Ever since the Indian and Chinese
army troops clashed in Ladakh area there has been a huge increase in anti-China
sentiments and the Govt announced a ban on 59 Chinese apps. Predictably the
opposition and many others educated taunted that the ban would have little or
no effect on China economically. To clear the air on that before moving ahead. Here
the focus is in not on some jingoistic or religious decisions but hard-core
economics.
Bans don’t achieve anything by direct correlation and cause little hurt to China. To understand this decision we need to get some leadership lessons. Watch his video.
As rightly said – the leader
should look ridiculous, but everybody hesitates to do something “stupid”. Once however
the ball is tossed, its just a matter of time before others join in. THAT is
when the hurting process begins.
Several companies that are doing business with China will start de-risking their business and supply chains. This will take some time but will have a domino effect. China will get hurt economically and a point will come when they will have to lose some face.
Right away, China is unlikely to pull back and shows a “beaten” face. On the other hand, China has come up with laws that can cause substantial concern within global corporates. Those who don’t know and think the stories they hear are just stories will have to ride their luck or experience China the hard way. The number of people that are willing to rear a snake in the belief that the snake will not bite them are far too many globally.
Many Global corporates and smaller Indian businessmen have learnt very brutal lessons in the past and if they have forgotten those lessons, then that’s their funeral so to speak. With Hong Kong no longer “independent” the attraction of HK as a financial hub will begin to wane. Nobody will rock the boat immediately, but de risking plans would have already been set in motion in many a board room.
Now in spite of all this I maintain that China will not be hurt because they know that greed overtakes need. Also, the foundation of strategy in China will not change but in India and the western world the foundations shift like sand based on the management, board, shareholders. A corporate which shouts from the roof tops at the smallest condition in an India or Vietnam will in China happily strip naked and prostrate with not even a whisper. They will actually celebrate their “Freedom”.
Take for example something as simple as a Personal Protection Equipment including masks. The PPE's are not rocket science, nor need billions of dollars of investment or take time to “develop”. Yet globally everybody has abdicated their capabilities to China on price. While from a pure business stand point one can still understand this, what is baffling is that nobody in the textile/garment business has felt the need to have designs, data, information readily available so that they can make these products in emergencies. Indians actually did this in double quick time, but the western world is still fumbling and searching and hoping to import from someone.
As rightly said, whatever may happen now, when in future there is another crisis, the world will again go back to depending on China unless investors, leaders, management change their foundation strategy as I call it. This is easier to do in India and crucial while the western world will need to do some hard thinking. The silicon valley kind of ultra-liberal management leaders will take substantial time to even accept this strategy let alone implement it. Globally and more so in India I call that plain laziness.
What is this foundation strategy as mentioned.? Let me give a metaphorical example to explain though unfortunately, it is not metaphorical but anectdotal. It is the foundation strategy which most would not even have observed – because that is NOT the way Indian or western business functions or even wired to think.
As an example, let us take a fleet owner in India wanting to buy a bus. He finds the Chinese product good, lower cost and the deal is good. Now the bus will need various subcomponents and while the buyer does not get into the nitty gritty, he at best looks at what is important to him. Now for a minute let us say he can dive deeper. As an Indian he can say – can you buy and fix tyres from India since after all many tyre plants are there in India? Or for that matter some other such item that is a purchased item for the manufacturer and he can well source it from India. This will need the buyer to SELL India and Indian products actively and specifically. Nobody does that. They just accept what is given provided it meets their requirement. That is how an Indian or even a western corporate would behave
Now let us say that somebody did make such a demand on the Chinese company. It would be furiously resisted. The lowest salesman in the bus company would fight tooth and nail on behalf of the tyre industry in China to ensure that their products are used. The salesman transforms from a bus seller to a tyre seller and aggressively tell you that Indian tyres are bad, Chinese manufacturers are the best and so on. When you resist, they start intimidating you softly, diplomatically, you would not even know you are being intimidated. You finally give in saying – "It’s not my battle, I want the bus, who cares about some Indian tyre company getting business".
But let’s say again you refuse to give up. The bus supplier finally agrees by requesting the buyer to help with introductions and he the seller would buy it from whoever is nominated. You think you have won. The Indian tyre supplier is kept busy and made to jump through so many hoops literally while the entire Chinese bus company in reality is not investing even a minute that soon the Indian supplier gives up.
But then let’s say the Indian tyre company salesman also refuses to give up and finally forces the Chinese to accept his product, they then simply say – please deliver to me at my plant. They say it smiling, so sweetly and they treat the Indian salesperson literally like a king (when his customers in India treat him like dirt) that he readily agrees. The next hurdle comes up.
Nobody has told anybody anything. But the customs, port and such other chaps put up so many barriers that you will wish that you had never taken the order. Using language, systems, rules they drive you to the verge of killing yourself.
The long and short of this is that the entire Chinese dragon behaves like one protecting everyone who is Chinese and preventing anyone who is not from entering. The bus salesman is NOT a bus salesman. He sells the engine, the tyres, seats, on behalf of whichever are the Chinese companies that make them. There are no names taken – just that the item must be from a Chinese company. In many a case, the bus salesman gets an EXTRA bonus or award for ensuring that a jingoistic buyer accept a Chinese subcomponent instead of some other that was demanded.
Every single Chinese sells China like a unified force – irrespective of what he is supposed to be selling or his role in the whole chain. You will never ever see this anywhere else in the world (even Japan I think has changed). This force multiplier effect beats anybody and everybody globally. Its so subtle because they will say what you want to hear and keep you otherwise occupied.
Now one can try to imbibe and implement a similar behaviour in our Indian corporates so that even when they buy Chinese, they still get a lot of India in it. Everybody can take pride in having Indian manufactured items as much as possible and no this is not about being inward looking, or some swadeshi movement. The items may well be made by a global American or European company but in India. The idea is that every citizen should be selling INDIA but not in some narrow-minded definition.
You can sit and argue that
this is a nationalistic approach and in a liberal society this has no place.
but then at the same time if the Chinese establish a monopoly to a point where they
hurt you – economically, socially - then nobody should complain. Remember, border incursions included they identify you as a weakling and do whatever it takes to subjugate your mind and spirit till you will no longer object to anything they do. What is abhorrent to you today becomes the new normal.
To me having pride in the country where you live, promoting the country globally, helping the country grow strong economically is not about some nationalist thing but the most practical, sensible thing to do. Because when the country becomes strong and progresses, automatically, I also grow, progress, develop and I know that I will be leaving behind a country for my children that can benefit them. Its that simple, a no brainer actually.
In the next segment I plan to elaborate on how Chinese companies work and what Indian corporates can do to become competitive.
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