Did You Know About Tatas' China Link?

The Tata Group is one of the very few Indian MNCs which has carved out a niche in China's highly competitive market, notes Rup Narayan Das.

Had it not for the disquiet in India-China relations, the passing away of Ratan Tata would have resonated prominently in the Chinese media.

Be that as it may, the Tata Group of companies is arguably one of the very few Indian MNCs which has made its foray into China since long and has carved out a niche for itself in a highly competitive market like China's in various fields, particularly in computer software.

Around 1859, Jamsetji Tata, the group's founder, was sent to Hong Kong to open a branch of his uncle's company.

Several months later, Jamsetji moved to Shanghai, where he remained until 1863.

Tata's relationship with China ended in the early 20th century and was resumed only in 1996, when Tata International set up an office in Shanghai for trade and business, signalling the start of the Tatas' engagement in modern China.

Significantly, that was the time when India-China relations were scaled up to new heights with the signing of a slew of confidence building measures.

As early as 2009, the Tata Group's turnover in China was $4 billion, or about 6 percent of its overall business.

Of the group's $4 billion turnover in China in 2009, 50 percent of it derived from Tata's auto business, which sell luxury cars like Jaguars and Land Rovers after acquiring the brands from British car maker Jaguar and Land Rover in 2008.

In 2007, the Tatas set up a joint venture with the Zhejiang Tea Import and Export Co Ltd to manufacture and market green tea in China.

In recent times, however, the turnover has slowed down for many reasons including political distrust and security dilemma.

How close the Tatas were to the Chinese leadership can be gauged from the fact that in April 2014, the Beijing-backed Boao Forum, the Chinese equivalent of Davos, roped in Ratan Tata, the doyen of Indian industry, to the Forum.

The 15-member Boao Forum board included former Japanese prime minister Yasuo Fukuda, former Malaysian prime minister Abdullah Ahmad Badwani, former Singapore prime minister Goh Chok Tong and former French prime minister Jean-Pierre Raffarin, besides former US treasury S=secretary Henry Paulson.

Yet another instance of the importance that the Chinese government attached to the Tatas is evident from the fact that during then Chinese premier Li Keqiang's visit to India in May 2013, Li, who passed away last year, visited the Tata Consultancy Services headquarters at Mumbai and had an interactive video conference with Chinese employees of the Tata Group, where he said that China was committed to address the trade imbalance with India.

China's expansive information technology sector to the volume of more than $350 billion, offered great opportunities as well as challenges to the Indian IT industry.

India has carved out a niche for itself in computer software the world over and has made its presence felt in a very competitive environment like China.

Indian IT companies eyed China for three reasons: The ability to service the operations of multinationals based in China, use it as a delivery base for Japan and avail the growing demand from Chinese firms for IT services.

Although a number of Indian IT companies including TCS, Infosys, Wipro, and Satyam Computers had opened their offices in China, the experience of Indian companies in this regard has been a mixed bag of successes and challenges.

Indian IT companies complain that the Chinese are reluctant to accept Indian software products, implying a trust deficit.

Chinese officials say that Indian companies have done far less than their international competitors to establish a significant presence in either sector.

The most successful story of Indian IT companies in China has been TCS which has had a presence in China since 2002.

It had three units in China: The Tata Information Technology Shanghai Company Ltd (TITSC), TCS (China) and TCS Financial Solutions Beijing Co.

In 2007, TCS clinched a $100 million deal spread over five years from the Bank of China to provide IT solutions.

The contract was termed as one of the major IT-related deals signed by a Chinese bank.

Bank of China is the second biggest lender in China and has the largest global network among all Chinese banks.

The opportunity was considered a big achievement because the vendors who bagged the deal for the international network would get an edge for the bank's mainland operations.

The deal was all the more significant for India because Chinese banks have not outsourced IT development to external vendors, suggesting trust and faith in the Indian IT major.

In spite of the trust deficit and security dilemma, recent news reports suggest Tata Motors' interest in procuring EV battery packs from Chinese manufacturers. Earlier, Tata Motors used Chinese batteries in its electric buses.

China believes that the significance of Tata Motors' preference for Chinese EV battery packs lies in the current state of the global green industry development and potential India-China for cooperation.

A trust deficit and the security dilemma, however, continue to stymie greater economic engagement.

• FAREWELL, Mr TATA

Dr Rup Narayan Das is a former senior fellow at the Manohar Parrikar Institute for Defence Studies and Analyses and also the Indian Council of Social Science Research. The views expressed are personal.

Feature Presentation: Aslam Hunani/Rediff.com