What China Is Vs What We Think It Is - Learnings From International Immersion Programme At IIM Indore

Meeting with BRICS president Mr. Kamath and Visit to Infosys 

We had the honor to meet the president of BRICS Bank, Mr. K V Kamath at the majestic BRICS Tower. He gave us scintillating insights on infrastructure development in Shanghai. (They even have a Chief Information Officer, Imagine!)

We also visited Infosys campus and learned the various tenets of Chinese culture important for trust-building with clients. We discussed the challenges of doing business with China as a global company and how Infosys has come through the journey.

Lessons

· To work in China, first help the local community

· Governmental structure plays a crucial role in the rapid infrastructural progress of China. Unlike India, they do not have to think only for 5 years- they think in the long term, without fear of being sabotaged by the opposition.

Visit to Hangzhou

We took the bullet train to Hangzhou where we were welcomed by one of the largest state-owned enterprises in China called the Hangzhou Turbine Company. We saw the manufacturing facility and the beautiful lake city of Hangzhou built on West Lake. On our return we missed our train to Shanghai, to our surprise, there was a bullet train to Shanghai every two minutes! Speed, efficiency and the scale there is something which India should aspire to achieve.

Lesson

· Chinese work in two time zones, they always have separate teams working on short term and long term goals. Essentially competing for resources and hence coming up with the best alternatives.

Learnings from Textile Hub of China, Xiao Xing Province

A whole city, dwelling upon textile trade, the Xiao Xing province is a small town where Indians are particularly respected for their trade ethics and ease of doing business with. This province gave us a quick reality check on the importance of Guanxi in Chinese business dealings. We were also familiarized with interesting anecdotes on Income taxation and community importance in conflict resolution. They NEVER go to court for resolution of conflicts among the import-export traders.

City Tour- The silver lining

We visited the Jade Buddha temple and learned the method of silent prayers. It was surprising to see that Shanghai has a museum for EVERYTHING! We went for a tour of the Magnetic Levitation train which traveled a distance of 35km in just 6.5 minutes, reaching a top speed of 431km/hr!

The view from the Oriental Pearl Tower was simply mind-boggling. The day ended with a cruise on the Huangpu River where we saw the glittering skyline of Shanghai and finally absorbed the reality of the science fiction we saw only in movies.

Lessons

· The meeting with Indian Industry stalwarts in China was an eye-opener, we met leaders from all domains ranging from Textile, Media, Flavors and Fragrances, Airlines, HR Consultancy and IT. We discussed about the wide array of opportunities that Flavors and Fragrances Industry has to offer (how is it neglected in premier B-Schools?). They shared their life anecdotes from China- Even a hurricane doesn’t deter the punctuality of the newspaper delivery!

· Chinese are very innovative when it comes to using their social media. They have one app for food delivery, payments, maps, e-commerce, and the list goes on. You name it and you’re on WeChat to get it done.

Visit to SUIBE School and Antai School of Management

The trip would be incomplete without seeing the difference in teaching pedagogy in India and China. In Chinese business schools, the list of courses was so widely diverse and students were given open funding to have their startups operating in the campus. The subjects we do as mere electives were the whole subjects of their masters!

Differences in Indian and Chinese Consumerism

We met the CII Chief, Mr Vitthal Mallya and Mr Anil Sethi who gave a very insightful lecture on the difference between Indian and Chinese consumerism. This lecture was followed by a talk on Fugumobile’s interesting digital mobile campaigns for major brands like Durex, McDonalds and Clear.

Lessons

· China, contrary to our belief, is one of the biggest consumers of luxury goods and branded items. They, in fact, consume more of these items than Indians. This is partly because of the absence of anchors in Chinese markets. For example, India had Indian Coffee House before Starbucks serving good filter coffee at approximately Rupees 55 which makes Starbucks seem outrightly expensive. Whereas for China Starbucks was the first source of good coffee and hence it’s a normal price of coffee for them. Same goes for Leather goods and luxury brands.

To sum up, let’s look at some of the peculiarities of the Chinese economy:

1. China is all about "Supply-side Growth". When we say infrastructure, it's not just roads, rails, etc. It also includes ports, airports, offshore oil & gas facilities, coal-based energy plants, refineries, etc.

What China has done so far is to put up an excess capacity in every facility they've built. So, there's a huge surplus capacity in their infrastructure assets. The basic growth based macroeconomic model for developing countries by Mahalanobis suggests that growth in the consumption goods sector will catch up with the growth in the investment goods sector. China has invested heavily in the Investment goods sector, creating excess supply situation. The capital required is sourced in terms of Long term debt from International financing instructions. This way of doing things has given China a so-called “Big Push" to bolster their economy.

2. High FDI- According to WTO's mandate, China had to open up its economy to the outside world during its reforms in the 80s. What China has been successful doing so far was that they devalued their currency vis-a-vis US dollar and other strong currencies. High exchange rate (RMB/USD) with an expectation of future appreciation in the Chinese Yuan, a lot of foreign investors prefer to invest in China. From 2018 statistics, 10% of the world's entire FDI inflows were in China. This was solidly backed by the policies regarding the ease of doing business in China. Currently, the US and the world are putting pressure on China to revalue its currency, which will result in a decrease in the exchange rate.

3. Targeted Skill Development- In the past China had a one-child policy, which yielded a demographic dividend wherein most of the population was a working class. This ensured low wage labor availability. China then created an ecosystem of targeted skill-based courses, which would specialize in individuals.

4. Trade surplus strategy- Another big boost to the Chinese economy has been its trade surplus with most of the countries. Devaluated currency, availability of cheap skilled labor and excess capacity in the infrastructure all combined helped China to export heavily to other nations. This created "Export-Led Growth" for China. This was backed up by favorable tariff and trade policies by the government as well.

Recently, the tariffs have been imposed by the US, cheap labor isn't so cheap anymore with the increased standard of living. China needs to find a dumping ground for such a huge production. Thus, they're coming up with initiatives like OBOR wherein they will be able to utilize the excess capacity, create more jobs, gain political foothold, etc.

This was my first visit to China and, naively, I had expected it to appear and feel more communist and more so "Third World", and less like a shopping mall. I kept holding on to the belief that once outside this flagship city of modernity, the "real" China would present itself, someplace more like India: mired in insatiable poverty, broken and crumbling yet victoriously reverberating the glory of ancient history and flamboyant diversity. Shanghai is probably a city curated like a jewel and the interiors are probably as rustic as anywhere one can expect in the developing world.

But in fact, none of this proved to be true—for better or for worse, Chine is quite the opposite of what we know.