Learning Experience China 1 - 3

April 12

For this learning experiences, I cannot go into details as it is an on-going project and confidentiality is very important. Hence this will be the last experience sharing for China. Maybe when everything is finalized I will share the further details with you. I will however give you the feedback, my Indian client learnt from the whole experience in China.

1. China infrastructure
My Indian client was very impressed with the infrastructure. This is the key difference in the economic progress between India and China. True there are still traffic jam in Beijing and Shanghai which is no different from Mumbai and Delhi. But looking at the infrastructure surrounding the two Chinese cities, it is the organization of the road and the speed in which is constructed. I remember when I was last in Beijing in mid 80's, there is only one ring road surrounding the capital. In year 2008, there are six ring roads and two more coming up. Even in Shanghai, they are building four underground tunnels across the Huangpu River to ease the traffic, all in next two years.

It is not that the India are not good contractors, the key difference is the government. China Politburo is focused and succession smooth for the last 30 years, while the Indian government changes every four to five years and so does its policies.......

There is another logic to why the infrastructure is so well established and this is my deduction. You see every provincial government gets their funding from the central government and with the funding comes the KPI. Construction and infrastructure are the best illustration of the province or cities deliverables. How this logic can be applied to India ?????

2. Attitude
My client felt that the attitude of the Chinese are arrogant. We went shopping, site seeing and experience service at a top hotel, the general feeling of my client is that the Chinese is rather arrogant. I personally think the word is not arrogant but the lack of understanding and cultural difference on the Indian.

Take for example service staff, I rate service staff in India very highly - one of the best in the world. I believe this has to do with India culture and also caste perspectives. In China serving others is not a norm and this is magnified by the one child policy. Let me explain. Since 1979 when the China government in order to control birth rate implemented the One-Child policy across China and by now many of these one child are in the working age. Can you imagine a child who is brought up by six parents (two parents and four grand parents), he or she must be served mouth to foot and now these young people are coming into the service line...... what do you think will be their attitude towards service.

The Indian in China must also manage their expectation. There are many good things in China that they have to appreciate and must not compare with India.

3. Market Forces & Pricing
Cheap goods and imitation are readily available in China. Some are so cheap that you wonder that they are sold below cost. True. Some are sold below cost. Let me explain. While in Shanghai we came across an imitation branded watch. A very good imitation - mechanical, convex glass, serial number, screwed casing and lock mechanism. Perfect in every way. They were asking for RMB 400 per piece and eventually sold for RMB 100. If I break down the cost of the watch, (I know the price well as I have know of a watch factory in Guangzhou.)

For a selling price of RMB100, the cost
Leather belt = RMB 15
Convex glass = RMB 10 (if flat glass for watch is RMB 6)
Watch mechanical mechanism = RMB 50 (for quartz is cheaper)
Allow RMB15 for logistics, middle man profit etc.
The total cost is about RMB 90, he makes RMB 10 per watch.

This is a volume business and when the peddler approaches you, he is happy with a small margin as he is going for volume trade. At time they may go below cost like selling for maybe RMB50 if you buy two or more. They will make the money from someone else.

BTW this is never found in any of your MBA text :)

4. Language
After the China trip, the conclusion was LANGUAGE. For Chinese to explore India as a market, language is an issue. The Indian cannot speak Chinese and Chinese cannot Hindu/Urdu/Tamil et al. I believe this is the short term problem and in another 5 - 10 years, there will be many Chinese in India. Chinese do recognize the size of the India market and the potential of the market in terms of construction, retails, electronics sector will be very attractive.

I cannot disclosed what was the final outcome.......