Gurugram: President Xi Jinping is forcing Chinese companies to create capacity equal to 90 per cent of the world demand, said renowned business advisor Ram Charan. He was speaking at an event, titled The China Reckoning: Business Strategy in the Age of US-China Rivalry, at Gurugram’s The Quorum Club on Wednesday, where he discussed the future of Indian industries in the midst of an ever-changing global business scenario.
“It’s not 90 per cent of the demand in China. It’s 90 per cent of the demand of the whole world,” said Charan, who is on the board of several Chinese companies.
The event was moderated by Shiv Shivakumar, Operating Partner at Advent International, who discussed Charan’s book, China’s 90% Model. Among the audience were investors and businessmen.
Charan said the Chinese are selecting industries, creating capacity, and then building and selling products.
“China has a single goal to get the world’s largest market share,” he said.
A Xi challenge
Given the global supply chain disruptions due to the Iran war, many economies have taken a hit. But, according to Charan, China’s manufacturing dominance remains to be the biggest challenge for the world, including India.
He said that Indian companies are competing against President Xi and not Chinese companies.
“They (Indian companies) are competing against a nation. The Chinese companies’ decisions are being made in the President’s office,” said Charan.
Charan said that if an Indian CEO goes there with a business proposal and talks to the companies, they would respond by saying that “We are willing to do it but we have to get permission from the President’s office.”
For China it is not about profit but market share, which is what matters, added Charan.
“President Xi believes in austerity and austerity is high,” he said.
Charan said that the weakening Indian currency will not stabilise because “psychology matters”.
He said that people who already have money and want to invest in India from abroad have a certain psychology.
“Should I keep it? Will it decline further? People are fearful and some take the risk while some hedge. Those who have had enormous amounts of outside borrowings and hard currencies, they have a very difficult time coming around,” said Charan.
Charan also said this will impact companies in the coming years.
“Their business model can get changed,” he said, adding that India is going through tough times and its focus should be on building strength.
However, Charan praised Prime Minister Narendra Modi’s economic policies.
“Modi has been totally consistent every year in reducing the fiscal deficit as a portion of GDP,” he said.
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‘China needs Indian market’
On being asked how personal diplomacy does not work with autocrats, Charan said that “China badly needs the Indian market”.
In his book, Charan describes China as having a “vertically integrated model”, where President Xi controls everything.
“His mindset is that I will not depend on anybody except within China,” said Charan.
For him, China is attacking the world economically, instead of militarily.
“It’s very clear and verifiable. I (China) will win on the economic basis,” said Charan, adding that China is running on communism.
“Communism is a movement and they want to conquer the world. It’s the ideology versus democracy,” he said, adding that President Xi repeatedly says democracy is declining and deteriorating.
One of the members from the audience asked Charan about the trust between the government and businesses in India, drawing a parallel with China where the state is governing the industries.
“Let me just mention one thing. China is not run by the state. It’s run by one man. Also, not everybody there likes it,” said Charan.
(Edited by Aamaan Alam Khan)