India and China woo cross-border business

By Howard W. French The New York Times - International Herald Tribune: "For years, the rapid growth of China and India has been based on business with the developed world, and has often meant taking business away from Western industries. Now, companies in those countries, the world's two largest emerging economies, are beginning intensive drives to hunt for business in each other's markets.

In recent months, one giant business after another from the two Asian giants has announced ambitious expansion plans in the other's economies. Trade between the two countries had already been growing at a phenomenal rate, reaching $13.6 billion last year - a sevenfold increase from 1998. Companies in each country have explained their new investments as critical strategic moves aimed at profiting from each other's rapid rise.

But also driving the new boom in cross-border investment has been the shortage in talent in crucial sectors in each country, each of whose strengths are remarkably different. China is an industrial powerhouse in the making, while India has placed its bets more heavily on services. Nowhere can this trend be seen more clearly than in information technology, where India is already perceived as a global leader, and where China vows to catch up.

Infosys Technologies, an Indian software and information services leader, to take one leading example, recently announced plans to invest $65 million to expand its business in China, where it will hire 2,000 computer experts over the next two years and build large new corporate campuses in Shanghai and Hangzhou able to accommodate thousands more workers. Infosys has not previously made an investment in China of that size and scope. Experts say it presages similar moves by other Indian technology companies.

"We are going to use China as a global development center, as much as we do India," said Saikumar Shamanna, who heads the company's human resources development for China, adding that Infosys would seek business with foreign multinational corporations in China, but also with China's own emerging multinationals. "Today, options for people are increasing in India so rapidly that hiring has become a matter of who's willing to overpay the most. When you look at the numbers of engineering graduates coming out of the Chinese universities, this becomes a very attractive place for us."

The Indian information technology sector is growing so quickly that wages in some areas are increasing 25 percent a year, and qualified graduates from the country's best schools are becoming scarce. China produces 400,000 engineering graduates each year, many of them in computer studies, and Indian companies' expansion into China is aimed in part at wooing them.

Infosys, based in the capital of India's computer services industry, Bangalore, has risen from obscurity in the past few years to become one of the world's top 10 computer outsourcing companies, mostly by providing software services to large corporations in the United States and elsewhere in the West.

Infosys's recent moves in China have been mirrored by those of several other large Indian companies that specialize in computer services and outsourcing, like Tata Consultancy Services, Wipro and Satyam Computer Services. Earlier this year, Satyam announced its plans to build a major campus in Beijing. Another Indian company, NIIT, has recently expanded its presence in China, creating over 125 centers around the country, where it teaches programming and other computing skills.

On the Chinese side, the drive to explore the Indian market is being led by corporate giants, like Huawei Technologies, a networking equipment manufacturer that competes with Cisco Systems.

"Since we are a company whose business is based largely on globalization, we felt we had to be in India," said Huang Ji, the chief executive of Huawei's Indian operation, which has recently hired 700 Indian software experts in Bangalore. "In recent years, Chinese companies have been doing research on software on a small scale, and things are still not very standardized. In India, lots of companies have reached a very high level already, and we would like to learn from them."

In China, the government still plays an important role in the creation of companies, and as the value of the computer services and software sectors soars, Chinese officials have also been beating a path to India in search of training and investment opportunities there. Infosys, for one, has recently accepted 100 Chinese interns at a corporate campus it maintains in the Indian city of Mysore. The Chinese province of Jiangsu also recently announced plans to recruit as many as 400 Indian software engineers to help it energize its provincial information technology sector.

Since starting modestly in China in 2003, Infosys has quickly filled three office buildings in Pudong, spurring it to construct a new campus there and a second major center in the nearby city of Hangzhou, whose reputation for information technology is already strong. An official with the company said he foresaw rapid expansion, with the potential for tens of thousands of employees spread around China in the near future.

On a recent visit to the company's headquarters, many of the new hires, most of whom are recruited from China's best universities, could be seen taking corporate training classes in English from an Infosys teacher flown in for that purpose from Bangalore.

For now, Indian companies enjoy a lead in cross-border investments. A stiff challenge for them remains, however: how to break into the Chinese corporate market, where outsourcing of information services is less established than in most developed economies, and where a strong bias in favor of working with Chinese partners remains in force.

Chinese manufacturing goods have become ubiquitous in the Indian marketplace, bringing down the prices of many products and forcing some Indian producers out of business. The future of the two countries' economic relationship will depend in large part on the openness of the Chinese. "Chinese companies are not really used to business process outsourcing," said James Lin, chief executive of Infosys China. "It's going to take a little more time. We tell them that if you want to be a truly globalized business, we can help you."