WHY THE RED DRAGON IS ON THE OFFENSIVE MODE?

China has been in the news for a long time now for bad reasons like censorship issue with the Google, issuing separate visas for Indians flying from J&K, Chinese army entering Indian Territory; the latest is the news that the Chinese have hacked the mail accounts of Google user’s mainly human rights activists and they are allegedly involved in spying activities. Why china is getting aggressive and trying to establish its influence around the globe? It has recently warned the US president Mr.Obama, not to meet Dalai Lama.

China has a totally different political and economic setup, and it has its own advantages. China is communist at heart but capitalist at brain, unlike other communist countries which adopted complete communist policies and too much of bureaucracy leading these economies to become stagnant, this is what happened with the Soviet Union, post Lenin era and some countries which were socialistic in nature started to adopt capitalism and have become almost free markets, they are totally in a confused state, mixed economy hoping to achieve the prosperity that capitalism promises, still keeping a majority of its masses in poverty, unemployment and illiteracy.

But china on the other hand, is a complete communist regime, party is above all, but yet has adopted capitalist model of growth. These Chinese are crazy about foreign direct investments; they have provided entirely favorable environment for foreign investors, they are not only flourishing in exports but also serve as a great market for western companies. Even the Chinese have started learning English, and are attracting even BPOs to their country. The kind of policy they have adopted has helped them build adequate infrastructure, attract huge foreign direct investments and more importantly has created millions of jobs. The policy makers of this country have played a fantastic role in pulling out millions of people out of poverty over the years and steered the total economy to achieve tremendous growth rates and will continue to be one of the fastest growing economies of the world, but what seems interesting is that, though these communists have adopted a capitalist model of growth and allowed a plenty of corporate companies to flourish in their territory, they still control the economy at a large scale, it is not a free market, remember party is above all. Usually, in a free market or capitalist society, the corporate companies rule the country, they control government decisions, and this is an untold truth and hidden fact. But these communists are very particular about that, they never allow private hands to play at their will, there is a complete government control in the whole functioning of the economy.

This is where the capitalist societies of the west have the problem, they want free market every where all around the globe so that, their companies grow, expand and flourish and strengthen their already strong economies and the Chinese communists know this well, that’s why they play this capitalist game very cautiously, but the point is, china is a very attractive market like India, and the whole west knows that china has a great future, and impatiently waiting that one day this china will become a democracy like India, so that the exploitation of the market becomes easier. They basically hate communist regimes.

The Soviet Union, of course had its own draw backs, the economy was totally mismanaged post Lenin era, but the then western Industrial powers, especially, the US played a great role in facilitating the collapse of the Soviet Union and these Chinese Communists know history very well, they know how their comrades were felled by these western powers and they wait for another historic opportunity to crash their present regime too. So, it’s a situation of act or perish, grow or perish. They have decided to expand their influence now around the globe and got into the offensive mode, unlike the Soviet Union which was very much defensive, and tried save its power till then it was very late. These Chinese have decided to take on all their threats, that’s why it views India more of a competitor than as an ally ( I have already posted an article on this), that’s why it has started its spying activities around the globe to keep a check on all the western powers. China has emerged as an important financial center of the world and in the years to come will become a super power and will pose a real challenge for the whole western world and now the Chinese communists are preparing themselves for the challenging future and to make themselves capable enough to foil any possible attempts the western world can make to destroy their regime. The on-going tensions between china and US over the US president’s meet with Dalai Lama, the US government coming forward in support of Google, the western countries’ concern over china’s rapid economic growth and a possibility of becoming a world power, Multinational companies’ desperation to exploit the Chinese market, all these factors may contribute to a Cold war situation in the future, remember such a cold war existed between U.S.S.R and the U.S for years until the collapse of the Soviet Union in 1991. So, The Chinese probably see such a cold war in the future and thus the Red dragon has decided to fight all its threats including India and right now is on the offensive mode. Now, the time has come for India to be cautious about China, and needs to prepare itself in all possible way economically and militarily to defend itself from any Chinese threats in the future.

TRAI WAKE UP! THE REAL TELECOM GAME BEGINS NOW……

“I don’t meet competition, I just crush it” said Charles Revson, but as the Indian Telecom battle going on, it’s likely that a few players will get crushed. Yes, it’s about the hyper competition that is going on in the Indian telecom market.

India is the fastest growing telecom market in the world, having approximately 52 crore mobile users, account to more than 50% of the population and the expert forecasts show that by 2014, the number of mobile users will rise to 100 crores. India being a very attractive market in terms of its population and ever growing educated middle class, and potential unexplored rural market, apart from some strong existing players, more and more new entrants have been entering the market. As the competition is getting intensified, Michael Porter’s all the forces have become active, in the telecom industry, right from industry competition, new entrants, bargaining power of suppliers, bargaining power of customers, Threat of substitution. Well, as the number of phone users growing day by day, new entrants see the opportunity and have been entering the market and also giving tough competition to the early birds. As the competition intensifies the companies have started to bombard the market with offers like cheap connections, lower call rates and various other mixed offers to attract customers, and the biggest beneficiary of this intensified competition is the customer, the Indian mass have been benefiting from the offers offered by these companies. Competition is good for any industry; monopoly is bad, because it will affect common people.

But what is going on now is something very interesting, blistering growth has attracted new players like Japan's NTT DoCoMo Inc which formed a joint venture with Tata Teleservices Ltd. in June and sparked a race to the bottom over prices as companies rush to grab market share. The price war triggered by these new entrants have resulted in hyper competition, the price cut is huge and unimaginable, the call charges were dropped as low as 1p/sec, later MTNL’s MTN offered ½ p/sec, and companies like Virgin,Reliance offered 20p/min, now the last one to join the price war is Tata Do co mo offering 1p/6 sec (call charges, though similar but may vary from place to place).

Indian consumers at least have a reason to smile, despite the increased food inflation, that the telephone bills have come down drastically. But see what the companies are going through right now. The four month old price war has hit margins at a time when Indian telecom companies have little scope for cost-cutting, Macquarie Securities analysts said in a report. They maintain that the "price cut contagion" is likely to spread from retail rates to corporate, wireless data, international roaming and SMS rates as well. Midst of the price war, government has decided to rise the spectrum charge to 50% for the existing players recently.

The kind of price war that’s going on may lead to heavy losses and can badly affect the whole telecom industry, at least now, TRAI, our Telecom Regulatory Authority of India and Department of Telecom can intervene, not to control the market, but to take some measures to curb new entrants from triggering such kind of price war in the future. A price war that analysts say could turn India's telecom boom into a financial bust.

You may say, millions of people are benefiting from the low call charges, and price war is good, and after all who cares about the telecom companies. But the point is, we are part of a large system, an economy, a complex structure of sub-systems, where one sub-system gets affected the whole system is affected. You must be aware of such a price war that went on in the Aviation sector, which resulted in heavy losses for Airlines and companies were asking for bail out packages from the government. The telecom game that is going on now may result in a disaster; if the companies incur losses, this will badly affect the telecom sector and economy as a whole. Ultimately, government has to come up with bail out packages to save the sector, because the concern is not only about these companies which are pillars of the telecom sector but also about the thousands of employees working in these companies and the number of units like the intermediaries, suppliers, distributors etc. associated with the industry.