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Chindia Alert: You'll be living in their world very soon
- 1. Chindia Alert Unlimited Zhang Chia-Hou FBCS CITP Chindia Alert: You’ll be living in their world, very soon 14 April, 2014
- 2. 22 ©2014 Chindia Alert Unlimited2 What’s the big attraction? Huge land masses, large populations, with high and growing GDP By land: 1.Russia 2.Canada 3.USA 4.China 5.Brazil 6.Australia 7.(EU) 8.India By population: 1.China 2.India 3.(EU) 4.USA 5.Indonesia 6.Brazil 7.Pakistan Rank Country 2012 GDP (millions of USD) — The World 69,899,225 — European Union 17,610,826 1 United States 15,653,366 2 China 8,250,241 3 Japan 5,984,390 4 Germany 3,366,651 5 France 2,580,423 6 Brazil 2,425,052 7 United Kingdom 2,090,314 8 Italy 1,980,448 9 Russia 1,953,555 10 India 1,946,765
- 3. 33 ©2014 Chindia Alert Unlimited3 Can you spot the difference?
- 4. 44 ©2014 Chindia Alert Unlimited4 Someone said of China: “Let the dragon sleep. For when she wakes, the world will tremble” • If you do not pay attention to key factors about China and India, you will suffer the consequences • What are these factors and what are the implications?
- 5. 55 ©2014 Chindia Alert Unlimited5 1947 to today: (except 1977-80 and 1998–2004) Largest federal democracy, but ... 1949 to today: Largest ‘centralised’ autocracy, but ... 1. Political factors: New eras started soon after World War 2
- 6. 66 ©2014 Chindia Alert Unlimited6 2. Economic factors: Both benefited from end of Cold War and globalisation 1978 / 1989 Reforms started in … 1991 / 2004 Hence the expression: “India is China 15 years ago” A deregulating Planned EconomyA centralist Market Economy
- 7. 77 ©2014 Chindia Alert Unlimited7 90 GW added in 2008 UK capacity – 83 GW China focuses on infrastructure … 3 Gorges Dam - $35b Electricity – 900 Gigawatts (coal, hydro, nuclear, wind, solar)
- 8. 88 ©2014 Chindia Alert Unlimited8 … and more infrastructure • 90,000 km of highways • 100,000km railways July 3, 2006: “After crossing 4,000 km, the first train to travel from Beijing to Tibet pulled into Lhasa today, inaugurating the world's highest railway. The last link took five years and around $4 billion.”
- 9. 99 ©2014 Chindia Alert Unlimited9 200,000 in 2008 $200,000 exported to US in 2005 … and manufacturing • Huge investment in manufacturing - No 1 or 2 in practically everything
- 10. 1010 ©2014 Chindia Alert Unlimited10 China: is taking climate change and environment very seriously
- 11. 1111 ©2014 Chindia Alert Unlimited11 China’s economic reform: 1. Securing food supply and food safety. 2. Changing industrial structure from investment in manufacturing and infrastructure to consumption, services and innovation. 3. Managing local government debt ($3trn). 4. Coordinating development between different regions (and between urban and rural areas). 5. Improving people’s livelihood and boosting employment. 6. Spurring international financial cooperation. China’s economy will grow at 7.5 percent.
- 12. 1212 ©2014 Chindia Alert Unlimited12 China’s manufacturing versus India’s services India • Home to not only call centres, BPO • But also IT centres of excellence, pharma, auto, etc • Past 12 months: • Inward investment increased to $20bn • $billionaires up to 46 • 140 SEZs! • 40% of top 340 multinationals plan to manufacture by 2012 Indian companies are ‘sounder’ than Chinese companies and they’re starting to speed up.
- 13. 1313 ©2014 Chindia Alert Unlimited ©2013 Oaksmill Associates India is more diverse: • Ethnic groups – 72% Indo-Aryan • Languages - Hindi 41%, Bengali 8.1%, Telugu 7.2%, Marathi 7% ... • Religions - Hindu 80.5%, Muslim 13.4%, Christian 2.3%, Sikh 1.9% 3. Social and cultural factors IndianIndian ChineseChinese • Spiritual * Materialistic • Intellectual * Pragmatic • Transcendent * Down to earth China is more homogenous: • Ethnic groups and language – 92% Han, single written language • Religions – mostly atheist, with Tao-Buddhism cultural background
- 14. 1414 ©2014 Chindia Alert Unlimited India – more ‘western’ with 250 years of colonial legacy • Conducts secondary education in English for ‘upper class’ • Is more fluent in English generally • Is more open and very warm • Dwells as large ‘joint’ families • Has more ‘ultra’ poor • Has rigid caste system, but significant positive discrimination
- 15. 1515 ©2014 Chindia Alert Unlimited China is more closed and ’face’ is very important • Larger population: 1.3b; but slowing down with one-child policy • Has 100 cities > 1m, 51% live in towns • Believes in education and primary school is compulsory • Higher literacy, especially amongst women • Middle class of 500m, high saving but also spending! • Home ‘ownership’ from 0 to 70% in 20 years • Over million $millionaires, with conspicuous consumption
- 16. 1616 ©2014 Chindia Alert Unlimited16 Similarities in cultural norms China and India in common: • Both are hierarchical and deferential. • When they nod (esp Chinese) when you say something don’t assume they are agreeing. • They don’t like to ask questions (esp Indians) • Very literal when answering questions. No attempt is made to try to understand the ‘real question’ even if it is often quite obvious. • They tend to follow conventions and traditions. • Finally, they tend to be collective (esp Chinese); taking a ‘safety in numbers’ approach. The more controversial the more collective the stance.
- 17. 1717 ©2014 Chindia Alert Unlimited17 4. Technology & industry factors Are you aware of the vast body of Chinese invention, including: Paper, printing, gunpowder, compass, suspension bridge, fishing reel, stirrup, crossbow, parachute, paper money, playing cards, decimal system, seismograph, negative numbers, brandy, rudders, cranks, movable type, matches, steroids as drugs, propellers, biological pest control; and many more? China (and India) is following path proven by Japan in 60s & 70s and South Korea in 80s & 90s: • Cheap adequate ‘copies’ • Low-cost good-quality substitutes • High-quality originals through indigenous innovation - eg SunTech Power, one of top 3 solar voltaic cell firms
- 18. 1818 ©2014 Chindia Alert Unlimited18 … and as producers for Information Technology • China for hardware, but moving into software ($2trn) • India for software & services, but moving into hardware ($270bn) • Both have other technology industries; pharma, biotech … • Both turn out huge number of science and engineering graduates
- 19. 1919 ©2014 Chindia Alert Unlimited19 … and as users of IT India: • Joint families often mean one PC or port per household • Rural poor have limited telecoms access • Indian farmers sell their produce through a shared intranet service provided by ITC, major agri-business firm ($3bn) • Bureaucracy slowly being beaten by Internet offices run by graduates for free • Street letter-writers being replace by mobile phones China has more users
- 20. 2020 ©2014 Chindia Alert Unlimited 5.1 China’s tensions & challenges • Social unrest: corruption, sex disparity, aging population; social media enables public to communicate, despite efforts to control and censor • Economic disparity: migrant workers, high inflation, have’s and have not’s • Technological issues: high-speed train crash, mining accidents, pollution • Ethnic strife: Tibet and Xinjiang • International issues: trade-skirmish with US; Taiwan, maritime disputes; siding with loner states, Iran, North Korea, Syria
- 21. 2121 ©2014 Chindia Alert Unlimited 5.2 India’s tensions & challenges • Religious strife: Hindu-Muslim, anti-Christian • Social-political strife: Naxalite insurgency; urban middle class feel disenfranchised by rural poor • Economic unrest: corruption at all levels, have’s and have not’s; less welcoming of FDI • Technological-industry issues: lack of infrastructure • International issues: Pakistan/Kashmir and China/borders
- 22. 2222 ©2014 Chindia Alert Unlimited 5.3 Implications for Western execs • What is your value proposition? • Be prepared to conform to local practices, but be alert to UK anti-bribery laws • Best to engage via established ‘middle-men’; for China, possibly Hong Kong-based • Be prepared to invest a lot of effort and, more importantly, time; ‘quick-wins’ are unheard of • Prepare well before making trip – see http://www.knowledge-must.com/en/resources/our_guide_books.html and www.ChindiaAlert.org or read http://www.amazon.co.uk/Chindia-Alert-Hidden-Crouching-ebook/dp/B00AQ29
- 23. 2323 ©2014 Chindia Alert Unlimited 5.4 McKinsey: All you need to know about business in China http://www.mckinsey.com/Insights/Winning_in_Emerging_Markets/All_you_need_to_know_about_business_in_China?cid=other-eml-alt-mip- mck-oth-1404
- 24. Chindia Alert Unlimited Zhang Chia-Hou FBCS CITP Chindia Alert: You’ll be living in their world, very soon 14 April, 2014
Editor's Notes
- This talk is based on the. book with the same title - http://www.amazon.co.uk/Chindia-Alert-Youll-living-their-ebook/dp/B00AQ29ASK That book is based on the contents of the website and blog www.chindia-alert.org . In turn, the website was developed following a keynote address the author gave to Microsoft’s EMEA Sales & Marketing Conference in 2006. If you have wondered about where China and India are heading and how it might impact you more than it has already then this talk is for you. It aims to inform and alert you to the threat and opportunities that China and India pose. It is based on extensive and intensive research. There is not only huge interest in China and India, but there is an over abundance of information. You can hardly open a newspaper without an article on China or India. However, as we know, having lots of information available does not necessarily make one any wiser. This talk intends to make the information more meaningful by putting some order and structure to the information. Due to the eclectic nature of the content, the talk may be of use to anyone interested in the evolution of global economics and politics. Charles Chang aka Zhang Chiahou - http://www.linkedin.com/in/charleschangoaksmill - is the author of “Chindia Alert” and also of “China Alert: Beware the Waking Dragon”. He has been tracking China and India all his adult life as he was born in Shanghai and brought up in Calcutta, though he has spent most of his working life in the West.
- ChinaIndia History4 to 5,000 years 4 to 5,000 years Land mass9.3m sq km 8.5m sq km ExtentTropical to Tropical with Himalayas, sub-arctic, & deserts & deserts Arable land15%51% Population>50% alongRelatively evenly spread coastal region &though a larger in three major rivers.Indo-Gangetic plain & coast Very sparse interior &west Per capita GDP –2011 IMF: China 90, ($5.4k); India 139 ($1.5k); Luxemburg 1 ($115k); US 14 , Japan 17, France 19, Germany 18, UK 22, Italy 24. PPP GDP per capita: China 94, India 126. Qatar 1, US 8, Germany 17, UK 22, France 24, Italy 25 China – no 1 exporter since 2010; no 1 trader 2013.
- At night, one can see by the lights where the people live. India is very fertile. The population is spread across most of India, including the Deccan plateau and the foothills of the Himalayas. At least 50% of the land surface is defined as arable. Only the Thar Desert is sparsely populated. China, by contrast, is very fertile on either side of the three great river systems, going West to East: The Yellow River, not far from Beijing The Yangtze, at Shanghai The Pearl River, at Guangzhou And along the coastal plains. Only 15% of the land surface is defined as arable. But inland, there are hostile regions such as deserts like the Gobi and Taklamakan, high inhospitable plateaus like Tibet and Qinghai. And mountainous regions like Yunnan. and Szechuan.
- India - largest Democracy, but feels like a but more like hereditary dynasty with continuity from Nehru, Indira Gandhi and Sonia Gandhi of the National Congress Party – which won conclusively recently; plus intense bureaucracy. China - largest so-called Communist state: but more market-oriented capitalistic than many western nations; also 40 – 60m Christians (in same range as registered members of the Communist Party - 75m. BUT, both are in unstable equilibrium: India continues to experience periodic sectarian violence: Hindu vs Muslim, Hindu vs Christian, upper vs lower castes China has tensions between Han majority and Tibetan and Muslim minorities; and feels like it could be on brink of popular revolt, fed by lack of trust; Tien An Men Sq mk2? Neither are aggressive nor have any history of ACTING colonial. Both have been invaded numerous times . But the only wars with neighbours and (almost all) about national boundaries.
- China: Deng – cat - red or not; 4 modernisations: agriculture, industry, national defence and sc & tech focused on infrastructure, energy and heavy industry went for export market, wooed FDI Peak growth 6.5 to 12+%; 2010: 10.3% India: after 6 years in wilderness (for second time after independence) National Congress won again. Sonia Gandhi stepped aside for Dr Singh; recent elections gave Congress a comfortable working majority – opportunity for more reforms. Singh – after Punjab U, Camb U, Oxford U – PhD Peak growth 5.5 to 10+%; 2010: 10.4%
- 9/10 most polluted cities and 16/20 most polluted rivers are in China; 70% of rivers polluted to some degree. China world leading renewable energy producer, installed capacity of 200 GW. Total renewable energy investment No 1. Wind: 10GW 2009, 30 GW 2010! Avg nuclear plant 1 GW. China world largest consumer of solar energy and the largest producer of solar water heaters, accounting for 60 percent of the world’s capacity. Total installed heaters c30 million households. Wind no 1. New Scientist ; BTW: May 2007 “World Stripped Bare” http://www.newscientist.com/article/mg19426051.200-earths-natural-wealth-an-audit.html Carbon emission 2011: 1 China, 2 US, 3 India, 4 Russia, 5 Japan, 9 UK, 17 Brazil Per capita emission 2009: 12 US, 23 Russia, 39 Japan, 43 UK, 78 China, 124 Brazil,145 India
- Ref: China’s Growth: The Making of an Economic Superpower – Linda Yueh, LSE
- ChinaIndia Population1.3b – no 11.1b – no 2 Growth- 0.6% and slowing- 2.1% dropping Ethnicity- 92% Han Chinese- Aryan – 50%, Dravidian – 30%, Mogul – 10% Ultra poor (<$1 pd) - 10%- 30% Languages- 92% same script-33 languages, 1,650 dialects Literacy- 91% (87% women)-60% (45%women) “No peasant left behind” Both have high levels of corruption. According to Transparency International’s 2012 Corruption Perception Index, China ranks 80th and India 94th (Somalia at 174 is the worst). Incidentally, the country perceived to be least corrupt is Denmark, with the Nordic countries, Singapore, Switzerland, Netherlands, Australia, New Zealand, Canada and Luxembourg occupying the other top 12 slots. The UK is number 17 and the US is 19. Ref: Ten Thousand Miles Without a Cloud - Sun Shuyun, traveler, writer
- India’s lowest caste, Dalits or ‘untouchables’ = 150m (16% pop) Including other lower castes and ethnic minority tribes form nearly 50% of India's population! But affirmative action very strong for education and govt; nearly 40% of places are reserved and often creates resentment in higher castes. First VP DR B R Ambedkar developed constitution was a Dalit; and now Mayawati a Dalit is Premier of the most populous state UP and is contending to lead country on key issues
- Ref: The Genius of China: 3,000 Years of Science, Discovery and Invention - Robert Temple (based on work by Joseph Needham)
- Science & graduates1.6m pa (Duke University)600k pa McKinsey160k to int’l std China – low tech: Barbie doll $10 retail, Chinese factory gets 35c. But China already reducing low end: 1,000 of 5,000 cheap shoe factories closed in last 2008/09 months; 500 out of 600 cigarette lighter factories closed in 2008/09 months. Even for high-end mobile phones at, say, US$500 retail Chinese manufacturer’s gross margin may be as low as $5-10.
- These figures are for 2012 and come from different sources: ChinaIndia PC150m50m Mobile1.1bn920m Internet - residential560m 150m Broadband380m 15m Spoken web: Voicesites and VoiGen - http://domino.research.ibm.com/library/cyberdig.nsf/1e4115aea78b6e7c85256b360066f0d4/9fb1978638a52de5852572890036ddc2?OpenDocument
- “India has a weak central government but a really strong civil society, bubbling with elections and associations at every level. While China has a muscular central government but a weak civil society, yet one that is clearly straining to express itself more.” – Tom Friedman, NY Times
- A lot of people view China business as mysterious. Relax. Consumers behave pretty much the same everywhere. Competition is pretty much the same everywhere. You just need to ignore the hype and focus on the basic fact that in China today, there are six big trends (exhibit). That’s it. Six trends shape most of the country’s industries and drive much of China’s impact on the Western world. They are like tectonic plates moving underneath the surface. If you can understand them, the chaotic flurry of activity on the surface becomes a lot more understandable—and even predictable. Coauthors Jeffrey Towson and Jonathan Woetzel discuss China’s six megatrends with Nick Leung, the managing partner of McKinsey’s Greater China office.
- Reports, including: Scenarios for India & China 2015: Implications for the City of London China – 2020: Key policy outcomes form the 17th Party Congress and their impacts” Books, including: When China Rules the World The Dragon and the Elephant: China, India and the New World Order Billions of Entrepreneurs: How China and India are reshaping their futures and yours India’s Century Writing on the Wall: China and the West in the 21st Century The Web, including China Daily and Times of India CIA World Fact Book For fuller list: http://chindia-alert.org/why-is-chindia-a-big-deal/chindia-sources/