Wary giants walk different paths

Book review:  Billions of Entrepreneurs: How China and India are reshaping their future and yours By Tarun Khanna; Harvard Business School Press, $29.95 (€21) Wary giants walk different paths Tarun Khanna goes beyond the standard question of why China attracts so much more foreign direct investment than India, writes Tunku Varadarajan.

On finishing this earnest and entertaining book (yes, it's possible to be both), my first reaction was to slap the author - metaphorically - on the back for refusing to deploy the word "Chindia" in his text.

That ghastly neologism - China plus India, rendered as a portmanteau word - is seldom absent from any discussion of the two huge Asian countries and their impact on the world order. In fact, ever since it was coined by a BusinessWeek writer, "Chindia" has come to represent an object of both paranoia for those in the US who fear economic eclipse, and pride for Asian dreamers who long for the day when the US gets its comeuppance. But in reality China and India, far from being in strategic wedlock, remain cool and wary neighbours.

Tarun Khanna, a professor at Harvard Business School, has written extensively on the comparative economic growth of China and India, and this book draws on his academic research. That is not to say it is a wholly original book. The Chinese and Indian economic success stories have been with us for so many years now that there is little eye-catchingly new to be said.

What Khanna does do, and does well, is cover vast sociopolitical and economic ground, and provide meaty information derived from conversations with people who have done business in India and China.

His other gift is to frame the right questions, and to go beyond the standard question of why China attracts so much more foreign direct investment (FDI) than India. "Why can China build cities overnight while Indians have trouble building roads?" he asks; and yet "Why are there so few world-class indigenous private companies from mainland China in spite of the creation of a juggernaut of an economy?"

Khanna also subverts the authoritarian-versus-democratic dialectic that hovers over comparisons of China and India by asking: "Why does China prohibit free elections while Indians, in free and fair elections, vote in officials with criminal records?"

But his most fascinating question, for those of us inclined to discern cultural factors in any story of economic success or failure, is: "Why do the Chinese like their brethren overseas, while Indians apparently do not?"

This is an economic question because, as Khanna explains, China's excellent "diaspora management" and India's embarrassing "diaspora mismanagement" arguably made all the difference in terms of FDI at the start of each country's economic liberalisation. As much as 80 per cent of China's FDI in the early years of reform came from Chinese living overseas.

While China embraced a principle by which citizenship (or its practical equivalent) was conferred by blood, independent India mandated that place of birth dictated citizenship. For years, millions of overseas Indians were thus unable to put their money to work in India. It was only in 2002 that the Indian government began to court overseas Indians in earnest and to grant them legal standing in their home country as Persons of Indian Origin.

This points to a broader message, one that Khanna makes in various forms throughout his book - any transition of the two economies to "developed" status will be powered by entrepreneurism - not just by Infosys or Huawei and the like, but by people such as politicians behaving entrepreneurially.

Intriguing, too, is Khanna's discussion of the distinctive ways in which China and India have projected their power beyond their borders. Borrowing conceptually from Joseph Nye, the political scientist, he characterises China as a country adept at putting "hard power" to use. This explains the country's ascent in Africa and elsewhere, and its "hard-power global expansion has been the result of premeditated and orchestrated state policy".

India's influence, by contrast, "has largely been achieved through soft power" and, just as Prof Nye located Hollywood as a centre of American soft power, Khanna finds that the force is with Bollywood, India's film industry. Other sources of India's soft power, he avers, are its software industry, spiritual gurus and broader intellectual tradition.

Khanna is Indian but is unfailingly neutral in this China-versus-India conspectus, and that is a blessing. - (Financial Times service)

• Tunku Varadarajan is a professor at New York University's Stern Business School.