tale of three economies: us, china & india

China, India and the US: Tale of three titans

Shyam R. Chidamber

The US, China and India represent a large chunk of the world

• Over 33% of the world economy• Almost 50% the world population• 80% of the world wide pool of science and

technology Ph.D.s are from US, China and India

These scenes have become common place

The shape of things to come…

Traditional gaps are closing…

shanghai-new-york-mumbai

Caveat Emptor: Making simplistic observations on complex matters…

Nevertheless, here we go!

Three Similarities & Three Differences

Similarity 1: All three are large, heterogeneous

countries yet incoming firms see each as a

homogenous market

Staggering Failure Rate

• 90% of foreign firms fail in the US market

• 48% of all foreign firms fail in China in the first year

• Equally high failure rate of Foreign firms in India

Market Diversity

Markets are not homogenous; they have distinctly different

consumer preferences and smart companies realize this

New England & California

Old Subaru History

Suburu built its US market presence with avid New England skiiers…

Think of specific sub-markets that are most amenable…

The US is several markets

Economic clusters in China

Clusters are sizeable

Two states: very different places

Kerala

Uttar Pradesh

Mickey D caters to Indian and Chinese palates

In Szechuan province: McDonald's "Numbing and Spicy" Premium Grilled Chicken sandwich. Note the Sichuan peppercorns and red chili peppers.

Meatless burgers in Gujerat (where vegetarianism is common)

Haier markets successfully to American urban college

students

Mahindra Tractor Commercial

Indian tractors to US family farms

US Customer Satisfaction rating: 97%US Customer Brand Loyalty Rating: 98%Fastest growing tractor brand in North America

Similarity 2: All three countries are combinations

of rich, middle class and poor consumers

US, China and India produce a lot of billionaires…

• US billionaires: 442• Chinese billionaires: 122• Russian billionaires: 110• Indian billionaires: 55 Forbes Billionaire Dashboard

…But all three countries have very high GINI (income inequality)

Behind the gates of the wealthyfood lies rotting from wasteOutside it's the poorwho lie frozen to death – Du Fu

Starting salary for a Beida graduate in Financial services: 3000 yuan/month

Price of Clarks Wingtip shoes: 1000 yuan

Firms seem to eye the rich…

65% of US households shop at Walmart; 25% of Walmart shoppers do not have a bank account

The US has a large (and growing) lower middle class

China: an urban middle class country

India is shaping up the same way…

Size of the worldwide

middle market:

$30 Trillion!!

Liquid Diary Products (LDP)

$15 Phones for the people at the bottom of the pyramid

Selling a billion 2 cent soap packets is a smart business

Similarity 3: Guanxi is important!

Traditionally considered important in China

Indian networks are deep rooted

Source: Emory University

Silicon Valley is a dense network of connections

Difference 1: Financial conditions are in different

stages of development

Overall Ranking:

USA: 2China: 23India: 40

US leads in non-banking financial services and in sophistication of financial markets

China lags even India in several key categories:

• Access to local equity markets• Ease of access to credit• Securitization of credit instruments• Penetration of life insurance products and services

India’s financial marketplace is lopsided. Highly developed IPO market, securitization, but low on legal enforcement of business contracts, regulatory framework, transparency etc…

America has a complex adaptive system of finance; Chinese and Indian

systems are in their infancy

Difference 2: US, Indian and Chinese firms (and

institutions) are different in their level of globalization

Assessment of firm globalization

Chinese and Indian firms are rarely truly global companies” unlike many US firms…

Not even one of these firms features in the top 100 global brands

Indian firms are even less globally well known…

But Indian and Chinese firms have joined the Global 2000 in record

numbers

And they are tapping global capital markets…

Difference 3: The three titans seem destined for different demographics

India has a potential demographic

advantage

Age disparity among the titans

India: Young and middle class

China: Old and middle class

US: Old and rich

By 2050…

It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, … it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way…

Seems fitting for a tale of three economies…

Charles Dickens,1859: Tale of Two Cities

If a man takes no thought about what is distant, he will find sorrow near at hand.

The future is nearer than we think…we need to better understand it

Our problems are man-made. Therefore, they can be solved by man. And man can be as big as he wants. No problem of human destiny is beyond human beings. Man’s reason and spirit have often solved the seemingly unsolvable — and we believe they can do it again. ... In the final analysis, our most basic common link is that we all inhabit this small planet. We all breathe the same air. We all cherish our children’s future. And we are all mortal.

Words to remember…