Namaste Hindustan

Ok ; don’t sigh at the completely unimaginative title – after Zaijian Zhongguo, it's inevitable that it has to be Namaste Hindustan. The title means Hello India, in Hindi.

Just as leaving a place is a cauldron of emotions, arriving at another, is equally so. Even if, and probably especially if, it's your home. Things are familiar. You know people. And yet it is an unsettling feeling. Things have changed. Some of your favourite places are gone. Some of the people you know have moved on. You are suddenly an outsider coming in, rather than an insider giving a knowing smile at the new arrivals.

As always, in such moves, it’s the small things that catch the eye. In the first few days back in Bangalore, these are what have really struck me

• Top of the list has to be reading a newspaper with the morning cuppa. A real newspaper. I almost lovingly caressed it on the first day ! I am in the camp which is firmly of the opinion that “The Hindu” (a longstanding newspaper in India) with filter coffee is the only civilized way to start the day.

• Switching on the TV ! Hooray. Only somebody who has been subject to CCTV (China’s television) for three years can understand this. Having said that, it really struck me how appalling the Indian news channels have become. Shrill and pathetic dredging of controversies all in the name of chasing eyeballs. Ugh !

• Walking into a place to eat and not worrying about vegetarianism. Not having to explain that you don’t eat meat and getting blank looks.

• Forgetting to tip. In China you don’t tip anywhere. In India you tip before you open your mouth. Having been spoiled in China, I have merrily been forgetting to tip and I am sure I have been subject to the finest collection of curses behind my back.

• Surprisingly, the confusion between right hand drive and left hand drive. I am still walking around to the wrong side of the car !

• Feeling scared of prices, because the Indian rupee is valued lower and hence you pay hundreds of it for anything. Used to paying tens of RMB, it's all feeling “expensive”. Illogical, I know. My irrational solving of the irrational thought is to pay by credit card, so I don’t feel the notes slipping by !!

• The phone goes tring tring. I get a Hello instead of a WAI !!

• Writing a cheque ! There are no cheques in China. Somehow the old world cheque seems comfortingly familiar.

• Getting junk SMSs which I can actually read !! China does not have a “Do not Call” policy, so on an average you get one junk SMS every 5 minutes. I couldn’t read it, of course, so I must have deleted a zillion messages without reading (tip to mobile phone makers – one touch deleting of SMSs would be a great functionality). Here I get junk SMSs every 5 minutes all right, but I can read the blessed thing.

But above all, there is the feeling of opening Blogger without hunting through interminable proxies. The feeling of actually writing the post on the Blogger editor itself. The feeling of playing around with the Blogger features, limited as they are. I never thought I would extol the virtues of Blogger, which is just an average blogging platform, but ......

Is good to be back home.

Read More

Zaijian Zhongguo

Goodbye China, goes the title of this post. For this will be my last post from China as I wind up here and head back to India. For nearly three years, Guangzhou has been my home and you’ll perhaps forgive me for a misty eyed long farewell post.

One of the first things that struck me when I decided to come here was how little, we in India, know about China. We study a lot about European history and culture, the Pharaohs of Egypt, the Incas and Aztecs of South America, everything about the US. But we know very little about China – most Indians can’t even name a city after Beijing and Shanghai, let alone know about China’s rich history. The reverse is equally true – very few Chinese know anything about India at all. I came to China as a newbie, quite ignorant of this country.

I leave China, equally ignorant, but perhaps with a greater understanding of my ignorance. China is a complex, fascinating country rich in culture, diversity, history and tradition. It is changing at such a rapid rate that it is almost impossible to keep up. It is a country like no other in the world

Business China is, of course, fascinating and excruciating at the same time. Probably the best known facet of China. The vibrancy, the size, the dynamism, the sheer energy, the opportunities, are all well known, and take your breath away. The scale is simply astounding. When you see a factory with 100,000 workers as common place, you know you are seeing a colossal giant. The pragmatism of many of government’s policies, the foresight on developing infrastructure (the phrase “build it and they will come” has an altogether new meaning here) and the single minded pursuit of economic development are all lessons every other country would do well to learn.

Cultural China, on the other hand has been a disappointment. This country has westernized completely, but with one big exception – language. Much of traditional China is gone in the cities. If you close your eyes, and discount the colour of the skin, you could be in any western country in the world. Buildings are steel and glass. Six lane highways everywhere. Everybody is western clothes. Only the very old do Taichi – the young are in yoga , or belly dancing. I was struck by an observation somebody made – From the west, India took the language and but kept its own culture. China took the culture, but kept its language. Ring of truth in it.

Sporting China has been an absolute delight. You would expect a sports nut like me to cover this, of course. Unbelievable facilities. Great events – sitting in Guangzhou I’ve been to the World TT championships, World Badminton championships, seen a couple of NBA teams, watched the Olympic fever (alas, didn’t go to Beijing) and if I had waited for three more months, the Asian Games. Yes, the Asian Games in November will be in Guangzhou – you’ll see a bit of the city on the telly then. Not to mention great sportsmen and very pretty sports women. Been teased mercilessly for my infatuation with Zhao Ruirui, Guo Jingjing and Xie Xingfang !!

Musical China is all western. Both classical and pop. Concert halls here rival the best in the world. Traditional Chinese music ?? What’s that ?

If you mention China, you have to mention food. But you have to excuse my mere passing mention, given that I am a freak who does not eat meat.

But above all, far above all, are the people. You cannot help being blown away by the friendliness . The people are simply amazing and incredible. Despite my not knowing Chinese, I have made some wonderful friendships that are unforgettable. At work and outside work. The warmth of my colleagues at work, who accepted a foreigner with open arms and took me into their hearts has been both a privilege and a honour. The sheer joy of friendships outside work and the smile of the stranger are reasons why this has been such a memorable time.

Have there been difficulties and things not so nice ?? Of course there have been. But it would be churlish and petty to dwell on them. For the joy and delight have been so overwhelming that everything else pales into insignificance.

I leave China with mixed emotions. I will truly miss China and the wonderful friends here. As I have done the rounds of farewells over the last month, I‘ve been saying it’s a small world and that friendships are not bound by distance. But I know it won’t be the same . We all move on and we will go our divergent ways. But at least, I am thankful, that for a little while, we journeyed together.

With a lump in the throat, with a heaviness in the heart, with a trembling of the lip, with a tear that’s threatening to spill over, I say zaijian to Zhongguo.

I’ll leave you with this song, for what better way is there to walk off into the sunset than to the strains of music ……..

Read More

How to score an own goal

China’s bosses sometimes find it difficult to understand the world; especially as seen through their own lenses, which are admittedly very thick. What can you make out of the following news report – “The western rating agencies are politicised and highly ideological and they do not adhere to objective standards,” Guan Jianzhong, chairman of Dagong Global Credit Rating, told the Financial Times in an interview. “China is the biggest creditor nation in the world and with the rise and national rejuvenation of China we should have our say in how the credit risks of states are judged.”

China likes to develop everything by itself. It doesn’t like Google; it has Baidu instead. Doesn’t like Facebook, YouTube, Blogger, …….., I can go on and on. Every one of them has a local equivalent. It’s not just in IT. Take Credit rating. It wants its own credit rating agency. Enter Dagong Global Credit Rating. It has about a quarter of China’s own fledgling credit rating market, and of course zilch of the global market. It started life with a “technology agreement” with Moody’s back in the mid 90s and having learnt the ropes, kicked them out – that’s par for the course for business here.

Back to the delicious irony of Mr Guan’s comments. Western credit rating agencies are politicised and in the same sentence he argues for China to have a say in how credit risks of states are judged !! To an outsider, it would appear that you could accuse Moody’s , S&P and Fitch of lots of faults, but being “politicised” is the last thing that comes to my mind. But from behind the myopic lenses from inside Beijing, it is understandable that it looks that way, because everything else here is that way.

He then goes on to criticise the practice of “rating shopping” wherein companies shop among the Big 3 to see who would give the best rating and give the business to them. Yes, there was much of that in the boom time, but Mr Guan, this is called competition. It is anyday better to have rating shopping than to have a single agency that would take its orders from the government.

And then, as is the wont here, Dagong published its own ratings for soverign countries. No prizes for guessing which country comes above the United States, Britain, France, Japan …… Another delicious comment from the delightful Mr Guan “US is insolvent and faces bankruptcy as a pure debtor nation but the rating agencies still give it high rankings “ !

The official news agency , Xinhua, immediately published an editorial wildly praising Dagong. It lauded Dagong’s report as a significant step toward breaking the monopoly of western rating agencies of which it said China has long been a “victim”. No doubt Dagong’s report was cleared with the powers that be and his comments vetted – how is it that the possibility that it might just be a tad too funny to claim politicisation of western credit agencies in the same breath escaped these mandarins ?

And Dagong’s aim is to break into the world credit rating market. Fat chance.

Sometimes, they just don’t get it.

Read More

Et tu J&J ?

What on earth is happening at Johnson & Johnson ?? It is one of the world’s foremost and respected companies. For 120 years it has commanded trust from consumers, employees, governments, investors – virtually everybody. It is a regular in the Top 5 of the World’s most admired companies – this year it is 4th. Consumers know it largely for its baby products – every mother trusts Johnson’s baby powder, or lotion or bath or whatever. If you are sick, you pop in a Tylenol; if your child is coughing you give her Benadryl. It is also a name totally trusted in hospitals – it produces a variety of medical equipments and supplies. Investors love J&J for the steady performance, and therefore the returns, it produces. It is one of the four companies left in the world which has a AAA rating. If there has to be one company that typifies all that’s good about the corporate world, it would be hard to find a better candidate than Johnson & Johnson.

And yet, I read with an increasing sense of disbelief of the troubles that are plaguing J&J. Today it just released its Q2 results and downgraded its yearly forecast of earnings. Not because of anything fundamentally happening in its markets. Because it has been facing a series of product recalls. It all pertains to one manufacturing plant in Fort Washington in the US. This has been going on now for more than a year – one recall after another, quality problems at the plant, scathing FDA reports and yet J&J allowed this problem to drag on for so long. Now it has shut the plant.

Remember this is the same company that created history in 1982. 9 people died in Chicago after consuming Tylenol – some criminal was tampering with the product on retail shelves and deliberately injecting cyanide into it. It had nothing to do with J&J – this was some crackpot criminal doing it. J&J immediately reacted by recalling 31 million bottles of capsules nationally. It was the first major product recall in the US – J&J said it didn’t care what the financial consequences were and whether it was responsible or not ; it was just not going to put any of its consumers at any risk. Full stop.

And now, look at what’s happening. Foot dragging on quality issues at that factory. Contesting FDA reports. A sorry saga of multiple recalls, drip fed over the last 18 months. Closing the factory only after a FDA inspection slammed it a full one year after the problems started surfacing.

This is a company which has some of the most outstanding quality systems in the world. I know this for a fact. In their famous “Credo”, which the company truly lives by, quality features in the second sentence. Every other manufacturing plant in the company probably has outstanding quality systems. Its just this one plant in Pennsylvania, that has been the cause of all the problems.

Just goes to show that when quality and safety are concerned, you can never, never, ever relax. Not even the greatest and the best are immune to falling. Next time when you take a safety audit as a pain in the backside or the ISO or CMM audit as a joke, pause and consider. This is probably what the plant management in the Pennsylvania plant did. Now look at the consequences.

I am now convinced that there has to be two clinically paranoid people in any company – the head of safety and the head of quality. Clinically certified as paranoid beyond redemption. Complete monsters who will believe nothing and crucify everybody. The most difficult and obstinate people who you can find on the planet. They will be the most valuable employees of the company.

All of you at J&J; please, please ,please, do not let down our trust. It's not just you, the company. You stand for all of the corporate world.

Read More

Why, oh why, do they come back

Why , Oh Why, do they come back ?

Don’t look back. Don’t ever look back. Please. You are an all time great. You have millions of adoring fans. You have made enough money. Yes, I know that the road forward seems only downhill and the wonders of the lands you have just passed is fatally alluring. But bite your tongue. Thrust your chin forward. Go forward. And don’t look back.

This could be true for any one of us, that is if you slightly discount the millions of fans and the enough money bit. But it is so so true for sportsmen. Its really tough not to look back – but alas, many succumb to the temptation.

Look at Michael Schumacher. Why did he do this. He had achieved all that there was to be achieved. And yet he comes back. To be scrapping with teammate Nico Rosberg for 10th place, and losing. Remember the days when the mere presence of Schumi on the track would be enough to strike terror in the hearts of opponents.

Michael Jordan was a case who both proved and disproved the theory. When he went away first time after “three peating” – Ah the wonders of American English – he could only stay away for 2 years. He came back and picked it up where he left and won three more. Went away and again came back after 2 years. This time, well; let's leave it at that.

Women in tennis are particularly prone to this affliction. Probably because they come very early to the game and retirement age is 25. That’s cruel. They come back and then struggle. Kim Clijsters and Justin Henin recently bucked the trend – they came back and won. But I think they will rapidly slip away.

The saddest sight is that of Lance Armstrong in this year’s Tour de France. Firstly he beat cancer. That was without a doubt his biggest victory. After brain surgery and extensive chemotherapy, he went on to win the most grueling of sport – the Tour de France, seven consecutive times. Nobody had come remotely close to that before. For years, the sight of Armstrong in a yellow jersey (the colour of the leader) dominated cycling. In 1995, after winning for the seventh time, he bowed out unconquered. And then, what does he do – he came back last year. He lost, but was at least competitive. This year, he is in the 25th place today. And we haven’t even got to the Pyrenees.

There are of course, those, who went out with great grace and never looked back. Don Bradman was one – after leading the arguably greatest team of all, the post war Aussies, in the Ashes, he went out when he was at the very peak. And a little man emulated it some 40 years later. For years, he had carried his country on his shoulders virtually single handedly. When he was still the best, he decided to go. The setting was Bangalore. Against the old enemy. The ball was turning square. In a minefield of a pitch, he stood alone, the Little Master. He was on an altogether different planet. India lost narrowly. But as the shadows lengthened, he walked away, unbowed, the greatest of them all. He never came back.

That's the way to go. Why, Oh Why, do they get tempted to look back.

Read More

What a waste of time

If you are an Indian, by now you would have seen the new symbol designed for the Indian rupee. Given the close attentions of my beloved net nanny, I cannot reproduce it , but if you really wish to see it, you can do so here.

This is a small matter, but is so typical and representative of India. Symbolism and pride is wildly disproportionate to reality. Currencies such as the US dollar, the Euro, the Yen, the Pound Sterling, all have their unique symbols. India aspires to be in that league. But the fact is that you don’t join the league by having a symbol; you join that league by having a currency (and by implication, an economy) that is worthy of being there.

With all due respect to the country, and I am an illogically patriotic Indian, the rupee is a basket case. Because, the underlying economy is far from strong. The rupee is still subject to stringent controls, especially on the capital account, and rightly so. The market is this currency is minuscule. Nobody, other than an Indian, really bothers about the Indian rupee.

While “India Shining” is a nice slogan and is in some parts true, the economy has serious problems that are masked by the heady intoxication of decent growth. The fiscal deficit and the national debt are at appalling levels – if India was not growing, it would be closer to Greece. Fiscal irresponsibility, especially in the states, is something that this blogger has frequently moaned about. I am willing to bet that not one state legislator is capable of even spelling fiscal responsibility in any language of his choice – we survive only because we are thankfully blessed with a more enlightened Central Government. Strange must be a country where a “reduction” of inflation to "only 10%” is seen as good news.

This post is a call to India to consider a large dose of humility. We are, but a bit player, in world economics. May be unpalatable and distasteful, but that’s the bare fact. Rhetoric cannot substitute for reality. Global perception of India’s weight is way above what it really is. We love the role of wrecker in chief of the WTO rounds of talks. We bang the drum at Davos. We want to be included in every global forum and want to make as much noise as possible. Much hot air and little substance.

I know this is an overcritical piece. But deliberately so. India has huge strengths. It should put its head down and do the right things economically. It should shun symbolism and achieve real progress. A dose of understated and outstanding performance would do it well. Deng Xiao Ping, a particular favourite, at least economically, of this blogger said “Keep a cool head and maintain a low profile. Never take the lead, but aim to do something big”. Wise words, India would do well to emulate.

The strategy of the country India sees as its main competitor (but to whom India is no more than a flea !) is exactly the opposite. Massive progress, but little symbolism and a head that’s just beginning to rise above the wall. But then India has one huge advantage that will stand it in great stead in the future. I can write such a piece about India. Try doing that in the land of the competitor. No way. Its not just that the powers that be will come down like a ton of bricks. The average Joe doesn’t even think on those lines.

And therein lies the key to the future success of India. But in the meantime can we stop wasting time with useless symbols – like this one of the currency.

Read More

Whys is AAA not a coveted prize any more ?

Hold your breath, all ye men and women – there are now only four companies in the world which are AAA rated – ADP, Johnson & Johnson, Microsoft and ExxonMobil. That’s it. Why are there so few in this exalted list ?

Before I go further, this is not a “technical” blog. Technically I should be saying companies whose bonds are rated AAA . Short term or long term ? Moody’s or S&P or Fitch ? Is Moody’s rating not Aaa ? Let it go. It doesn’t matter. The point is not to be technically correct. A AAA rating (in whatever form) acknowledges that the company’s bonds (not shares) have the highest degree of safety . Wouldn’t it be something every company would die for ? Obviously not. Only four companies are there. Why so few ?

The recent financial crisis has taken its toll. Quite a few have dropped off the list in the last couple of years. Notably GE, a long time star of that list. Understandable. But this doesn’t explain the paltry list fully.

Some companies deliberately get off the list for strategic reasons. A good recent example is Pfizer. Pfizer decided on a big strategic acquisition in Wyeth. It took a lot of debt on its balance sheet to do the deal. It lost its AAA rating because of this deal, but was perfectly happy to do so. Many companies decide to forgo their AAA rating for a strategic acquisition.

The real issue is the cost versus benefit of maintaining a AAA rating. Bragging rights is all fine, but bragging has little economic value. The real value of a AAA rating is that your cost of borrowing is lower. But to achieve that, you need to meet a number of stringent parameters, including having very little debt on your balance sheet (every one of the four on the list has virtually no debt). Perversely, as a company, if you have all equity and no debt, your cost of capital is high. So what’s the use of lower borrowing costs if you are not borrowing in the first place, or borrowing very little ? Companies decide that the AAA rating is simply not worth the price and therefore don’t aspire for it.

Rating agencies have also become very wary of AAA ratings. Quite a few members on that list have subsequently defaulted !! AIG, once a member of that club, is a good example.

But somehow, it doesn’t seem right that only four companies in the world have the highest degree of financial safety. Is the corporate sector simply too risky ? Or has risk not been priced properly enough to warrant some more companies deciding that the trade off of cost of borrowing and stringency of safety requirements is worth it ? Or does the investment market simply not care for the “highest” degree of safety and is perfectly happy with “adequate” levels of safety ?

So what does the “Scottish widow” (euphemism for the most risk averse investor) do with her money ? Dig a hole in the backyard. Hardly safe. Buy gold ? You must be joking. Put it in a bank ? This is what most widows do, but show me a AAA rated bank. There is just the mistaken belief that there is an implicit sovereign guarantee and that no country will allow a bank to go bust.

I can understand all the logical reasons why there are so few companies at the top, but somehow it seems odd that only four companies in the world are really really really safe financially.

Read More