When it comes to the economic battle of the Asian giants -- China vs India -- plenty of people have opinions about which contender has the upper hand. But relatively few have practical experience of doing business in both countries.
Anthony Fasso, chief executive in Asia Pacific for Axa Investment Managers, is one of those rare people who can compare and contrast both markets with some authority. He has overseen the setting up of similar Axa joint-venture operations in China and India -- a process that has taken three years since the search for partners first began.
"Ultimately the subscribers in both markets are retail investors. But the way you access them is completely different," he says.
"In India there's a mass of layers and many distributors. You have to keep selling the product and do lots of advertising. Whereas in China, distribution is much simpler. The main three or four custodian banks dominate distribution. You plug into their network, and that gets you pan-China distribution. So it's more B2B [business-to-business] in that respect than India."
Axa's brand name is relatively unknown in both markets. So choosing the right local partner was important. Both the Indian and Chinese joint ventures were formally launched within a week of each other. China was first, at the end of August. "We're dealing with a Shanghai government bank -- Shanghai Pudong Development Bank -- that's listed on the stock exchange. Everyone knows it -- particularly the Chinese characters. They give us the credibility and the retail know-how."
But Axa has a very different partner in India, the conglomerate Bharti Enterprises. Bharti also partners the US mega-retailer Wal-Mart Stores in India, and has a big telecommunications business, Airtel, which is well known for its cricket sponsorship, and has more than 50m subscribers in India.
Bharti and Axa also have a joint insurance venture. Bharti's retail experience is crucial, Mr Fasso says. "You have to have pan-India presence. You have to be in many of the main metro cities to support what is a very intensive retail effort with a very stratified distribution market."
At the moment, India seems the more sophisticated market, in terms of staff and customers, Mr Fasso says, as unit trusts have existed in India for several decades. "It's only in the last 12 years they've had any choice of companies and only in the last four that many other companies have come in," he says. As a result, there is much more competition, and that means more innovation and competition in service.
"There are many platforms for business -- they can do telephone switching, internet switching."
"Also the talent pool for asset management is much deeper and wider than it is in China. Asset management is more an emerging industry and profession in China, particularly in speciality areas like risk management and compliance." Many Indian staff have worked abroad and so have a good understanding of how multinational financial companies operate. Far fewer Chinese have similar experience.
India, Mr Fasso says, also benefits from having an English-style legal system based around case law. But that advantage is being eroded.
"In many respects the regulators in China have been very smart and they have had the benefit of strong relationships with regulators in Hong Kong and other countries like Singapore. So they have been able to learn from the best and pick some of the best practices. They also want Chinese fund companies to learn as much from their foreign partners to raise standards.
"In some aspects I've seen China overtake places such as Taiwan and Korea in being more sophisticated in their regulations and contracts."
Mr Fasso has the same worry for Axa's prospects in both China and India, namely the chance of a sudden market correction. That would mean "people waking up and losing 40 per cent of their money and getting out of funds, saying 'these things are dangerous, what were we thinking?' and it taking another three or four years to educate them again that funds are OK."
For now that looks like more of a possibility in China where stock markets have doubled in value during 2007 rather than in India, where they have rallied just 40 to 50 per cent since the beginning of the year. "What the Chinese could learn from the Indians is allowing you to launch a family of funds. If you are only allowed one fund, and it's an equity fund, and then the markets take a down turn, people are going to switch out of your company and put their money back on deposit in a bank.
"At least if you have a money market fund you can still retain their money and retain them as a client. And when markets change they can switch into another fund."
Copyright The Financial Times Limited 2007