Q&A: Xi Jinping and Narendra Modi turn to U.S. for investment. How will it play out?

The heads of China and India – the world’s two most populous countries – will make big splashes on the West Coast this week. They’re here to convince leaders of U.S. multinational corporations that investing in their respective nations is a strong bet despite economic and regulatory uncertainty.

The main destination for Chinese President Xi Jinping and Indian Prime Minister Narendra Modi is the U.N. General Assembly in New York. But Xi will visit Seattle beginning Tuesday and Modi heads to Silicon Valley this coming weekend.

Each faces a skeptical audience. The U.S. is friendly territory for Modi, but potential partners want to see India’s infrastructure and bureaucracy improved. Xi’s visit comes with more tensions, including concerns about China’s escalating cyberwar aggression and business-related espionage.

For some insight, we chatted with Anil Gupta, an expert on the U.S.-India-China triangle and chair in strategy and entrepreneurship at the University of Maryland’s Robert H. Smith School of Business. Here’s an edited excerpt.

Why the West Coast?

We’re in an era of digitization of everything. The companies doing the transforming – Microsoft, Amazon and Facebook, are [all based along the Pacific]. They want to meet with the technology leaders, exchange views and potentially leverage their technologies.

The economies of India and China can’t be lumped together anymore, right?

It’s one of those questions for which you’ll never have an answer. The similarities are obvious: They are the two of the fastest growing economies in the world. At the same time, China’s economy is 4.5 times as large as India’s because it’s grown much faster over the last 25 years.

How exactly are they different?

The picture is quite different in the technology sector.

Under Xi Jinping, China has become decidedly unfriendly to multinational companies while India has become more fundamentally open to multinationals, not just in technology but in sectors like autos and telecoms. India is more open than China [except for retail].

China has focused on a policy of fostering national champions; in tech, the government’s concern is really about security. They want to control the access to media.

How does that play out on this visit?

Microsoft has been in China from the early 1990s, but revenues from China are insignificant. Historically, Microsoft has a good relationship with China but even Microsoft has had a decidedly unfriendly relationship recently. [Microsoft co-founder Bill Gates’] meeting in Seattle with Xi Jinping is less out of eagerness but more because they were asked by the Chinese government, and they didn’t want to say no and appear impolite.

In the case of India, companies like Apple historically didn’t regard India as an important market but [Chief Executive] Tim Cook has begun to take India quite seriously. Silicon Valley CEOs would be more eager to visit with Modi.

Modi seems to hold a lot of the chips then?

From the perspective of any U.S. technology company, they don’t want to put all the eggs in one basket. Whether it’s Uber or Microsoft, they want to have big presence in China and a big presence in India.

Gays, lesbians, human rights activists, academics and more want to see Cook, Gates and other business leaders press China and India on social issues. How does the social activism of leaders like Cook translate abroad?

CEOs know that on these issues the political leaders are going to do whatever they are going to do. Their ability to change perspectives is pretty minimal.

Within the U.S., whether it’s immigration or gay and lesbian rights, they feel a lot more comfortable advocating as American companies, just as [Indian tycoons] Cyrus Mistry or Anand Mahindra or Ratan Tata talk about what the Indian government should or should not do on various fronts.

Multinationals find themselves in a tricky situation abroad because they feel like they are guests of the country. Hindustan Unilever [the Indian branch of the European consumer products giant] has been there for [nearly] 100 years. Yet they still would feel hesitant to talk about human rights. They would talk about economic policies, but going into social, cultural issues for multinationals in a foreign country, it’s very tricky.

To get into Tibet-related questions with China would be very problematic.

Why?

It’s problematic not because they don’t have a right to comment on these issues, but it would be viewed as presumptive. Google can talk about privacy with big loudspeakers in the U.S. or even Europe, but in China, the Chinese government would say, ‘Who are you to tell us?’ They are viewed as outsiders in emerging markets.

Would there be any reason that they step up?

Going outside the economic issues, there are lots of things they could choose to focus on. Literacy is huge in India. Clean water. From the perspective of say a Microsoft, if you have to pick and choose what social issues to focus on -- literacy, clean water and toilets -- the company is not positioning itself on the opposite side of political leaders. Rather than antagonize political leaders, companies want to keep them happy so political leaders don’t create any more barriers. It comes down to who is more powerful, and the government is more powerful.

Cybersecurity and climate change are issues the Obama administration is bringing up with both countries. Will business leaders broach those topics with Xi and Modi?

China is viewed geopolitically as a potential enemy and virtually an enemy now. On cybersecurity, I’m confident no CEO would bring this up in the discussions with Xi because the forum for that discussion really would be government to government. Cybertheft by China is aided and abetted by the Chinese government. If the government itself is the culprit, then it’s for the U.S. government to take it up because it becomes a matter of national policy.

By and large on climate change, countries have become aligned. India, China and the U.S. accept that climate change is a global problem and requires all countries to connect to reduce carbon emissions. Cities like Delhi and Beijing are the most polluted in the world, so there’s enough domestic pressure.

Would businesses trying to gain favor with India and China try to lobby the Obama administration to back down on social and security issues?

My conclusion is no. U.S. tech companies no longer trust the Chinese government ... seeing as it not willing to play a fair game. If I look at all the big tech companies, the one that went out of its way to embrace the Chinese government is Microsoft at the leading edge. And it’s found itself in trouble recently, so they are realizing the Chinese government doesn’t care if we do good things for China.

Even if they press the White House, I doubt the White House would listen.

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