Tue, Jan 05, 2016 page9

• A Chinese company in India, stumbling over a culture

  Chinese companies have embarked on ambitious overseas expansion efforts, snapping up land in dozens of countries, but they are struggling to navigate complex cultural, political and competitive dynamics

  • By Keith Bradsher / NY Times News Service, SHINDE, India
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  When a Chinese truck company wanted to open a factory in India, its president looked at sites that had a mountain in back and a river in front — especially auspicious locations in the traditional practice of feng shui.

  The company, Beiqi Foton Motor, found a seemingly ideal spot, securing 101 hectares of farmland in a western Indian village. Foton wants another 506 hectares nearby to build an industrial park for suppliers.

  However, the mountain there is sacred to many Hindus. For at least 2,000 years, the cliffside caves have been home to generations of monks. One of the most revered Hindu saints is said to have attained a pure vision of his god during the 17th century while meditating in the highest cave overlooking what is now Foton’s site.

  

  Illustration: Yusha

  The culture clash was immediate.

  Foton erected barbed-wire fences and hired uniformed guards to keep out trespassers. Cattle herders and Hindu pilgrims have repeatedly trampled the fences. The monks do not want a noisy neighbor.

  “In today’s life, spirituality and science are both important, and neither should deny the other,” said Kailash Nemade, a monk, during a pause from chanting religious poems. “But this factory should not come here, because it will ruin the spirituality of the mountain.”

  Chinese companies have embarked on ambitious overseas expansion efforts, snapping up land in dozens of countries to build factories, industrial parks, power plants and other operations. While the investments provide critical support for many economies, Chinese businesses are struggling to navigate complex cultural, political and competitive dynamics.

  China’s economic slowdown last year, along with a stock market plunge and a currency devaluation, have not deterred the country’s companies. Many have accelerated their global shifts as their home market becomes less attractive.

  However, Chinese enterprises lack the experience of their Western counterparts, which have spent decades developing international operations. As Chinese companies have built their businesses largely at home, they have not had to address the same challenges.

  In China, companies with strong Chinese Communist Party connections can bulldoze communities and religious sites. The Chinese government bans independent labor unions. While strikes and other labor protests are becoming more common, they are quickly squelched by the government if they show signs of spreading.

  As Chinese companies now venture overseas, they are dealing with a wave of resistance.

  In Africa, workers at Chinese-run oil fields and copper mines have gone on strike over low pay and dangerous working conditions. The Myanmar government halted China’s construction of a hydroelectric dam there after protests over environmental damage and the displacement of villagers. And in Nicaragua, residents have resisted the planned resettlement of villages to make way for a canal proposed by a Chinese businessman.

  In India, Foton’s experience provides an insight into the internal struggle that countries face.

  India desperately needs foreign investment to support the 13 million young people entering its labor force every year and to begin relieving chronic unemployment in its countryside. Indian and Western factories within a few kilometers of Foton’s site have created thousands of jobs.

  Western companies have tried to tread more carefully in India, in some cases learning from past mistakes. They have worked closely with communities, explaining their projects to residents. The companies have typically sent teams of executives, often with overseas experience.

  Foton strongly defends its plans. The company said that its plant and supplier park would create a much-needed economic boost.

  “Because of these projects, the employment of thousands of people, even tens of thousands, will be accomplished,” Foton’s executive vice president Zhao Jingguang (趙景光) said.

  However, Foton keeps revising production plans and delaying construction. With the project stalled, the promised jobs have not materialized.

  Foton’s corporate style has also caused friction. It managed the project mainly from Beijing, sending executives to India for two-week visits. When Foton’s Indian managers needed to work with the main office, they sat through videoconferences that lasted hours, with Chinese executives often speaking at length in Chinese.

  Zhao denies that the company picked the location for its feng shui, which the Chinese government condemns as superstition. Still, he acknowledged that “there is a river, should be good feng shui.”

  However, the land deal has been less than harmonious.

  Regulations mandate that factories be located at least 500m from temples, preventing construction on half of Foton’s site. A state agency also reserved land for a 13.71m wide dirt access road to help pilgrims reach a footpath to the caves.

  Despite Foton’s efforts, many villagers and monks said the factory would still be too close. Pilgrims, who can number more than 5,000 during religious festivals, would have only a 0.2 hectare area to pitch their tents.

  Sitting cross-legged in a pink-painted cave, the monks’ leader, a Hindu holyman named Vishwanath Maharaj, listened closely when asked for his view on Foton’s plans. However, he merely gave a slight smile and shrugged his shoulders, preserving his 35-year vow of silence.

  When Chinese President Xi Jinping (習近平) arrived in India a year ago for a visit, he was welcomed at each stop by Indian military honor guards, including a row of turbaned cavalry lancers on horseback.

  Xi and his host, Indian Prime Minister Narendra Modi, smiled as a succession of deputies and executives exchanged more than a dozen commercial and cultural agreements with one another. One of the agreements called for the creation of the supplier park, where Foton would rent out space to Chinese parts manufacturers.

  “Your vision cannot be too small,” Zhao said. “Nowadays, people say you must have an international vision.”

  Following the lead of the US, Japan, Europe and other big economies, Chinese companies are diversifying overseas to find new customers, markets and opportunities.

  A decade ago, China’s overseas purchases of companies, land, equipment and other physical assets totaled just US$20 billion a year. Last year, China’s total was US$120 billion. China trails only the US — and US overseas investments have been heavily aimed at limiting taxes.

  Pune and its environs have long been a hub of foreign investment, tracing their industrial roots to a munitions factory built in 1869 under British rule. Big assembly plants now churn out Chevrolets, Mercedes, Mahindras and other cars. A Corning plant makes fiber-optic cables. A General Electric factory creates wind turbines.

  For Foton, India offered cheap labor and a strong market for its products. India’s position between Southeast Asia and Africa provided a natural hub to supply other developing markets.

  Even without the supplier park, Foton has leased the biggest site in the area, 101 hectares. Corning, GE and others nearby have less than 40.47 hectares apiece for their factories. A Bridgestone tire factory occupies 74.87 hectares.

  In Shinde, speculators have bid up the price of land, expecting the state government to buy it and lease it to Foton. However, many villagers are opposed to selling; the deal would eliminate much of the farmland that is left.

  Kaluram Kendale, who grows onions and raises buffaloes, is upset that the state government already forced him to sell 2 hectares of the 4.86 hectares that his family farmed for generations.

  “If I sell the land, it’s one-time money,” he said. “But my land is beautiful, it’s fertile, and it’s a permanent source of income for my family.”

  Chhaya Shinde, who grew up in a mud-walled sharecropper’s cabin with dirt floors, was a star student, learning to read and write Hindi and Marathi, the local tongue.

  Her father, unlike most in her impoverished hamlet, wanted his daughter to get an education. He paid US$16 per year for Shinde to attend a school in a nearby village. She dreamed of becoming a social worker to help the elderly.

  Shinde’s education ended after Foton came to town.

  While landowners were paid for their fields, sharecroppers got nothing. Shinde’s father, a millet farmer, lost much of his income. Shinde, 18, had to drop out of school one year ago.

  Since the arrival of Foton, the gulf between the rich and the poor has widened.

  The Panmands, who owned the land where Shinde’s family farmed, sold half of their 23.47 hectares for the Foton factory and two other factories. With the proceeds, they built a 10-bedroom villa with a large courtyard and a fishpond.

  When Suresh Ghanwat sold land, he invested part of the money in a three-story apartment building, renting out the top and bottom floors. He also set up a concrete block business, producing a daily profit of US$80.

  However, many families are like Shinde’s, trying to survive in cramped, dark cabins.

  Indian laws on land deals are fairly generous by developing country standards, calling for compensation for tenant farmers and sharecroppers. However, to qualify, they need to live on the land or record the arrangement in official logs. Shinde’s family did neither.

  Shinde, who wears a pair of simple barrettes to hold back her dark hair and slim golden bangles that encircle each wrist and ankle, now labors part time on one of the Panmand family’s remaining fields.

  “I wish they had never come here,” she said of Foton, wielding a scythe to cut pearl millet. “Those who were rich became richer, and the poor, poorer.”

  When Foton acquired the land three years ago, young babul trees sprouted as soon as the farmers left. Today, Foton’s site has about 12,000 full-grown babul trees, a widely loathed plant with 5cm thorns.

  Their height, up to 3m, brings a tree preservation ordinance into play. When Foton eventually starts building, it will have to get permission from the forestry ministry to cut the trees down.

  As the babul trees flourish, Foton’s leadership has agonized over what to build, according to five former executives. The original plan called for welding, assembling and painting heavy-duty trucks.

  The plan shifted to building delivery trucks, and then to assembling sport utility vehicles and cars. In that time, Foton’s Indian operation has had four chairmen and at least three executive vice presidents.

  Zhao said the company hoped to start building the factory early this year.

  The supplier park looks less certain.

  Both the Beijing government and the New Delhi establishment regard the deal as important. However, Foton did not enlist the support of local bureaucrats, and a civil servant in Mumbai could ultimately derail the project.

  The state land agency, the Maharashtra Industrial Development Corp, has to approve the deal.

  Agency chief executive Bhushan Gagrani has resisted, citing a dearth of farmland and earlier disputes with families like the Ghanwats. He wants to steer the supplier park farther inland, where unemployment is more acute and farmland abundantly available.

  However, the alternative sites would require supply trucks to haul parts for several hours. Foton, Gagrani said, did not send anyone to look at them.

  The Indian prime minister, accompanied by an entourage that included Gagrani, traveled to China in May last year. Chinese officials pressed the case for the Foton supplier park again.

  However, a deal might not be possible now.

  Taiwanese electronics giant Foxconn Technology Group has decided to build a mobile phone factory nearby. Foxconn negotiated directly with the state government.

  “Any land left we are giving to Foxconn,” Gagrani said.

  Additional reporting by Jonah Kessel

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