By Vincent Van Ross

India is on its way to becoming a developed nation. That means India is on its way to where Europe and America were for over a century. That is good news.
We are on our way to boom while the American and the European economies have hit the ceilings of their boom periods and are facing recessionary trends.

While the United States of America and the erstwhile Union of Soviet Socialist Republics were busy stockpiling nuclear arsenals and implementing their star war programs, China was silently invading the world with a weapon that was less fanciful but more lethal. The one reason which puts China ahead of India and most of the other countries in world trade is the incredible price tag it is able to attach to its products and services. China can price out any product in any country. Nobody—not even the USA or the then USSR—could have imagined that ‘price’ could one day be used as the most effective weapon to invade the world!

To many Indian entrepreneurs it is still a great mystery as to how the Chinese products sell at one third the price of their Indian equivalents. Indian products have an obvious advantage of ready market, low transportation cost due to distance, cheap labour costs and other infrastructural facilities while competing with the Chinese products in the Indian market. In spite of this, the Indian products are priced out.

If the Chinese are able to make a profit even after selling products at such a low price, what is the mantra that they are employing to make this happen? This is one area which needs to be studied in greater detail and with much more seriousness. This is a rat race and there is no harm in learning from our competitors whoever they are. There is an old saying: “Give the devil its due.”

China has been singular in its onslaught on the international market. Perhaps, no other nation in the world has applied its mind as much as China to capture the world market. For China, the strategy to capture the world market has been both systematic and sustained. It has been like the tortoise in the hare and tortoise story when you compare the Chinese economic development with that of the western countries. Their motto is: slow and steady wins the race. And, they have proved this beyond doubt.

Their strategy is based on some serious study of human psychology and market trend analysis. What seems to be simple at first sight is not so simple. In fact, somebody has taken pains to study this phenomenon and applied his mind to work out a strategy for the Chinese economy. Here, it is worth mentioning that what works for the Chinese economy may not work for other countries because of cost factors.

Think of how the Chinese invaded the world in the first instance. Not with nuclear warheads…, not with money…, not even by force…but with food that has a direct conversation with your stomach. The Chinese learnt what the Indian women knew for ages. It applied this age old wisdom to its advantage on an international scale. What have our parents taught the girls of marriageable age? The Indian girls have been groomed for centuries to prepare delicious food to please their husbands. The philosophy behind this is: the way to the husband’s heart lies through the stomach!

China went one step further and carried this beyond its borders. Today, you find Chinese food all over the world. And, the world laps it up. The secret of this success does not lie with the taste alone. It has a lot to do with the price as well. This was perhaps the first major success story of Chinese business outside China. This is not to ignore the fact that the Chinese sold weapons to pool in money or gain loyalty of other nations. But, that is a different story and that is restricted to certain countries that China holds close to her heart. Chinese tanneries have also left an indelible mark on countries where they established their leather business. But, the invasion of Chinese food was by far one of the most spectacular business strategies of the twentieth century though many economists may not attach so much significance to it.

The second Chinese strategy is also nothing new to India. In India, we have known for ages that there are two types of obstinacy that cannot be put off or done away with. One is Raj hat, which pertains to the wishes of the ruler. And, the second one is, Baal hat which refers to the wishes of children. No sensible person would take the risk of putting off either of these. The days of the kings and their kingdoms are gone. So, the Chinese went after the kids of the world. It flooded the world market with toys. And, the prices are unimaginable! They are so cheap that if something goes wrong with Chinese toys, you would think nothing of throwing them away and buying new ones. These toys appeal to the parents as much as they do to their kids.

This was followed by the Chinese onslaught on the electronic industry. Computers, entertainment electronics, digital cameras—you name the product—and you will find that China is omnipresent in the market. Now, why would a common man purchase a 29” colour television set at Rs.20,000 when he could buy a television set of the same description using a Chinese kit at half that price? The bulk of the popular international brands of computers and accessories such as “Dell” and “Hewlett-Packard” are manufactured in China. It is much more cost effective to outsource production of these products to China.

This is not the end. The Chinese are now keenly eyeing the automobile market. Nepal has already gone in for Chinese automobile in a big way. Chinese medicine is another contender for Chinese business outside China. There are any numbers of outlets for Chinese medicine located at vantage points in the USA and the European countries.

Just imagine what addiction to Chinese goods may do to this world. When Chinese goods enter the market in a country, the domestic competition is priced out. The local industry has no option but to shut shop. There is no way the local manufacturers can compete with the cost effectiveness of Chinese goods. And, once we get used to Chinese goods, China may hold us to ransom. Here China may be as open to modern tactics as to ancient wisdom. There used to be a saying that “the United States of America could destroy a country through sheer neglect!” Those were the days when most of the third world countries were surviving on US aid.

Just imagine China selling toys to a country for say ten years. In such a long time the local population would get used to buying toys at throwaway prices. That would throttle the competition from local toy manufacturers and force them to close their factories. One fine morning, if China decides to stop the supply of toys to that country, can you imagine what that could lead to? Anything—even a civil war!

A civil war—that may seem farfetched but look at this: (i) the toys were being sold at one fourth or one fifth the price at which the local manufacturers were selling; (ii) the local toy industry is dead; (iii) if toys are imported from a third country, it may be more expensive than the price at which the local manufacturers would have sold them; (iv) the families would experience a sudden budget crunch; (v) people might take on the Government of the day to set things right; (vi) what can the Government do? (vii) If the government fails to do something, they might bring down the government. So, you see, it is not as simple as it appears. These things can have far reaching consequences. Unless, we take timely measures to offset this onslaught, China too may be in a position to destroy a country through sheer neglect by emulating the American model!

There is nothing new in this strategy. Many countries have been conquered through trading posts. The Indian history is replete with stories of French colonies, Dutch colonies and Portuguese colonies. The British, who ruled our country for over two centuries, also started off with a trading post in Calcutta called The East India Company!

Thankfully, the United States of America has realized the repercussions of the expanding Chinese trade. And, the USA is finding ways to restrict it. The Americans lead the way in this kind of things. And, the western countries follow suit. The USA has started rejecting the Chinese products. They began by saying that Chinese dog foods contain a slow poison. And, then, Mattel (the US-based world’s largest toy manufacturers) recalled 1.5 million toys made by a Chinese contractor as the toys are believed to contain harmful levels of toxic lead. There have been many more instances of the USA rejecting Chinese products. This is sure to hit China badly.

The one good thing about this is that it will open up these markets to other countries. It is a good time for India to step in and grab these markets that are being vacated by the Chinese because it will take them a long time even to hazard a re-entry.

Today, we brush our teeth with a Chinese tooth brush; our children play with Chinese toys; we watch our television set made with Chinese components; we use computers and accessories manufactured in China; we eat and drink Chinese cuisine; we wear Chinese footwear; we drink water from Chinese flasks; we smoke cigarettes from Chinese cigarette cases and light them with Chinese cigarette lighters; we use Chinese torches; we use Chinese emergency lights; we use Chinese umbrellas to protect ourselves from rain and the Sun; we use Chinese pens to write; we store our jewels in Chinese jewel boxes; we stick our pictures in Chinese photo frames; we worship Hindu, Christian, Buddhist and other Gods made in China; we celebrate Diwali with Chinese lamps and lights…the list is almost endless. The Chinese manufacture and sell anything that can be sold anywhere.

How do the Chinese know what we need? Obviously, they have gathered a lot of commercial intelligence. Have you seen a Chinese in the street? No! What does that mean—that the Chinese are invisible? If they can gather commercial intelligence without being visible what stops them from gathering intelligence relating to other matters? You know what the CIA is all about; you are familiar with the KGB; you have heard of the MI6; you keep reading about the escapades of the ISI; you know that Mossad is the most effective secret service in the world. But, have you ever heard of the Chinese secret service? Do you know what it is called? See, how secret their secret service is? That is dangerous!

The fact is, day in and day out, we use Chinese products. China has become a part of our daily life. And, we did not even realize it. Do you see how effectively China has turned herself into the silent invader of the world?