Business Books: Weaving parallels between China and India

By Tom Miles

HONG KONG, Jan 31 (Reuters) - Whoever first thought of boiling investment decisions down to a simple trade-off between "risk and reward" should try fathoming the world's two most populous markets.

Many an investor has been lured by the the siren songs of a billion consumers in China or the world's largest democracy in India, only to drown in oceans of bureaucracy or be stranded by an unreliable partner.

In "Billions of Entrepreneurs" (Harvard Business School Press, $29.95), Tarun Khanna seek to reassure potential investors with tales of how others have steered their businesses in these difficult waters.

Khanna, a Harvard Business School professor, writes that colleagues and friends frequently ask "Can I really make money in China and India?" The answer is a resounding "yes," qualified by the need to know what you are getting into and to prepare for the long haul.

"Landing on foreign soil to make a quick buck virtually never works," he writes.

Khanna, a Harvard Business School professor, contrasts the two countries in areas as diverse as technology, healthcare, movie-making, oil, banking and agriculture, but rarely, if ever, pronouncing one to be better than the other.

SO MUCH TO BE DONE

Khanna chides such black-and-white thinking. "The pundit's favourite issue, of 'who wins,' China or India, misses the point."

Aside from size and rapid economic growth, the two countries are very different: communist versus democratic, an planned economy with an iron will versus a muddled and arbitrary bureaucracy, a unitary state versus the most diverse nation on earth.

To illustrate the pitfalls of comparisons, he unpicks data on foreign direct investment. At first, it seems heavily in China's favour, but after he strips out anomalies, a more balanced picture emerges.

The temptation to take such data at face value is not confined to foreigners.

"Even managers of the Asian companies I visited were sure that their Indian operations outperformed their Chinese operations but were convinced that the Chinese operations mattered more to headquarters," he writes.

He suggests that businesses should recognise the depth and complexity of both markets -- and the opportunities within.

"My thesis is that entrepreneurship in developing countries occurs in far more encompassing and far-reaching ways than in more developed settings -- for the simple reason that there is so much more to be done."

Khanna's optimism leads him to glass-half-full assessments, such as an appreciative view of the Chinese Communist Party.