insightful book by Tarun Khanna, an Indian born HBS professor, comparing the development of India and China from their early histories to their current emerging superpower statuses. It covers a wealth of issues but I am selecting here just a few of the most interesting ones and coupling them with my experiences of having lived in both countries.

Great leaps forward

I am now based in Suzhou Industrial Park, a brand new, super modern suburb of the city of Suzhou, housing some 1.2 mil people (the whole city has a population of over 10 mil). Where several years back were only farms and fields, the new Chinese middle class is now riding their new BMWs or Volkswagens to French bakeries for fresh croissants.  On the other hand when I was staying in South Mumbai with my Indian friends, I could see centuries old fishing village right next to some of the most expensive property in the world. How is that possible?

My Chinese host family took to visit their relatives living in dark winding streets of old Suzhou countryside and told me that in two years, everybody will be moved out and there will be factories standing here. When the Communist Party decides to do something, nothing can stop them from executing the idea. On the other hand my Indian friends told me that if the Indian government would try moving the fishing families against their consent, the government would fall the next day. So while China makes great leaps forward, Indian state muddles forward with little progress. The author notes that ‘China’s GDP per capita rose from $673 in 1978 to $5,878 in 2005. Further, the number of people living in absolute poverty dropped from roughly 250 million in 1978 to estimated 26 million in 2004.’ In India, ‘as many as 290 million people live in grinding poverty, a number that rises to 390 million if poverty is measured … as existing on less than $1 a day’. Is freedom of speech and free elections worth widespread extreme poverty and poorer living conditions? I am yet to make up my mind on that.

Soft vs. Hard power

India exerts its influence on the world mainly through soft power such as exporting Buddhism to China nearly two thousand years ago or yoga to the west over the last century. It has never attacked any other country and followed a policy on non-alignment during the cold war. On the other hand China was not reluctant to integrate Tibet by force or to attack India in the 1962 Indo Sino war. Nowadays, it is busy doing business with the world’s dodgy regimes such as Iran, Venezuela or several African dictatorships that other countries including India put sanctions on. To China’s merit, it also engages with many other mainly African countries where it trades natural resources for infrastructural development.

Long terms affairs

Almost all Western companies who have managed to succeed in China or India were in it for the long run. Especially in China, the Communist Party often expects the company to make contributions towards the development of Chinese society, be it through forming joint ventures with local companies to facilitate technology transfers, subcontracting to local companies in as far as possible (this often includes giving direct support to those companies to get quality of their production up to scratch as was the case for example with GE Medical and Bharat  Electronics Limited in India), supporting R&D activities of local universities or focusing on reaching out to the countryside. By engaging with local society, companies win over local politicians and regulators to their side, a crucial step towards company’s success in the country.

In India, businesses thrive mainly in industries untouched by the government where regulation is not so strict or where necessary infrastructure can be provided by private companies as opposed to the dysfunctional state. A prime example is India’s software industry. In China, the author points out that companies have three routes to success. Either they wear a ‘small hat’ and stay private, under the radar of the Party, or they wear a ‘red hat’, that is cooperating closely with the local party representatives mostly by letting government bodies have a stake in the company and its people on the board or thirdly, by wearing a ‘foreign hat’ and forming a partnership with a non-Chinese company.