Posted by: Bruce Einhorn on October 18, 2006
It’s one thing for India to roll out the welcome map for Western multinationals looking to take advantage of Indian talent. But what happens when the companies that want to set up Indian R&D operations are from India’s longtime rival, China? Huawei Technologies, China’s No. 1 telecom equipment company, has had a small R&D center in Bangalore for a few years but has had trouble winning business from Indian operators – and clearly one reason has been Indian worries about being too nice to a company founded by a former member of China’s People’s Liberation Army, the same People’s Liberation Army that back in the days of Mao and Nehru clashed with India over disputed territory along the mountainous border between the two countries. Now China’s other world-class telecom equipment maker, ZTE, is trying to break into India – and having similar problems. Last week, Indian telecom operator BSNL disqualified the Chinese company from bidding for contract worth $4 billion for GSM equipment. You might say, that’s just business – and since Motorola also got the axe from BSNL, there’s clearly no anti-Chinese bias.
But, as Indrajit Basu points out in this story from the Asia Times, Motorola’s exclusion actually might prove that in this bidding, the rule was No Chinese Allowed. ZTE, Basu writes, was excluded for the obvious reason that it’s a Chinese company. As for Motorola, the American company was only one degree away from a Chinese company:
Motorola declared in its tender offer earlier that it was sourcing a significant part of its equipment from Huawei, another Chinese vendor. According to India’s intelligence agencies, like the Research and Analysis Wing (RAW) and the Intelligence Bureau, Huawei has been “responsible for sweeping operations in the country”. Consequently, the final bids have now narrowed down to just three European vendors, Ericsson, Nokia and Siemens.
The timing of the move against the two Chinese companies is odd. Chinese President Hu Jintao is scheduled to visit India next month. Trade between the two countries is on the rise and with the North Korean nuclear test once again putting the spotlight on the nukes deal that India made with the U.S., Indian Prime Minister Manmohan Singh wants Beijing’s support, according to this wire story in the Hindustan Times: “From India’s point of view, Hu’s visit is crucial as it gives New Delhi another opportunity to win Beijing’s backing - an influential member of the 45-nation Nuclear Suppliers Group - for the India-US civil nuclear deal and international nuclear cooperation. China can play a spoiler in NSG even after the nuclear deal clears the US Congressional process.”
Meanwhile, Indian companies like Infosys, TCS and Satyam have been pushing aggressively into China, with no opposition from the Chinese. (Of course, China is determined to build a software industry of its own, so there’s certainly self-interest at play here. But still.) The moves against ZTE and Huawei show that a lot of Indians still aren’t ready to make nice with China.