Posted by: Bruce Einhorn on November 24, 2006
Remember a few weeks ago I wrote about the problems that Chinese telecom equipment makers were having trying to sell in India. (Here’s the item from Asiatech.) State-controlled telco BSNL rejected bids by ZTE, China’s second-largest telecom equipment makers, and Motorola (which was planning on using equipment made by Huawei, China’s biggest) for a big cellular contract. The worry among some Indian officials was that relying on Chinese-made equipment presented a security risk. That wasn’t the first setback for the Chinese. The Indian government, through the Foreign Investment Promotion Board, had also prevented Huawei and ZTE from expanding their small presence in India.
With Chinese President Hu Jintao having just spent four days in India, though, Sino-Indian harmony is the theme of the month, and things are looking up for the Chinese equipment makers. Both Huawei and ZTE early this month won some business from state-owned operators. And now comes news that ZTE is teaming up with an Indian partner. The Shenzhen-based company plans on working with MCorpGlobal, according to the Economic Times, “to set up a service-based company, which will import, distribute and sell telecom equipment and also offer other telecom-related services in India.”
Clearly this is a setback for ZTE, which no doubt would have much preferred to stick with its original plan of going it alone in India. Given the pressure from the Indian side, the Chinese company backed down and formed a joint venture. It’s hard to feel much sympathy for the Chinese in this case, though. For years, Rule One of doing business in China was find a local partner. That’s changed in the past few years (post-WTO) as China has opened up more. But lots of foreigners still think that they need local friends to make problems go away. Meanwhile, companies like eBay and Google that don’t have a local partner are struggling. So there’s some justice in the fact that the same rules now apply to Chinese companies trying to break into another giant Asian market.