TERRA PHARMA: Anji Reddy (centre) with management staff of Rotam Reddy in ChinaGuanxi. It’s an omnipotent Chinese phrase. It means networking, contacts, connections – things that businessmen thrive on. It’s a phrase that is also rapidly gaining currency among Indian entrepreneurs joining the lengthening queue to set up shop in,TERRA PHARMA: Anji Reddy (centre) with management staff of Rotam Reddy in ChinaGuanxi. It’s an omnipotent Chinese phrase. It means networking, contacts, connections – things that businessmen thrive on. It’s a phrase that is also rapidly gaining currency among Indian entrepreneurs joining the lengthening queue to set up shop in China.Last year, when a delegation of officials from the Chinese province of Guangzhou visited Mumbai to seek investment, the Bombay Chambers of Commerce managed to fit the proceedings in its conference hall.But last week, when the province’s Vice-Governor Tan Bing Quan led a team to the city, it had to book the Ball Room at the Taj Mahal Hotel to accommodate over 200 eager-beaver businessmen – all looking at opportunities in the once-forbidden land.Sure, not all of them wanted to set up plants. Many were seeking marketing tie-ups to tap China’s low-cost manufacturing ability. Some were looking at exports or technology exchange while others were simply sniffing around.Big-ticket investment is just a trickle right now. But the rush is clearly on – and in the pipeline are big plans by such names as Bajaj Auto and, in the IT sector, Tata Consultancy Services and Infosys Technologies.Dinesh Patnaik, head of the economic wing at the Indian Embassy in Beijing, confirms the trend: “The number of Indian businessmen scouting for opportunities in China is on the rise.” But is it just China’s low-cost manufacturing ability that is attracting them? Patnaik believes otherwise. According to him, China currently imports goods worth $230 billion and by next year the figure is likely to touch $300 billion.advertisementBig-ticket investment by indians is just a trickle now but the rush is imminent with big names and bigger plans in the pipeline.But India’s share is just $1.35 billion (Rs 6,200 crore). Hence it’s a huge opportunity. Also as Srinibas Swain, chief representative for the State Bank of India at Shanghai, points out, “There is a lot that Indians can learn from the Chinese in terms of economies of scale, cost-effectiveness and adherence to time frames.”The power of the pro-business environment has got many plugged in. Pharma major Dr Reddy’s Laboratories has staked its expertise in branded formulations and set up the Kunshan Rotam Reddy Pharmaceuticals. Ranbaxy has set up a unit in Guangzhou and introduced 11 brands in China.Aurobindo Pharma has branched out as Aur Bindo Tangling (Datong) Pharmaceutical Co Ltd in Shanxi. Also wired into China are computer education majors NIIT, which has centres in Shanghai and Pudong, and Aptech, which has set up over 45 centres inthe country since February 2000.The lure of China is manifold. Says Satish Reddy, managing director and chief operating officer of Dr Reddy’s: “It is a question of using our expertise and reputation in finished formulations and reaching out to the global market. China is among the top 10 markets we needed to tap.” For Bajaj Auto, it’s an opportunity to introduce its three-wheelers. It also wants to tap the low-cost Chinese advantage in components and gearless scooters.For many, the Chinese option is a defensive move. The low-cost economics offers many Indian manufacturers a way to cut costs by outsourcing. China also offers a chance to do what they couldn’t do back home in India’s cramped business environment. The biggest draw is China’s attitude to investment, an area in which Reddy feels India has a long way to go.BIG TIME: An Indian plant at Kushan was rated a Good Management Practices facilityIn China, he explains, powers are delegated to local provinces, investment decisions and approvals are local and only exceptional cases are referred to the Centre. “They are very pro-business, you don’t have to deal with a hundred different windows,” he adds. Pramod Khera, Aptech’s executive director and CEO of its education and training division, agrees. “We looked around for a partner for about six months but once we signed a deal, things moved very fast.” And this despite a bureaucracy.Clearly, it’s not just Guanxi at work. It’s a passion that is difficult to quantify. Baron India CEO Kabir Mulchandani relates an anecdote which might help. Over dinner, when a corporate lawyer asked a visiting Chinese official what made the country tick, his passion impressed everyone. “He had all the details on his finger tips,” recalls Mulchandani. “He knew the business plan of every company for the next five years.” The Chinese record of matching words with action is just as impressive.A senior partner at a consultancy lists some of these achievements: in 1985, China decided to push through land reforms and did it; in 1990, it unveiled a plan to upgrade infrastructure and realised it; in 1994, it set out to bring inflation under control and succeeded. All adding up to economic growth.Vijay Kalantri, chief of All-India Association of Industries, puts it in perspective: “It’s not that they have invented a mantra for growth. The fact is – and nobody will say this openly for fear of persecution – they have done everything that our governments only talk about. Do Chinese companies have 59 different inspectors visiting them? Obviously not.”advertisementChina also has high-quality infra structure. Guangdong alone has 176 open ports which handle freight of 186 mtpa, 10 special industrial development zones connected by 1,900 km of express roadways and an installed power-generation capacity of 33,854 MW, nearly a third of India.Its tele-density is 28.4 connections per 100 people spread across 14.2 million fixed-phone users and 12.52 million mobile-phone users. Its total investment in infrastructure over 20 years: $280 billion.The pay-off is an unbelievable year-on-year growth of 13 per cent between 1978 and 2000 for Guangdong. Its GDP in 2000 was $115 billion (a fifth of India’s) and its exports touched $91.9 billion (nearly thrice that of India’s). The total FDI flow into the province in 22 years has been $98.81 billion with $12.2 billion (six times India’s FDI) coming in 2000.Guangdong boasts of 50,000 foreign-invested enterprises, including 200 of the top 500 companies in the world. The push is not just in manufacturing of consumer goods. Diamond- cutting costs, for example, are barely 28 cents (Rs 14) per unit in China compared to Rs 27 in India. A Chinese operation can cut, polish and deliver a consignment in 10-15 days compared to 45 days in India. Naturally, five top Indian exporters have moved to China.The low-cost economy of china and its excellent infrastructure allow Indian manufacturers a way to cut costs by outsourcing.Says Sanjay Kothari, chief of the Gem and Jewellery Export Promotion Council: “China rolls out the red carpet for anyone investing in gems and jewellery. To hold on to our advantage, we will have to be vigilant and the Government too needs to be supportive.” The migration of Antwerp-based Indian outfits to China indicates that this is not the case. And early this year, a large infotech company recruiting software engineers found to its surprise and dismay that students from Shanghai University scored higher than IIT graduates.The reason: in 1999, the Chinese Government unveiled what is now popularly known as the Trans Century Project involving universities of Beijing and Tsinghua. Its aim: to transform higher education in China. Start-up research grants under the scheme are around $250,000.Tsinghua University in Shanghai has been given a grant of $217 million (Rs 1,019 crore) and MNCs like Siemens, Panasonic, Bell Labs, Ford and Microsoft and institutions like MIT and Michigan University have been roped in. The faculty have the flexibility of working half the year in industry – in China or the US.Also wooed are the Aptechs and NIITs to achieve the critical mass China needs in infotech. Naturally, software companies like Tata Consultancy and Infosys are looking at China. Says Nandan M. Nilekani, managing director, Infosys: “We are evaluating the possibility of starting a development centre in China as in other parts of the world.”advertisementClick here to EnlargeIn Guangdong, the Government is even promising a 10 GB/sec connection across its province. Vipul Tuli, principal with McKinsey & Co, believes the determination with which the Chinese are transforming their technical education is “something that we should emulate”.But that isn’t the case. In December 2000, Prime Minister A.B. Vajpayee and his ministers sat through presentations by the it Ministry on the urgent need to upgrade the quality of Indian institutions and the threat from China.Six months on, action is yet to be taken. In contrast, Chinese President Jiang Zemin and Premier Zhu Rongji recently spent an entire day each at the Beijing and Tsinghua universities reviewing their progress.The commitment of the Chinese is what makes the difference. When the Guangdong delegation came calling, it was accompanied by Li Chang Chun, the seniormost member of the central Politburo of the Communist Party of China. This sense of commitment is evident everywhere, whether it’s business, education – or sport.To understand its depth, take the promise the Chinese made to the International Olympic Committee in their bid to host the 2008 Olympics in Beijing: investment of $20 billion to upgrade the city. Also on that day in 2008, every person in Beijing would speak in English. It wouldn’t be surprising if by then Guanxi would be part of the English lexicon.