I have been asked to chair a forum called “India and China: How do you choose” at SIBOS, the largest annual meeting of SWIFT, the payment system infrastructure provider for the global banking industry. This annual meeting, which brings together about 8000 transaction bankers, is taking place in Amsterdam and this session will be on the afternoon of Thursday 28 Oct (2pm local time).
I am writing down these notes as a primer for the session, as well as to collect my own thoughts on how to address it. If any reader to my blog would like to add to it, before or after the session, happy to have your thoughts.
It appears to be one of those iconic topics that captures the imagination of people wanting to think about how the world will shape out. In an insidious way, in the West, it is constructed in an adversarial way. “Choose either China or India,” is what The Economist magazine, in its usual British mindset, has been suggesting in no less than five editorials in the past year alone, always taking the side of the underdog just to keep the tensions alive and give fodder for debate. Newsweek and Time magazines tend to state their own positions on the topic more fairly, either way, assessing current developments of both countries as these happen.
The validity of the topic is itself something that we need to pin down before we debate it. Is there a reason to debate if the world should choose “China versus India”? If you are a proponent of globalisation, you have no business thinking this way. If we are in an increasingly connected world, then it should be “China AND India AND Russia and Brazil” and whatever.
But taking the hubris out of the way, there are still valid reasons for discussing these two countries together. They jointly represent a huge part of the global recovery equation as the lowest cost provider of services and manufactured products that is virtually un-replicable in almost any other country today. What these two countries do to create a long-term and sustainable economies will be game-changers, not just for the West, but also a whole string of mid-sized countries whose own strategies will have to shift along with that of China and India.
The way I am choosing to construct the topic however, is really take stock on what I think are three valid questions about both of these countries worth asking:
i. Firstly, where are China and India heading, given their current economic trajectories, if we project into the next 5 and 10 years. Related to this are the questions of whether their current trajectories are sustainable, what are some possible flash points that can undo these trajectories.
ii. Secondly, how should the outsider to these two countries make sense of the essence of the local businesses, industries and even the governments, as they undergo the tremendous changes that are taking place. What are these entities struggling with? What are their ambitions? What are their limitations? The knowledge of this is important for a variety of reasons – for those who are planning to do business in either of these countries, or compete with players from these two countries or profit from them in any way. In a banking conference, I would focus on practical issues specific to banking – the internationalisation of the reminbi, the growth of the Indian corporate, the building of payment and securities processing infrastructure in both countries, the strength of their financial institutions and so on.
iii. How we then fit in the assessment on the above two into how globalisation will play out.
The answers to these three questions, I believe, will give the serious investor, business person or strategists, clear actionable ideas on how to think about the impact of these two countries on the global economy.
To answer the first question, I will be relying very much on Gerard Lyons, the chief economist & group head of global research at Standard Chartered, to provide an overview of what I call “the trajectory” – where the path currently taken by both countries will logically lead them, all things considered. Gerard is always good fun to have in any discussion, with his use of “3Rs and 4Ts and 5whatevers” to simplify otherwise complex issues. He has a very sympathetic view of emerging markets and is generally cognitive of the actual mechanics of both China and India. I will also expect him to say something about Standard Chartered as a business in both of these countries.
To answer the second question above, I will be ploughing through the contribution of ideas, aspirations and perspectives of both Chinese and Indian business leaders on the panel. On the Chinese side, Zhou Yue Qui, the head of the asset custody business of ICBC Bank. He appears to be growing on the back of the QFII and QDII businesses, and has ambitions to become a global custodian player – the how, when and whys, we will ask him. I will be drawing on Ms Zhong Hong, the director of strategic development and macro economy research, Bank of China for her on-the-ground perspective of the challenges China is facing in saving off currency speculation, property speculation, unbridled inflation, and the other macro-economic challenges it faces.
On the Indian side, I will be very interested to hear the views of Rajnikant Patel, CEO, Reliance Exchange Next and Reliance Money, he was former CEO of the Bombay Stock Exchange and an ex-regulator as well, so there will be much to draw from his many previous experiences. Also, I do think that the profile of Reliance as a big business with a cosy relationship with the state, is worth examining. N Chandrasekaran, the CEO and managing director of Tata Consultancy Services tells me that the story of his company is one of doing business in both India and China, even if his business in China was built through an invitation by the Chinese government. Finally, I will be drawing on the insights of S Sridhar, the chairman and managing director of the Central Bank of India, a fairly large domestic bank that is really on the front line of domestic business and retail customers, and a proxy for state-run institutions.
In China, the institutions that best exemplifies the move towards the future are the banks themselves. The success of the retail payment infrastructure appears to be good, but it would appear that the introduction of the internet and mobile channels can threaten the dominance of the large domestic banks in the country, both on the retail and corporate fronts. There also appears to be a lot of central planning and policy guidance that dictates what Chinese banks can or cannot do.
In India, the institutions that best exemplifies the move towards the future is the exchanges, the payment systems infrastructure. On the other hand, India, the country with some global companies like Reliance Industries and Tata, has a fractured retail payment system – it is here that it is valid to ask where does the industrial revolution era model ends and the modern, business driven era begin.
My thoughts on this topic is obviously quite deep. But I am very keen to see how holding this conversation on a global stage will play out, the outcome of which, will give me an even better sense of the different forces of change driving them.
Any comments welcome.