Chinese president Hu Jintao's visit to India was high on symbolism and low on substance. This was, perhaps, inevitable. Despite politically correct noises from both sides, relations between the two Asian giants remain mired in mutual mistrust. "The Chinese Government will continue to encourage competitive Chinese companies to make investments and do business in India and Indian companies are welcome to explore business opportunities in China," Hu remarked during his recent India visit.

But Hu's exhortations failed to warm the Indian establishment to the idea of a Free Trade Area (FTA) with his country; Indian companies cry themselves hoarse over the subsidies their Chinese counterparts receive from their government. Moreover, the National Security Council has blocked investment proposals by Chinese companies like the telecom major Huawei Technologies, Hutchison Port Holdings and Great Wall Industry (the latter two are looking at starting cargo operations).

The Chinese, obviously, don't like this very much. "Chinese businessmen think it is protectionism under the garb of national security," says a Beijing-based businessman. That charge does look a little harsh. The government has barred only a handful of Chinese companies' entry into sectors like telecom and ports that are important to India's national security. Other Chinese firms, notably white goods majors TCS and Haier, have a free run of the Indian market.

The point, then, is: where do Sino-Indian business ties go from here? The potential is huge. In 1990, the two-way trade between India and China was a paltry $260 million. Circa 2006, the figure stands at a little over $18 billion (Rs 81,000 crore), and looks set to surge past $40 billion (Rs 1.8 lakh crore) by 2010. Several Indian companies, like Ranbaxy, Infosys and M&M, among others, have set up or acquired companies in China to take advantage of its low costs.

Says strategic affairs expert, Kanti Bajpai: "Hu's utterances during the visit signal a broad commitment to a long-term strategic partnership." Such visits, some think, go a long way in changing perceptions among political and business establishments and the people in general. "India is the flavour of the moment in China," says Hong Chen, Chairman and CEO of the Beijing-based Hina Group, "all major newspapers and TV stations are talking about India." Adds Malvinder Singh, MD and CEO, Ranbaxy Labs, which has a large set-up in China: "At the end of the day, business is what drives growth." The implicit implication: the two neighbours have little choice but to do business with each other. "The average Chinese knows very little about India," says Girija Pande, Head (Asia Pacific), Tata Consultancy Services (TCS), "Hu's visit will help in dispelling notions that stem from little or no communication."

But till China actively, and sincerely, addresses India's genuine security and geo-political concerns, the economic potential of the relationship will remain at sub-optimal levels. The sticking points: China's claims over Arunachal Pradesh; its proliferation of missile and nuclear technology to Pakistan; its efforts at ringing India with military and naval bases-at Coco Islands near Andaman and Nicobar and Gwadar in Balochistan; and its overall efforts to keep India pinned down to the subcontinent.

These are very real concerns for the Indian security establishment. Hu, unfortunately, did nothing during his visit to address these. Sino-Indian relations, therefore, will continue to go forward two steps and come back one.

INSTAN TIP
The fortnight's burning question.

Will the government's proposed mega recruitment drive increase the flab in and affect the efficiency of PSUs?

No. Nilotpal Basu, MP, CPI(M)

The government itself has said there are massive vacancies. The growth in the GDP hasn't generated employment figures. Its impact on employment generation is abysmal. In the light of this, such a rethink by the Planning Commission is welcome.

Maybe. Subir Gokarn, Chief Economist, CRISIL

I think the move is well intentioned. Yet, this is not the answer to the problem. The answer really lies in developing more effective labour markets. The government is really looking at substitutes for market forces, which is not a very welcome thing. The private sector should be given more time.

Yes. Subir Raha, Former CMD, ONGC

Hiring by PSUs is not the answer to the problem. We need to create jobs. Infrastructure and manufacturing are the drivers of growth. The government should create an environment where manufacturing is promoted.

-Compiled by Aman Malik

Q&A
"We Will Tie Up With Bollywood"

Michael Burke, CEO, Fendi, was in the country last week to launch the Italian fashion label's first store in India, at the Taj Mahal Hotel, Mumbai. BT's Deepti Khanna Bose spoke to him in the middle of his gruelling schedule. Excerpts:

Typically, who is the Fendi woman?

She's a strong woman; she's not frilly; and she dresses for herself rather than for others. Fendi is not about being girly and frilly; it's serious, with a twist. But the twist is always a bit hidden, and you'll see it on second inspection.

Worldwide, Fendi plays a big role in films. Do you have any plans to get involved in the Indian film industry?

Opening up in Mumbai is the first step towards finding an appropriate way to collaborate with the Indian film industry. We want true relationships with directors, the stars and stylists. These things have to occur in a natural, organic way and now that we have our presence here, this is something that will happen.

How is Fendi doing in China?

We opened our first store there only three years ago; now we have seven stores in China. We're profitable there. And it's going to be the same in India; we will be profitable here as well.

FM Radio is Booming

In the past two months, almost 100 new fm radio stations have started up in 90 Indian cities. However, sceptics seem to doubt the viability of all these new channels. Not true, says a report by Morgan Stanley, which believes radio's share of the Indian advertising pie will grow from 2 per cent today (against the global average of 8.5 per cent) to 5.1 per cent by 2008-09; it will then be worth about Rs 1,140 crore. The reason, it says, is the retail boom. Advertising by retail outlets accounts for over half the total radio ad-spend in most countries and just 8 per cent in India. So tune in!

-Kushan Mitra

A NEW OPPORTUNITY

Nandana: In a services sweet spot

Facilities management services is emerging as a big business opportunity, as companies increasingly outsource such work to outside agencies. "It began with soft services like security and cleaning and gardening and moved on to hard services like electrical and water maintenance and other services," says T. Raghu Nandana, MD of the (approximately) Rs 100-crore Updater Services, the largest player in the country, with offices in 10 cities.

Nandana, who, incidentally, maintains all Infosys facilities, employs 10,000 people and has even received $10 million (Rs 45 crore) in funding from venture capitalists like New Vernon Bharat. Updater Services handles everything from the reception desk to mail management (dispatch and receiving), to packing and loading of containers, to energy management, to supplying drinking water, flowers office stationery and catering services.

Sinar Jernih (a Malaysian company operating largely in the hospitality and hospital segments) is another player in this segment. J.S. Shekar, Executive Director, Sinar Jernih, says: "Given the shortage of nurses, hospitals are willing to outsource non-medical activities." The boom in the retail and housing industries means opportunities will grow several fold in the years to come.

-Nitya Varadarajan