Western-backed carriers in India are accused of cold-shouldering Chinese equipment vendors. Is this important? A combined Sino-Indian market well in excess of two billion people says ‘yes’, it is… 

China’s main equipment manufacturers are beginning to moan in public about the unofficial barriers to market entry – it would be crude and inappropriate to call them ‘Chinese walls’ – that prevent them gaining a foothold in India. The cultural divide between the two countries is as high as the passes that separate them and as long as the passes that separate them.

The formal re-opening last week of the Nathu La pass between the two countries (or between Sikkim and Tibet, to be precise) is a physical link which, technology-wise, does not yet exist in trade terms.

China’s vendors, like her operators, have two things going for them. The first is a massive home market. The second is state surety and thus state credit.. But the rest of the world – and not just India - just cannot take China seriously.

If and when Chinese vendors win overseas contracts they are more often than not engineered to drive down the prices charged by ‘conventional’ western vendors on the same deals, with the latter gobbling up the majority of the contracts on offer. This is not an open global market: instead, it’s a rather clumsy attempt to allow sweat-shop pricing to frighten western vendors into trimming the fattiest of their margins. And boy does it work!

In India, the situation is more complex. The Nathu La Pass may divide (and link) the two countries, but India’s carriers are increasingly under the influence of foreign investors and those foreign investors have recently become increasingly hostile to Chinese vendors. Pet vendors from the West and token contracts with Indian equipment suppliers are the order of the day. Chinese suppliers are left frozen out, like the lorries on the Nathu La Pass itself.

For the Chinese, the obvious solution is to buy their way into non-Chinese markets. Even then, they are met by suspicion.A problem here is that the detritus of western industry for which they are invited to bid tend to be rubbish. Eg: Marconi.

Late last month, a bid by China Mobile for Millicom International Cellular (a third-rate mobile holding company with a dubious track record) fell to bits amid recriminations over who actually pulled the plug on the deal. Call me old-fashioned, but I suspect the Chinese had difficulty coming to terms with a company based in Luxembourg – a country whose postage stamps are typically bigger than the national landmass itself.

And yet we return to the Chinese equation of massive capacity, firmly backed by the state, and (whisper it) what has recently become a dawdling domestic economy. China’s economic future lies beyond its shores.

Try to convert these positives into a global position, however, and China’s vendors have very little at all going for them. In the big volume markets like the US, Europe and in particular in India, they get crumbs. Instead, they are forced to extol contract wins in sub-Saharan Africa or Latin America where the driving force behind each contract is the state aid backing each deal.

Do not be misled. The sheer scale of indigenous Chinese vendors and carriers will not be eroded. And the first and most obvious stage on its journey will be the Indian market. China may be the world’s largest bureaucracy and India its second largest; western FDIs may yet find that the mutual relationship seeks to exclude them from playing a full role.

In China this is the case. In India, the waters are muddied. The next three years of telecom development may hinge on whether these two super-populated powers choose to cohere or antagonise each other. Sino-Indian cooperation would make everyone else pretty irrelevant – and scared, to boot. Likely to happen? I’ll pass on that.
Jim Chalmers