Billions of Entrepreneurs

Tarun Khanna
Boston: Harvard Business School Press
Chapter 8: Diaspora Dividends: Paragons and Pariahs from the Overseas Chinese and Indians Pages 167 to 174

On January 9, 1915, a serious young Indian lawyer arrived in Bombay on a ship from South Africa. He was given a hero’s welcome. His satyagraha (Sanskrit for “truth and firmness”) movement in South Africa had attracted several thousand followers and brought him fame in India. This nonresident Indian (NRI) had fought successfully for the civil rights of South Africa’s Indian minority; among other concessions, the Union of South Africa had abolished specific taxes levied on Indians and recognized Indian marriages. Mohandas Karamchand Gandhi, the Mahatma (Great Soul), would go on to lead the fight for India’s freedom and dominate the next thirty years of Indian politics by sheer moral suasion.

Eighty-seven years later, on January 9, 2002, India held its first annual Pravasi Bharatiya Diwas (Overseas Indians’ Day). The symbolic date, honoring its most prominent NRI and accompanied by a public relations blitz intended to reach out to contemporary NRIs, was meant to usher in a long-overdue appreciation in India for its diaspora. Unlike China, which has benefited tremendously from its diaspora’s wealth and talent, India has historically missed and ignored its own. Until recently, as hard as it was for an Indian within India to conduct business, purchase property, or even volunteer time or expertise to any cause, it was even harder for NRIs. Not until 2002, a decade after India launched its economic reforms, did the government create a Persons of Indian Origin policy, which extended benefits and concessions to ethnic Indians worldwide. (1) Although some of these overseas Indians have dutifully sent remittances home, transforming the lives of their immediate families, large-scale investment from this group has been wanting.

I participated in the second Pravasi Bharatiya Diwas and was privileged to share the stage in New Delhi’s grand conference center, Vigyan Bhavan, with two stalwarts of modern India: Mukesh Ambani, head of one of India’s premier business groups; and Lal Kishan Advani, deputy prime minister of India, strong man of the Bharatiya Janata Party (BJP), and the leader of the ruling coalition government in India at the time. I should mention that although I am an NRI, because I have returned to India three or four times a year, I remain more connected than most Indians living overseas and thus have not felt cut off, shunned, or dismissed.

Ambani spoke first, reminding the audience that his father’s businesses began with a diasporic connection in the Red Sea port of Aden. Dhirubhai Ambani, whose life saga is India’s most celebrated rags-to-riches story, worked as a gas station attendant in Mumbai before immigrating to Aden, where he started a small-time trading business in the busy Yemen port. Over the next few decades he built one of the world’s leading petrochemical and refining groups, famed for its ability to handle large-scale construction projects with ruthless efficiency. Reliance Group was India’s only entrant into the world’s Fortune 500 list. Dhirubhai’s other major contribution to Indian business was to court the retail financial investor. In 1977, desperate for capital, he bypassed India’s sultans of high finance and successfully raised large sums from numerous small shareholders, becoming responsible for an important change in Indian capital markets. Last but not least, Dhirubhai had politicians at his beck and call.

Because of this legacy, when Mukesh Ambani called on corporate India to develop the rest of the country and lauded India’s diaspora as potential agents of change, his words carried weight. Ambani reminded the audience that wealthy Indian diaspora had come of age in the West and had won worldwide acclaim for its entrepreneurial and academic successes since the 1990s. This welcomed development offers the possibility that India, like China, will benefit from its diaspora’s wealth and talent. The potential is great. Today the diaspora’s annual income is about $160 billion, a third of India’s GDP, with a sizable proportion of the affluence originating in Silicon Valley, home to some three hundred thousand Indians. (2) Whether this potential will be realized depends on whether the Indian government will match recent rhetoric with tangible policy that reaches out to the Indian diaspora. I spoke after Ambani, focusing on the need to specify a channel through which the diaspora could play a role in India. I argued that specific involvements would breed commitment and familiarity, rather than just rhetoric. Many successful diaspora members, particularly in the United States, are highly educated. Thirty-seven percent of India-born U.S. residents, for example, have master’s or doctoral degrees, compared with 8 percent of U.S.-born residents and 18 percent of Israel-born U.S. residents, Israel being another bastion of high-tech prowess. Eighty percent of working-age India-born Americans have tertiary degrees compared with 54 percent of American citizens born in China. I argued that the world increasingly valued knowledge capital, and India’s diaspora was synonymous with advanced know-how in software, biotechnology, and the like.

I suggested that diaspora Indians could help shape the world-renowned Indian Institutes of Technology (IITs) and Indian Institutes of Management (IIMs), where many had been educated. At that time, the government’s human resource development minister had proposed subjecting the IITs to more government control and oversight, virtually eliminating the decentralized system that had spawned excellence in them. A higher percentage of the seats in the IITs were to be reserved for members of India’s most disadvantaged populations, and faculty appointments were to be centralized. The IITs had vigorously protested the proposal. The excellence of the institutions was in no small part due to a grueling examination that selected the best talent and did so from a very level playing field. Reservations would compromise this, and centralized appointments were a recipe for political interference and therefore mediocrity. Government interference in higher education would be a move in the opposite direction from that taken by the country’s private sector in the prior decade-dismantling centralization, expanding choice, and fostering competition. Unsurprisingly, a vituperative battle had played out in the media.

I echoed Prime Minister Vajpayee’s exhortation that the diaspora could provide a wealth of ideas that would be followed by economic wealth. The surest way to motivate successful diaspora members to reconnect with their universities was to emulate U.S. institutions by assuring alumni their input into the community would be respected and their time well spent. From this assurance and confidence ideas and money would flow. I argued that the government’s proposed interference in the IITs and IIMs would cut off the diaspora from constructive engagement with these universities.

Last to speak was the septuagenarian Advani, long a fixture on the Indian political scene. His was the speech of a maestro. He responded to Ambani and me by pronouncing that the time had come for a jugalbandi - “a duet” in Hindi - between Indians and their diaspora. This was during the time that Advani’s party, the BJP, had articulated the “India Shining” campaign as their election slogan, and was prior to their surprise defeat in the polls a few scant months later. Apparently India had not quite shone for the rural residents who voted them out of office.

At the time of the second Fravasi Diwas, Advani was in his element, alleging that democratic norms stitched together Indians and the diaspora. The duet had to occur within democratic norms. Neither Advani nor his government nor the bureaucracy could forge a link. It was up to decentralized action to make it happen. Individual initiative would be the engine of connection.

Since that Pravasi Bharatiya Diwas, I have become more convinced that India could learn a lesson from China about diaspora management-economic incentives coupled with patriotic rhetoric-for the country’s economic’ advantage. By consistently welcoming its diaspora, China has catapulted its economy forward, while India’s ambivalence, even patronizing distaste, have held it back.

The difference is that over the last century, with the exception of Mao’s time, the Chinese state has viewed the diaspora as part of the national fabric, a resource to be galvanized to aid the country’s modernization and economic development. Since the ascent of Deng Xiaoping, successive Chinese leaders have smartly fashioned both policy and rhetoric to lure this group’s wealth and investment. (3) Collectively referred to as huaqiao huaren (huaqiao means “citizens living overseas,” and huaren refers to foreign nationals of Chinese origin and their descendants) this group has yielded China handsome dividends. No indicator evidences this unique Chinese situation as well as the percentage of the massive foreign direct investment pouring into China - as much as 80 percent in the early years of reform-coming from Chinese living overseas. This involvement is one of the most distinguishing characteristics of China’s economic rise. (4) In 1997 the Canadian magazine MacLean’s encapsulated this unique phenomenon: “[T]he world’s 57 million overseas Chinese … rule the world’s third most powerful economy.” (5)

This diaspora-state relationship has been mutually beneficial. China has consistently offered special treatment to overseas Chinese. Thus have the wallets of the hai gui or sea turtles - so called humorously because the Chinese word for “return” rhymes with that for “turtle” - been lined, giving them a leg up in the greatest growth story of modern times.

From China to Chinatown: Diaspora Entrepreneurs

Who are the 57 million overseas Chinese? (6) As early as the 1840s Chinese immigrants began to make their way to the West Coast of the United States. In 1848, with the discovery of gold in the California hills, immigration increased dramatically. While a few of them were independent merchants, most were rural peasants-indentured laborers-brought in by mining and companies to work in the mines and build the railroads. By 1860 China had lost two wars to the British and other Western colonial powers; The Opium Wars radically changed China’s political and economic landscape. From war-ravaged provinces, particularly Guangdong, huge numbers of emigrants left for the United States. In many parts of China, natural calamities like famine and floods added to the prevailing poverty and deprivation. Roughly 34,000 Chinese were in the United States in 1860.

By the end of that decade, as the Gold Rush abated and railroad construction neared completion, thousands of Chinese suddenly had to seek alternative employment. They soon branched out into service businesses like laundries and restaurants. Before long, however, a slowing American economy and accompanying unemployment gave rise to anti-Chinese sentiments on the West Coast. Slogans like “Yellow Peril” and “The Chinese Must Go” began circulating, and violence against ethnic Chinese individuals and businesses was rising. In response Chinese immigrants clustered in what came to be the Chinatowns, and also began to move to bigger cities, especially in the East. Thus were laid the nuclei of present-day Chinatowns in San Francisco and Los Angeles on the West Coast and in New York and Boston on the East Coast. (7)

Reasons to leave China remained strong. During the second half of the nineteenth century, when economic growth remained elusive and poverty and famine were never far away, emigration remained a coping strategy. However, the profile of the Chinese immigrant changed. Uneducated laborers were replaced by scholars and craftspeople who sought work and business opportunities in the West. By no means, however, was it a homogenous group. Based on generation of immigration, place of origin, and socioeconomic and education levels, Chinese immigrants carved out various niches in most countries of Southeast Asia, North America, and Australia.

Boston’s Chinatown is in the heart of the city, sandwiched between its financial and theater districts. Not long ago I walked through its paifang, the Chinese name for the traditional archway that marks the entrance to every Chinatown around the world. Each archway was donated to a particular city as a gift from the Republic of China, and local contributors financed their construction. (8) Just a few minutes’ walk away from Boston’s paifang is the office of the Fung Wah Bus Company, where I had an appointment with its entrepreneurial founder Liang Peilin. Liang’s success is emblematic of the general success of the diaspora worldwide and the material wealth into which mainland China has successfully tapped. I was curious about the Fung Wah Bus Company because of its near-cult following; travelers on the Boston-New York City corridor claim the bus ride is comfortable, easy, and costs a fraction of the price of its American competitors.

I climbed a narrow dimly lit staircase to Mr. Liang’s office for a 9 AM appointment. The empty ballroom-like hall contrasted sharply with the crowded Chinatown exterior. Traditional Chinese musical instruments adorned a wall. A middle-aged woman stared at two computer terminals, and without looking up, informed me: “Mr. Liang is at lunch.”

With no further explanation forthcoming as to why Mr. Liang’s dietary schedule included “lunch” at nine in the morning, I settled down to wait. Founded in 1997, Fung Wah-“magnificent wind” in Cantonese-today operates more than twenty buses with hourly service linking Boston and New York. The company originally provided transportation between Brooklyn and Chinatown for Chinese immigrants in New York, but gradually extended its line to Boston and became the dominant low-cost provider. At $20 per round trip, Fung Wah charges less than half what mainstream competitors like Greyhound and Peter Pan charge.

The boss arrived a half hour late. A short man with high cheekbones and relatively dark skin, he looked about forty. He told me he was Cantonese, from Zhuhai city in Guangdong province. As we talked I learned that he followed his parents to the United States in 1988 at the age of twenty-six. His parents, who were white-collar employees of state-owned enterprises in China and managed to get sponsored by some relatives in the United States, took jobs in clothing factories near Manhattan. Liang took two part-time driving jobs: van driver and noodle deliveryman. At that time the van company Liang worked for served Chinese immigrant workers living in Brooklyn. He explained, “For security, Chinese workers preferred to commute to work in vans run by Chinese rather than taking the dangerous public transport; and so this van business became more and more profitable, especially after 1992 or 1993, when more and more Chinese arrived in New York. Most of them were illegal immigrants from Fujian Province who arrived daily by boat.”

After seven years Liang decided he had accumulated enough experience to set up his own company. He secured a license from the New York Taxi and Limousine Commission to operate a bus along 8th Avenue in Manhattan in 1995. One year later, his company, named Fung Wah Vans Incorporated, came into operation. Liang was both driver and boss.

Liang began to see an unmet need within the Chinese transportation market. Chinese parents living in New York regularly visited their children attending Boston’s universities. He applied for a permit to transport passengers between the two cities and launched his new service in June 1998. At first no customers signed up, but just before Thanksgiving-typically the busiest travel day in the United States-word of Liang’s service spread among Chinese students returning home for the holiday. Within months Fung Wah had become an urban legend. In 2001, acting on advice from his g customer base, Liang introduced an online ticket-selling system that been hugely popular. “Fung Wah’s passengers used to consist of 60 percent Chinese and 40 percent other ethnic people,” Liang recalled, “while now 80 or 90 percent are non-Chinese customers. Sixty percent of all the tickets are sold online.”

I found it interesting that Liang found a way to profit from the diaspora’s needs. In a sense the diaspora is responsible for his success, a success that ultimately feeds back into the mainland. But Liang corrected me: “In my judgment success must translate into making money and in that sense I am not successful at all. When my competitors fail to attract customers, they just cut the ticket price, and I have to follow. I don’t make anything.” Fung Wah has three main competitors, all of which have been set up by Chinese immigrants from Canton-Liang’s province. Although the New York Times reported Fung Wah could earn $340 for every round trip driven in 2004, the situation is now different. “The oil price has doubled,” Liang explained. “You see how much profit margin is left, maybe $240 or maybe $140 for a round trip if the bus is full.”

This Cantonese domination does not extend to other businesses. Indeed, the diaspora dividend from Boston’s Chinatown originates from many of the major communities - Hakka, Teochiu, Fujianese, and Shanghainese - originating from different parts of the mainland. (9) Many of their investments are channeled back to their home provinces. (10) These communities often do not assimilate with each other or with their host communities. Experiences across Southeast Asia also vary. The Chinese diaspora is well integrated in the Thai and Filipino economies. (11) In Malaysia and Indonesia the community is economically successful but politically and socially marginalized. Chinese immigrants in Burma were forced to move north across the border in 1950s when the Burmese government issued them foreign registration cards barring them from seeking the same opportunities available to locals. (12)

Liang’s story of assimilation is telling of most first-generation immigrants. None of his three children are interested in learning Chinese. “The teaching in the local Chinese schools is not suitable to kids. The content is too profound and boring for kids. If they teach how to write Chinese characters through textbooks like the Analects of Confucius, how could the kids generate interest in Chinese?” To compensate, Liang insists his children speak Chinese at home. He gives three reasons for his position. First, he believes that they should never forget that they are Chinese. Second, Liang believes that China will be a great power in the world within the fifty years, and knowledge of at least colloquial Chinese will open doors for his children. He adds, “Things change so fast that no one knows what will happen next. When we were in school in China, we were devoted to the slogan, ‘Down with U.S. imperialism.’ I never imagined that I would run a business in the U.S.”

As we talked that day I learned how Liang’s family was largely shaped by the vicissitudes of twentieth-century immigration. His grandfather was part of the massive 1920 exodus from China, when it was wracked by the civil war between the communist and nationalist armies and the war against Japanese aggression. Some two to three million people left China, fleeing either political persecution or economic hardship. Liang’s grandfather chose the Philippines. After a few years Liang’s grandfather returned to Canton to marry a local girl and brought her back to the Philippines. When Mao imposed strict restrictions on emigration in 1949, Liang’s grandfather feared persecution and never returned to China. Liang’s father, who was in China, could not leave the country, and the family did not reunite until his grandfather’s death.

Liang rationalized, “Perhaps it was because every family in Canton had some overseas relatives, the government could not discriminate; even officials themselves had overseas relatives.” But having an overseas relative was costly in other ways: it could impact one’s chances of going to college or joining the party. Liang was denied a chance to attend university in China because of his emmigrant great-uncle. After graduation from high school he began to learn Yue Opera - a traditional Chinese opera - from a private teacher.

In November 1985, however, the Emigration and Immigration Law was adopted, for the first time guaranteeing Chinese citizens the right to travel outside China for private reasons. “The overseas Chinese also gradually began to return to visit their family members at home,” Liang said. “The fantasies, fresh goods, and money brought back by overseas Chinese sparked the locals’ desire to go abroad. I knew I needed practical skills to work in America. Everyone in the U.S. drove, so I gave up opera and became a truck driver in China.”

My final questions to Liang were about his current links with relatives in China. His answers reflected the success of the new China that Deng Xiaoping had built. He concluded, “There are great changes! I even could not find the way back to where I used to live. The previous rice field became highways. If China was like this when I left in 1988, I might have dismissed the idea of emmigration.”

(1) The Indian diaspora today includes both NRIs, Indian citizens residing abroad for an indefinite period, whether for employment or for carrying on any business or other vocation , as well as PIOs, foreign citizens of Indian origin or descent. Excluded are ethnic Indians living in Bangladesh and Pakistan.

(2) Baruk Gathani, “People of Indian Origin to Play Larger Role in Development,” Hindu BusinessLine, October S, 2004.

(3) Elena Barabantseva, “Trans-nationalising Chineseness-Overseas Chinese Policies of the PRC’s Central Government,” ASIEN96 auly 2005): S7-82S,

(4) Paul J. Bolt, China and Southeast Asia’s Ethnic Chinese: State and Diaspora in Contemporary Asia (Westport, CT: Praeger, 2000), 3.

(5) P. C. Newman, “Tapping into the Bamboo Network,” Maclean’s, July 21, 1997.

(6) Guohong Zhu, Zhongguo Haiwai Yimin: Yixiang Guoji Qianyi deLishi Yuanyin (Chinese Emigration: A Historical Study of the International Migration) (Shanghai: Fudan University Press, 1994), 65-66.

(7) Amy Freedman, Political Participation and Ethnic Minorities: Chinese Overseas in Malaysia, Indonesia, and the United States (New York: Routledge, 2000), 120.

(8) The Bosron paifang was donated by the Guornindang government. In later years the People’s Republic of China donated paifangs to American Chinatowns, such as the one in Washington, DC.

(9) The Hakka have kept their culture and language alive even after they moved from elsewhere into southeastern China over hundreds of years. They live primarily in the Guangdong and Fujian provinces. The term Fujianeserefers to the locals of Fujian, excluding the Hakka. The Teochiu also live in Guangdong, but have their own dialect.

(10) Lyn Pan, Encyclopedia of the Overseas Chinese (Cambridge, MA: Harvard University; 1999).

(11) G. W. Skinner, Chinese Society in Thailand: An Analytical History (Ithaca, NY: Cornell University Press, 1957), quoted in K. B. Chan and T. C. Kiang, “Rethinking Assimilation and Ethnicity: The Chinese in Thailand,” in The Chinese Diaspora, Selected Essays, Vol. II, edited by Ling-chi Wang and Guangwu Wang (Singapore: Times Academic Press, 1995), I8.

(12) Martin Smith and Annie Allsebrook, Ethnic Groups in Burma (London: Anti-Slavery International, 1994), 64.

Copyright © 2007 Tarun Khanna. All rights reserved.