Of global ambitions & Innovative thinking: The Chinese way

VOL. XXXXVI NO.4

OCTOBER 2020

CONTENTS

CHINA: Business, Technology & Economy in 2020

The Art & Power of Nudging M S Narayan

Partnerships in the Age of Covid Panel Discussion

Transforming India & Indian Businesses Pradeep Deshpande

Women Leader Series: Policing in Covid Times & Beyond

Lakshmi Venkatachalam

Panel Discussion

EDITOR Gp Capt R Vijayakumar (Retd), VSM EDITORIAL SUPPORT Gp Capt Dr R Venkataraman (Retd) LAYOUT EXECUTIVE D Rajaram

MADRAS MANAGEMENT ASSOCIATION Management Center, New No.240 Pathari Road ﴾Off Anna Salai﴿, Chennai 600 006 Ph:044‐2829 1133 Email:mma@mmachennai.org | mandate@mmachennai.org www.facebook.com/mmachennai

They think big and want to be number one... They are, in general, implementers of technology, not particularly inventors; and they are not ashamed about that. suitable technologies, factories and opportunities.

China is a very large country, three times the size of India. The population is almost similar. They have one common language—except for two or three of the far­flung provinces—which helped in bringing and keeping them together. The unemployment is very low at 1.7% and youth unemployment is remarkably low. India has something like 23%.

The few good things that they did I have lived in Hong Kong and China for

and a lot of support from some of the

started from 1978. Premier Deng

a little more than 10 years. I have been

developed countries nearby. The

Xiaoping brought in a sharp focus. He

very much interested in their culture

Northeast provinces like Heilongjiang

tried to open the country and develop it.

and made a lot of good friends and

and Liaoning were adopted by Japan.

In 1978 when he took over, there were

business associates. I have tried to learn

Places like Shandong got support from

88% of people below poverty line and

a lot from them.

Korea. Fujian was adopted by Taiwan

today they are at 1.7%. Life expectancy

If we look at the map of China, we

and Guangdong by Hong Kong. Thus,

from 1978 to now has improved by

can understand how the transformation

the strong influence came from these

about 10 years. Infant mortality has

happened with the State's own interest

neighbouring countries and brought in

come down from 53 per thousand to 8

Business Mandate fountainhead of excellence

per thousand, and literacy also

Along with Deng Xiaoping, there was

factories—400 of them owned by China.

improved to 96%. The State provides

another economic mind—Zhu Rongji,

The road from Shanghai to Myanmar is

free education up to class 9. Labour

who contributed a lot to where they

so well developed that fabric is able to

force participation by women is 60%,

have reached today and how they think

reach from the textile mills in Eastern

whereas in India it is about 25%. That

now. Government policies are in place

China to the border of Myanmar in 10

means the State has provided jobs,

to create self­sufficiency, stability and

days. Also, Myanmar is one of the

income, healthcare and education.

continuity. That is the bigger approach.

countries where the important Mekong

China’s economic liberalism is a

They have something called the

transformation story of 40 years. In

‘whole nation system’ which started as

1980, their GDP was less than India’s.

a system to support sports and develop

Today they are at about 14 trillion and

a number of world­class athletes. There

India is at 3.2 trillion. China is a global

is also another parallel system for

River flows. Water, of course, is a resource of the future. China has a lot of interest in Pakistan and Myanmar for these reasons. Pakistan gives them access to the Gwadar port and has river water up north.

China has made a lot of developments and inroads into Myanmar, to an extent that Myanmar is like another province of China. In Myanmar, there are 600 garment factories—400 of them owned by China

China has developed infrastructure extremely well—power, roads, railways, ports and communication. They think big and want to be number one. Even within their sub­systems, they aspire to be number one. They are, in general, implementers of technology, not

trading power. They are trading at

education. Some of their best minds are

particularly inventors; and they are not

4,600 billion dollars with 54% exports.

grown in special universities and

ashamed about that.

India’s trade is about 844 billion.

military universities and are developed

The people want to be safe and

China's trade with India is about 100

for serving the country. China has global

respected. They are a collective lot and

billion dollars. For them, we are not a

ambitions. You take the Belt and Road

do not stand up as individuals. They

very big trading partner. But for us, they

Initiative, which is a big Silk Road kind

work as a team. They look up to the

are important because we import 75

of movement to connect countries from

government, and the government unites

billion dollars of products from them.

China to Asia, Africa, Europe and

them. They cannot perform without a

China has tweaked RMB to USD very

Australia.

leader. They are good at working as

opportunistically and intelligently, and

China has made a lot of inroads into

tries to maintain parity where imports

Africa because Africa has a lot of

and exports are both supported. In

minerals. They are not there in Africa to

Guangxi and Renqing

essence, China is a very interesting mix

make textile garments. China has made

Guangxi and Renqing are two important

of Confucian tradition, communist

a lot of developments and inroads into

concepts. Guangxi means relationship.

orthodoxy and super capitalism!

Myanmar, to an extent that Myanmar is

They are very particular about personal

like another province of China. In

and business relationships. Vendors try

Myanmar, there are 600 garment

to support each other. Even if there is a

How do the Chinese think?

10

OCTOBER 2020

teams.

Business Mandate fountainhead of excellence

minor accident on the road, drivers get

From Three Gorges to the Great

down, exchange cigarettes and start

Railway: The Han penchant for

making relationships!

greatness

People have ‘hope’ as poverty has been removed. For them, Apple and Amazon are not the happiest places to work. China’s story is somewhat like that. Happiness is not the important thing. It's about being successful and their nation being an important

2,000 gigawatts and 25% of that is coming from new energy. They have the vision

to

identify

new

energy

opportunities like solar, wind and nuclear. They set up and commissioned the Three Gorges hydroelectric power plant, which is one of the wonders of

country!

They

focus

on

setting

up

infrastructure projects and identify potential industries like steel, mining, cement,

automobiles,

aluminium,

fertilizers, machine tools, armaments and food. As time progresses, they are willing to re­calibrate the list of potential industries and add artificial intelligence,

drones,

e­commerce,

electric vehicles, robotics and space. So firstly, they identify the right industries and then the government supports them

They

invest

first,

start

developments and course­correct later.

It is not uncommon for the pollution control board people to go to the factories with chain and padlock and lock it up. They shut down all the small dyeing units and revised their standards for water pollution, several years after developing the industry.

In general, their approach is to finish projects ‘on­time,’ if possible to finish ahead of schedule.

OCTOBER 2020

modern

engineering

world

with

generating capacity of 22.5 GW. It took them 14 years working 24 x 7. They helped in resettling some of the villagers. It has also helped them to control the flooding problem. China adds additional power every year by the same amount which Spain consumes in a year.

Let us take semiconductors. They have a goal to meet 70% of their own needs locally by 2025. In April 2018, when America decided to ban ZTE, Xi

with land and tax subsidies.

12

In power, their installed capacity is

Jinping arranged a meeting with his industry leaders within a month—in May 2018 itself. They have 139,000 kms of railway lines; almost double that of India’s.

They executed the Qinghai to Tibet train project covering 1400 kilometres –with 1000 metres of the stretch set up at altitudes of more than 4,000 meters, overcoming lots of challenges and yet, completing it one year early!

Then they set up a train system

The people want to be safe and respected. They are a collective lot and do not stand up as individuals. They work as a team. They look up to the government, and the government unites them.

Business Mandate fountainhead of excellence

through Kazakhstan and Kyrgyzstan to

are very important part of the Chinese

from USA. Once China decided to

Europe, and it is functional. A lot of my

system. They have labour incentives.

embrace the world, USA decided to

produce is going by train from China to

The workers and staff have a lot of

embrace China and trade was going to

Germany and Spain now.

respect. Among the business units

be a big opportunity. For instance, the

Recently China had the foresight to

within an enterprise, there are profit

entire city of Chongqing is modelled on

seize the opportunity to set up the Tesla

centres and profit sharing. The unions

Chicago. Everything is big like

Gigafactory. It took them just 18 months

are generally passive. They don’t believe

McDonald and Kentucky. They like the

to

to

in gossip but only work. The

big scale concept. The banks favour the

commissioning and start of production.

government does a good job on skill

bigger and stronger companies.

This is an entirely American investment

development using many vocational

Let's take the example of Midea and

project. They were able to change their

training schools. People are getting

Galanz, two Chinese home appliance

mind and did not wrangle about the

more tech savvy. In the global

companies. Midea makes washing

factory being half­Chinese and half­

Innovation Index, they are at 14,

machines and Galanz, vacuum cleaners.

American.

Vietnam at 42 and India is at 48.

They reached the peak in that category,

go

from

land

approval

When we decided to go in for 3D

then Midea decided to make vacuum

They are agile and think in very

designing, we invested in two licenses

cleaners and Galanz decided to make

innovative ways

for India, 2 for China office and 2 for

washing machines. They just went with

They develop ecosystems in clusters. We

Vietnam office. But one of my Chinese

the proposal, got their approvals and

also have clusters in India, like Tiruppur

suppliers called Ningbo Kashion bought

loans and got into production.

and Surat in the textile industry. When

50 licenses! That is the way they go­­

we talk of Chinese clusters, they have

The Canton Fair is an amazing fair

with muscle, scale and power. The

the

and

held in Guangdong. It is held two times

government and banks support them.

ecosystem of all the vendors and all the

a year, in three phases because of the

They are agile and think in very

sub­assemblies available around. So this

number of products they have to cover.

innovative ways.

It is a place where businesses get really

complete

infrastructure

is the difference. The government

My garment sample room in

transacted and huge orders are closed.

Hangzhou make samples in about six

I went in and walked around Canton

working days and we courier it out to

Fair for the first time. I went to a booth

Zara in Spain. What did my Chinese

and picked up a garment. I looked at it

To cite an example, in January

competitor do? He moved his sample

and made some remarks. The next day,

2005, the global textile quota was about

room to Spain, just outside Zara. I could

I was back in my office and I saw that

to be abolished, and the world was going

not beat him on that. These are some

the same product which I had seen in

to become a level playing field and

interesting things our competitors do

the fair was sent to me. I did not ask for

China was expected to boom. Around

and we learn from them.

it. This is their initiative. They know

provides a lot of incentives by means of tax rebates. In India, we call them as duty drawback.

February 2005, the Indian government

how to promote and develop business!

withdrew duty drawbacks! These kinds

When it comes to thinking of business

of signals can often be very confusing to

development…

the industry. Speed, agility and support

The inspiration for size came to them

14

OCTOBER 2020

For those who cannot go to Canton Fair, there are places like the Shanghai­

Business Mandate fountainhead of excellence

Mart which is a 365 days­a­year

one with 100,000 pieces capaciThey

anomalies exist and one keeps

exhibition. It is one huge mall where

always get the benefit of doubt due to

wondering how they manage to do that.

suppliers from all over China have their

their scale.

Subcontract is a way of life. They

stalls, all the time. There is the Yiwu City

They have already gone ahead to

don't think anything wrong about it.

consumer product wholesale market. It

develop base line on the electric vehicle

They take it for granted. They don't

is an amazing place and a Disneyland for

batteries. Two of their companies are in

always ask for permission. Subcontract

the consumer products business. There

the top five–CATL and BYD. A number

is something you have to live with if

are huge malls all around the city—one

of other Korean and Japanese

you're producing or sourcing from

mall is only for stuffed toys, one for

companies are also producing in China.

China. The factories are profit centres

footwear, and one for household plastics

I believe they struggle in a couple of areas. They have a culture of cost‐ cutting in the factories and there is a rampant problem of counterfeiting

and they decide whether to do in­house Of the 'counterfeit’ mindset &

or subcontract. They think it is cheaper

subcontracting

to buy outside. This is not only for

I believe they struggle in a couple of

apparel but many other engineering

areas. They have a culture of cost­

industries too.

cutting in the factories and there is a rampant problem of counterfeiting.

The mysterious ‘shadow factories’ &

There is also a problem which some

the 'third shift'

people call as ‘quality fade’. The quality

There are ‘shadow factories’ in China.

of products starts declining over a

They project at the front a factory as the

period of time. One has to patrol a lot to

face to the client and behind them are

achieve the quality standard. This I

other factories, which don't always

and so on. You can go there and buy one

believe is because of their mindset of

follow all the compliances and laws of

piece or 600,000 pieces. That is how

frugality. They believe that one should

the land.

they

not spend too much and they look if

When faced with quotas or

something can be cut down to a cheaper

restrictions on the amount of export

level. Not always do they take approvals

from China, they wriggle out by moving

and permission for that change!

the goods to Singapore, Cambodia or

think

of

their

business

development.

In terms of capacity and delivery, the factories are so large. To traverse from Line No.1 to Line No. 20 of a T­

The counterfeit business is also

Dubai, repack, re­document and re­

Shirt factory, we need golf carts! Why

because of their mindset. They feel,

export. Then, we have the famous

does scale and size matter? Let's take a

“Why should only some people have

China's third shift philosophy. If they

customer like Uniqlo. They have got an

Louis Vuitton bags?” They go around

get an order for Hugo Boss shirts, in two

order for 100,000 pieces. They know

copying Louis Vuitton because that

shifts, they will make Hugo Boss and, in

that things may go wrong in the pre­

doesn't need any marketing. They have

the third shift, they will make a precise

production or planning. When it comes

Land Wind car which is a direct copy of

copy and these will be sold in other

to the crunch, who will catch up with the

a Range Rover. It was launched almost

outlets. Where they falter are in the

delivery faster? The factory with 1000

at the same time when the Range Rover

areas of product integrity. German

pieces per day capacity in India or the

was launched. These interesting

engineers from Bosch once walked OCTOBER 2020

15

Business Mandate fountainhead of excellence

around a factory in China looking at the

humanely acceptable or not? I raised the

Partnership (CPTPP) with Canada and

ball bearings. They were so experienced

question to ETI (Ethical Trading

Australia has come through. Free trade

and by the hand­feel of the bearings

Initiative) in the UK and they said, “No,

agreements are very important to boost

found out that something was wrong.

Sorry. We cannot approve and you

the business.

When questioned, the supervisor

better pull back.”

We have to benchmark and improve

scratched his head and said that they are

China is often blamed for ‘dumping’

our ease of doing business. All the

made in another factory. The infant

because of their mass production. One

parameters on ease of doing business

milk powder case was very famous. The

has to be very careful about IP issues

are very relevant and directly contribute

milk powder had melamine plastic

with them.

to the growth of Indian industry. We

components which were added to

should partner with Taiwan and

increase the protein content of the

Can India do a China?

Singapore for electronics to move away

powder. It does not just happen by

Can India become as big as China? They

from our dependence on China. We

default; it has something to do with the

started reforms in 1978 and we in 1991.

import about 66% of our electronic

culture.

We are now at $3.2 Trillion GDP and

products from China.

I had placed an order for shirts and

they are $14 trillion. 15 years back,

when I went for inspection, nothing was

China was at 3 trillion. So we are 15

going on in the factory. When asked

years behind them. As time progresses,

about my order, they said they are made

maybe we will ramp up. It is not about

in another place called Anhui. At Anhui,

trying to be as big as China but trying to

I saw that every house in a village was

have our own position in global

making my shirts!

business. I feel that we must give economy the primacy and which I

We should take Koreans and Japanese as our mentors. Wherever the Koreans and Japanese have gone, they have developed the industries very well.

Japanese bring in the quality angle while Koreans bring discipline into business. We have to make world­class quality and execution our brand!

Jianyu Gongchang and the question

believe is not being given. We should

of ethics

cast a vision for 2047, when our country

We have to set a time plan for self­

My Quality Controller once went to a

will be 100 years old. We should be

reliance. We can't say that we will stop

factory for inspection. They replied that

forward­looking. Our policy should not

importing from China from tomorrow.

the job had been subcontracted. As my

be two steps forward and one step

We have to sharpen the saw in terms of

QC insisted on inspection, with a lot of

backward. Government should try to lay

skills, competencies and logistics

reluctance, he was taken to a state

the carpets out, offer incentives, remove

infrastructure. We should try to develop

prison. Their state prisons referred to as

the barriers, lower operating costs and

Northeast India where there is a lot of

Jianyu Gongchang have a lot of

try to make the factories thrive. We

potential. That will also help us in

workshops not only for tailoring but

should pitch for FTAs like Vietnam.

keeping these states closely bonded with

also engineering and other industries.

Vietnam was working on free trade

us. We have to maintain our software­

My QC brought back samples. They

agreements with USA and Europe. Their

as­a­service (SaaS) leadership and Start­

were pretty good. But something

Europe FTA has come through. Their

up leadership. We have to be assertive.

bothered me.

Comprehensive

Progressive

We should try to be a little more

Trans­Pacific

powerful. Chinese people respect that. 

Is prison factory production 16

OCTOBER 2020

Agreement

and for

Business Mandate fountainhead of excellence

China's rise was not limited to just export oriented factories and shiny new physical in‐ frastructure. It made startling shifts in power relations too. sprees of Western Nations including Spain where I am sitting right now.

During the seven years that I spent in China, I worked in three capacities —initially as a teacher; I was teaching news writing in English. Subsequently, I was an advisor to the CII. Overlapping with that, I worked as a journalist, eventually becoming the China Bureau Chief for The Hindu newspaper.

At that time, I was the only Chinese speaking Indian foreign correspondent based in China, which I always found amazing, considering that together we

I had written a lot about the challenges

2009 and this was really an epochal

of Indian businesses and also tried to

time in the country's opening up. China

unpack the complex reasons behind

had just joined the World Trade

China’s success in driving itself and

Organization in 2001 and Beijing had

transforming itself from a bit of an

won the bid to host the 2008 Olympic

Although Indians remain obsessed

agricultural backwater into the kind of

Games. So there was really a kind of

with China, there was very little

manufacturing

visceral energy that was palpable across

investment in trying to understand or

the country in those years.

learn about it as evidenced by the fact

and

infrastructure

superpower that it has become. I have often said that the Yiwu City Market was more spectacular and amazing and jaw­dropping than the Forbidden City.

China's rise was not limited to just export oriented factories and the kind of shiny new physical infrastructure

At least 90% of the world's

either, indicating one of the most

Christmas trees and ornaments were

startling shifts in power relations.

being manufactured in and around

Beijing had also begun to emerge as the

Yiwu and being sold there. Similarly

globe's chief creditor and it had

80% of the world's zips and buttons,

accumulated the world's largest foreign

plush toys, even Ganesha and Krishna

currency reserves. Particularly after

statues were made there.

2008,

I lived in China between 2002 and 18

OCTOBER 2020

formed a third of the world's population and were very important part of the geostrategic picture.

that there were so few journalists stationed over there. When I moved to China in 2002, like most Indians, I knew very little about it. There had been a long diplomatic freeze between the countries and there were no direct flights. Between 2002 and 2008, the growth was really exponential.

My first impressions of the country

financing

were about scale. The size really hits you

powerhouse, financing the spending

—the roads and the buildings. This was

it

became

a

Business Mandate fountainhead of excellence

not only true of modern China but true

itinerant vendors that would pass by

nothing at all that we could learn from

throughout the history of China. For

there. People addressed each other in

them. I travelled the length and breadth

example, the Forbidden City was huge.

familial terms just as they do in India.

of China and visited about 25 Chinese

We saw it replicated during the

When quizzed on their perception of

provinces during the years I lived over

Communist period as well. They relied

India, they would talk of India as a

there. I went looking for poverty and

on this kind of gargantuanism with size

Buddhist country.

was taken to a village in Ningxia, which

and heft as a symbol of authority. It has

A certain demographic people had

is one of the poorest provinces in China.

translated into the modern and

been watching Hindi movies that were

I met two old couples who were

contemporary times too.

massive hits from the 1950s and 60s

supposed to be really poor. They lived in

through to the 1980s. They would even

a room, had a motor cycle, fans and a

dance to the songs from the movie

refrigerator. Looking at the consumer

‘Awaara.’

products definitions in India, they were

The rhythm in Hutongs As I lived in the city and learned Chinese, I ended up living a very local

very firmly middle class. This was

life. Unlike a lot of expats, I did not live

Some would comment on our

in the suburbs. I lived in the Hutongs

population and suggest that we should

(narrow lane in Beijing) and spent a lot

have ‘one­child’ policy. Once I asked an

of time with the working­class Chinese

old bicycle repairman for his views on

Prelude to Covid‐19

people. I learned quite soon that a lot of

India. He didn’t open. After a lot of

I began my reporting career writing

the stereotypes we had about the

prodding, he said that India’s telecom

about a strange new virus that had

Chinese as being inscrutable, unfriendly

policy is quite advanced, people have

begun over the winter of 2002 and

and inhospitable were completely

choice in choosing the operator and the

which the Chinese government was

wrong. They laughed readily, had a great

tariffs are low. I was blown away by that

covering up. That was a novel kind of

sense of humour and were very much

—the fact that this guy had that kind of

corona virus. That's how I began my

into teasing people and teasing me as an

knowledge, but I think it was also a

China journey and we seem to have

Indian as well.

reflection of the broadening out of

come full circle today!

They were rustic and easy to approach. Like in India, people

coverage that they were getting about India.

supposed to be like the deepest poverty that you could find in a village in China!

I think that China has learned a lot of lessons from 2002­2003 in managing

welcomed you very effortlessly into their

In India too, we had very little

the present outbreak. South Korea,

homes. Lower down the socio­economic

knowledge about China and when I

Japan, Taiwan and Vietnam have been

order, people were more open.

asked the reverse question in India, I

relatively successful in how they have

would get the full spectrum between

handled the corona virus as opposed to

Pride and Prejudice.

Europe. We can trace the epochal

If you took a bus into the countryside, people would share their eggs and oranges and nuts with you just

There were people who either

change after Xi Jinping came to power

like people would, on a train in India.

believed everything was so amazing in

in 2011­ 2012.The China of today and

There was a sort of rhythm of everyday

China and we should emulate it in every

the trajectory it has taken is quite

life in the hutongs. That was again very

way or people who thought that China

different from the one I would have

familiar to an Indian. You had one to ten

was the biggest enemy and there was

predicted 10 years ago.  OCTOBER 2020

19

Business Mandate fountainhead of excellence

The ‘mandate of heaven’ also shares the platform with other philosophies and values of China... This is the basis of the underlying belief system of the Chinese people.

Professor Vijay Govindarajan. This flagship program is offered for about five large US based multinational companies and one British company, which is Rolls­Royce.

I started picking up a liking for China. I could connect a lot of dots from the past to the present. Incidentally, ethnography is my speciality and that's the reason why Tuck School absorbed me into their programs. I started seeing different aspects of China, largely from I am primarily an educator. I used to

of the ancient travellers of China came

run Indology programs for American

to India and vice versa; and these were

and British based museums and also for

so compelling on me. I decided to go to

educators who teach about India. I had

China. In 2008, I landed in Beijing.

this big apathy for China like most Indians. I had one long stint in the Nalanda archaeological site in Bihar. My guide, an elderly person, always used to tell me that I should see the beautiful Chinese Museum which was being constructed by the Chinese.

The map that led to China

I was there for a BMW foundation and a CII meeting. Then I took off and I spent about a couple of weeks in the region of Zhengzhou. That is where I could really learn about China’s glorious past, the Chinese people and their backgrounds, cultural moorings and why they think the way they think today.

an American lens, but also from working on developing leaders who were yelling in pain about doing business in China.

I also went through the transition of China with Xi Jinping coming in and the metamorphosis of China happening.

Experiential learning was my specialty.

My job involves taking people and putting them for half a day in a small little Communist Party office in a village, then bringing them out and having conversations with them.

One fine day, he took me to the Chinese

I went all the way to Kashgar which

Museum and what struck me was the

is in the extreme west of China. I

What I learned is that in China, there is

huge map of China. I looked at the

travelled extensively and that was my

a deal between the rulers and the

Xinjiang province in the West of China

passion. From 2005, I have been

subjects. This deal was made some time

and thought about the connection

running a Global Leadership 2030

in 600 BC. It is known as the ‘Mandate

between India and China through the

Program for the Tuck Executive

of Heaven.’ They don't necessarily

West, the pathways through which some

Education in which I am a partner of

believe in gods and goddesses, but they

20

OCTOBER 2020

The deal

Business Mandate fountainhead of excellence

do have a notion of a heaven.

emperor is gone and the rebel hero

authoritarian rule. It is not a

Metaphorically, let us assume that the

becomes a new emperor, a new dynasty

dictatorship as when Mao Zedong ruled.

heaven is like the ocean and the earth is

starts off and people follow the new

Subsequently, there have been a series

the only ship in the ocean. The emperor

dynasty.

of well­planned successions in China,

has the mandate of the heaven to steer

This cycle has been going on. The

which do not exist in any other

the ship in a way that there is harmony

last cycle in China was broken in the

communist country. Xi Jinping has

at all times.

‘century of humiliation’ as Chinese call

taken that away. As long as he is

Then there are subjects in the ship

it, when westerners for the very first

winning, one cannot argue. It is also

and their responsibility is to serve the

time came into China and ruled for

very difficult to say that the people have

emperor and follow him. This deal has

about 100 years. For Chinese, it is all

not given him the mandate. Of course,

helped China sail in the past. The

right, if the problem is within China.

there is unrest going on in Hong Kong.

‘mandate of the heaven’ says that

Now the Chinese Communist Party

subjects have the rights to rebel but they

(CCP) has this deal with the people of

better be sure because the emperor's axe

China is a country which believes in

China. The ‘mandate of heaven’ also

could fall on their neck. It also tells the

meritocracy, which is very important for

shares the platform with other

emperor that it is his responsibility to

them. This is not imposed by the

philosophies and values of China, like

lead in righteousness and if he does not

government or Chinese Communist

the Confucian and Taoist values. This is

deliver, there's going to be a rebellion.

Party. Meritocracy is something which

the basis of the underlying belief system

came to China way back from the 12th

of the Chinese people.

century.

The ‘mandate of the heaven’ also

Merit all the way

tells that from time to time the heaven

China is an authoritarian state, but

will give clues to the people when

You need to very good. You need to

that doesn't mean that the people are

righteousness is being defiled. Those

have excelled in school not only in your

unhappy there. People are proud of their

clues are diseases, earthquakes, natural

studies, but also in games and extra­

culture and they have managed to

calamities and foreign enemies ganging

curricular activities. Then you get a

maintain this heritage in all these years.

up and trying to break the fort and come

ticket to the Communist party. You are

With this as a mooring, you can drop

into the country. This might sound very

judged and rated as you pass out from

down to present­day China.

school, college and in the party affairs.

much like a fantasy, but this has been in

Xi Jinping has a vision that no

Only if you are good in all these things,

other country has in the world today.

you can climb up the party ladder. You

In China, there were many

His vision is to deliver China as the

can imagine the people who are sitting

dynasties which came up and went

number one country in the world. That

right on top in the politburo of China

down. Every time a dynasty came up, it

vision is backed with the traditional

—the seven member committee who are

was because there was a rebellion. It

Chinese values. This is the single most

reporting to Xi Jinping. They are highly

starts from the intellectual circles. There

important differentiator between China

qualified and very capable people who

are wise people who start voicing up and

and any other country and it percolates

have risen up the ranks.

eventually there are people who take up

down into everything else.

vogue in China.

arms. When the civil war ends, the

22

OCTOBER 2020

China

is

a

bureaucratic,

If as a CEO of a company, you end up in one of the cities in China

Business Mandate fountainhead of excellence

discussing with a local Communist Party

vision of saying that they had to come

When we talk about freedom, there

office about doing a joint venture with

out of the ‘century of humiliation’ and

are three kinds—the personal freedom,

the semiconductor factory in China, you

become the best. The roles were very

political

better be sure that the person sitting

clear; the commitment to the party and

freedom. Soviet Union and most of the

there is amongst the best CEOs in the

to the Communist Party Chief was also

Communist Bloc countries started with

semiconductor industry.

clear. But the mission was all a series of

political freedom, which is not possible

experiments.

without personal freedom. Then they

There is no inheritance in China.

What I mean is that in India, we had a legacy from the British. They left us a ‘work­in­progress’ sort of administrative system. But for China, there was nothing like that. When they got the country, it was a clean slate development. They had to learn everything. So they had this grand

freedom

and

economic

allowed markets to take care of Decentralised China 85% of the total spend of China is done by the local governments. The central government or the federal government spends only about 15%. Even in the most developed economies, the rate would be something like 50­50 at best.

economic freedom.

Most of them failed, or so say most authors. In China, they never gave personal freedom and political freedom.

The freedom they gave is economic freedom. And, this is the kind of a competitor we are actually up against. 

The ‘mandate of heaven’ also shares the platform with other philosophies and values of China... This is the basis of the underlying belief system of the Chinese people. recruited a number of Chinese staff and sales managers. We supplied fabric to a number

of

Chinese

garment

manufacturers who used to ship the garments over to USA and Europe.

Coming to the Chinese staff, one of the most important aspects that I noticed was their total focus on quality and productivity. Compared to an Indian staff member, they were not as quick in grasping things. They took a lot more time and needed hand­holding.

I will share my experience working with

two decades back and one more recently

Chinese people, competing with and

between 2015 and 2018. I set up from

supplying to Chinese companies. My

scratch the Asia­Pacific regional office

experience is in two parts—one is about

for Arvind Mills in Hong Kong. I

24

OCTOBER 2020

But once they understood the process and requirements, they could do the same thing again and again. I could close my eyes and trust my staff with the shipping documents, bank documents,

Business Mandate fountainhead of excellence

invoices and any operational aspects.

would deliver something to the

they would work very hard to learn

There would be absolutely no fault.

customer, they would do it. One of my

English so that their teacher need not

Their productivity was two to three

biggest challenges in leading the team

lose her face.

times what I used to observe back in

of sales personnel was to be able to

With respect to competition, they

India.

make sure that the backend team in

do not have a profit motive but market

India meant what they had committed Face value

share is very important. They work

to the customer. It was a hard time

The second important aspect I noticed

backwards from the selling price while

retaining the sales people because they

is a basic philosophy in China called the

we normally work on cost plus profit

would not want to lose face with the

‘face concept’. What it means is that: “I

model. Therefore, competing with

customers. If once or twice the

cannot lose my face in front of either a

Chinese in manufacturing is especially

deliveries got delayed, they would just

customer or somebody superior.” They

very difficult.

leave the company. This was their

will go to any level to make sure that

mindset.

their ‘face’ is protected.

Chinese customers expect us to be extremely agile and nimble. The

My wife worked as a teacher in

I noticed this very strongly with my

commitment made to them should be

Hong Kong teaching English to Chinese

sales team. If they promised that they

met and they follow up closely. Promises

school children. They used to say that

must be delivered, come what may. 

OCTOBER 2020

25

What should we do to attract Apple and Samsung to India?

Mr Venky Nagan: When I drive down in Hanoi and go past the Samsung factory, I find it humongous. It is really a giant factory that provides employment to around 20,000

Will the supply chain move away from China?

people. The question is—will our policies change every few

What is the impact of an adverse US­China

years?

relation?

Mr Balaraman, Past President, MMA: Mahesh told

Mr Venky: Many are scared by the tensions in US­China

me that in China, the government makes sure that the entire

relationship. But they feel that things can change in

value chain is competitive.

November. So they adopt a wait and watch approach. They

Mr Mahesh: In China, the entire value network is important. They are into many fields—Electronics, PCBs,

look at other options but after going through all the pros and cons, they still find China as the best option.

Semiconductors, Wafers, Fablabs and so on. They probably

Ms Pallavi: There has been thinking in China in

don’t have raw materials. In India, we can only get contract

preparation for this scenario. They may challenge the entire

manufacturers like Foxconn to set up shops. The

world. Whether they have miscalculated their strength or

government gives incentives and capital subsidy. As

not, will be known only in the next few years.

components are not made here, China can possibly create

How do you view the strength of India’s history of

roadblocks in our getting the components.

democracy versus China’s authoritarian rule?

Due to the failure of globalisation, many companies that

Ms Pallavi: India has a safety valve in democracy. In

have established their entire value chain in China feel they

China, things can change only by revolution. There is no

are stuck. Now, if we go on an audacious scale by having the

question mark on the future of India as a country. Transition

entire value chain here, countries will not want to risk now.

of power can be China’s Achilles heel. But I don’t think there

For them, it will be shifting the problem from China to India.

will be a revolution in the near future. They have developed

Maybe, we should tie up with other countries like Malaysia

domestic markets. They say that the Communist Party is an

and Singapore so that we can assure the big players that they

elephant riding a bicycle. An economic slowdown can be a

are not putting all their eggs in one basket. Because of the

serious challenge for them.

trade war between US and China, many companies who have set up their factories in China are anxious. They begin to realise that they have to work with pockets of excellence like India in spite of changing governments and policy issues.

Ms Pallavi: Countries like Japan want to diversify away from China but they do not prefer India. They prefer Vietnam or even Bangladesh. This is because of the policy changes in India. For India to emerge as an alternative, they have to convince the manufacturers a lot but I think it is difficult.

Mr Balaraman: I know that many Chinese workers have lost their jobs in the recent slowdown and they are moving to their villages. There are huge empty buildings in the cities.

Mr Mahesh: Xi Jinping and the Communist Party have promised to deliver to their people. The people of China do not know what is happening in the world other than what is told to them by the Chinese media. So, there may not be a major shift in the near future. 