China and India Leaders In U.S. to Court Tech Giants

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The leader of 1.3 billion people is now in the U.S. but has been largely ignored by the American media. No, I’m not referring to China’s President Xi Jinping, who received full state honors in the American capital on Friday. His visit, although overshadowed by the Pope’s, has been covered well.

I’m thinking of Narendra Modi. The Indian prime minister arrived in New York for wall-to-wall events on Thursday and Friday; met with the CEOs of America’s largest companies, including Indian-born Indra Nooyi of PepsiCo; and then flew to California for another packed two days. Modi is only the second Indian leader to visit the Golden State. Jawaharlal Nehru went to San Francisco in 1949.

Modi is also in the Bay Area, but the current prime minister is spending his time in Silicon Valley and points south instead. There, on Sunday, he speaks to a packed-to-the-rafters crowd at the 18,070-seat SAP Center in downtown San Jose as well as the 29,000 who couldn’t get tickets. The latter group will hear his words live-steamed to Arena Green Park, just across the street.

Yes, Modi is like a rock star, but his smaller events are also crucial to the future of his country. A day before the San Jose extravaganza, Modi hobnobbed with CEOs, Microsoft’s Satya Nadella, Google’s Sundar Pichai, and Shantanu Narayen of Adobe Systems, all born in India.

And when he wraps up his six-day trip to the U.S., Modi will have met with Tim Cook of Apple and visited the headquarters of Tesla and Facebook.

India is especially alluring to America’s tech companies. For one thing, New Delhi doesn’t block their entry. Facebook and Twitter, among others, are banned in China.

The only thing worse than being shut out of the world’s most populous country is being let in. Just ask Google, which had its source code filched and dominant market share stripped away by Beijing. Today, thanks to official help, home-grown Baidu had, according to one estimate, 79.8% of China’s overall search market by revenue in Q2.

How about the world’s largest software company? Microsoft has had to surrender source code and has been subject to continual harassment.

Think you can escape if your name is “Qualcomm”? In February, the Chinese central government, in the form of the National Development and Reform Commission, exacted a “fine” of $975 million and essentially undermined the chipmaker’s business model.

Xi Jinping’s China cuts down foreign competitors that win leading market shares. His latest attack on foreign tech companies occurred this summer, when the China Information Security Certification Center tried to get them to sign pledges to surrender intellectual property and user data and to ensure their products were “secure and controllable.”

This brazen attempt followed similar initiatives to force foreign tech vendors to give up source code, an effort thwarted in April by Washington but now apparently revived. In any event, China’s new National Security Law, enacted in July, will surely be used to obtain what Beijing has not so far taken.

Xi Jinping talks about pursuing reform, as he has did in Seattle to tech execs on his current trip, but his actions show he is determined to reserve China’s home market for Chinese competitors, preferably state-owned ones.
So far, Apple has escaped a debilitating attack on its business in China. Cook is bullish on the country, which he continually says will become Apple’s biggest market, and today things look good. The iPhone 6s and 6s Plus sold out within hours there, but Huawei Technologies—and Beijing—look like they are gunning for the iconic American brand.

No wonder India now looks so promising in comparison. It has not always been this way, however, as the country has been a backwater for tech companies. “We raised our fund during some of the toughest times in 2013 and early 2014,” Sandeep Murthy of Lightbox Ventures told Bloomberg Television last week. “At that time we would meet investors and you would talk about India and it was ‘ehhh, not necessarily the best place.’ ” “India is sort of the second child in the ecosystem,” he explained.
India may still not be the family’s most attractive sibling, but its moment to shine will come soon. The World Bank expects the country to become the world’s fastest growing major economy by 2017, and eventually investors will accept the notion that India may hold that crown even now. Both countries claim 7.0% growth for the last quarter, but China is probably at 2.2% or less.

In any event, India will overtake China to become the world’s most populous state by no later than 2022, the date the U.N. projects in its “World Population Prospects: The 2015 Revision, released at the end of July.

China’s population will peak in 2028 with 1.42 billion people and then fall to just over a billion at the turn of the century. India, on the other hand, will grow until 2068, when it will hit 1.75 billion. Then, according to the U.N., China will have 541 million fewer people.

These trends make it virtually inevitable that India will overtake China in internet usage. Beijing reports 668 million Chinese were plugged into the internet in June. India is far behind with only about 350 million people online. No other country, therefore, scores higher than India in potential.

And with mobile, India can connect its far-flung people quickly. Quick connection is important because it can help Indian businesses overcome fragmentation and scale up fast.

That’s exactly what Modi wants to do with his “Digital India” initiative. And the giants of Silicon Valley are planning to be a part of that.

“There is a lot that is going to happen in the next one to two to three to four years,” says Aarthi Ramamurthy, founder and CEO of San Francisco-based Lumoid, speaking in connection with Prime Minister Modi’s visit. “This trip is very historic and very timely.”

So Xi Jinping may have gotten a 21-gun salute and state dinner in D.C., but it is Modi who will reap American cash.

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