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Indians
make China their business
From
fear to ambition, India's outlook on the erstwhile enigma called
China is changing pretty fast. Even until a year back, India's
industry sectors were scared of invasion by cheap Chinese products,
but now, as the country gets ready for its first prime ministerial
visit to China - from June 22 to June 27 - in nearly a decade, its
industry is hoping that it will give them an opportunity to invade a
newly-found Utopia.
"We
do not fear the Chinese anymore," said Tarun Das, director
general of the Confederation of Indian Industry (CII), recently,
commenting on the industry lobby's expectations from Prime Minister
Atal Bihari Vajpayee's China visit. "Instead, the visit of the
CII delegation to China this month coinciding with the prime
minister's sojourn is an invasion of the Chinese market by Indian
companies."
While
it is old news now that having consolidated in the past few years
Indian companies have already started taking advantage of the
burgeoning Chinese economy, the hottest development regarding China
is that Indian companies are now eyeing a stake in the country's
economic success; China's state-owned enterprises (SOEs) to be
precise. "Our members have decided to invest in China and are
seriously looking at investment opportunities. Their target sector
at the moment are state-owned enterprises, which are being
divested," said Gurpal Singh, senior director of CII. He added
that Indian companies are interested in either joint venture or
acquisition of SOEs, mainly in the manufacturing and information
technology sectors.
The
CII, in fact, is urging its members hard to cash in on China's
highly successful and proactive "red-carpet approach"
towards foreign direct investment. "Indian companies seeking to
set up manufacturing operation in China should have no difficulty
making entry into the country," says Singh. A stake in Chinese
companies is likely to offer two obvious advantages to Indian
companies: one, access to the vast Chinese market, and two,
beneficial exposure to the proven efficiency of the Chinese
manufacturing environment.
And,
according to the CII, the experience can lead to a situation where
Indian companies can service their established Indian market share
with products from China-located factories or, hopefully, enhance
the competitiveness of their Indian operations by adoption and
adaptation of cost-efficient practices learnt in the Chinese
environment.
Companies
that are visiting China as a part of CII delegation are not the only
ones eyeing stakes in Chinese companies; so are companies that
belong to the other two major industry lobbies, the Federation of
Indian Chamber of Commerce (FICCI) and the Associated Chamber of
Commerce and Industries). However, these lobbies feel that
concentrating on SOEs could prove time consuming since their
divestments involve security issues and concerns of the Chinese
administration, and they are thus more interested in privately-owned
companies.
These
organizations feel there are a host of sectors for Indian companies
to tap, like telecommunications equipment, energy, medical
equipment, automotive parts, agricultural chemicals, plastics and
packaging equipment. China telecom, particularly mobile telephony,
offers tremendous potential for Indian telecommunication businesses,
says the CII, following China's consent to enter the World Trade
Organization regime.
The
Indian prime minister's visit is also emerging to be a significant
event for China as well, which said that it is willing to step up
bilateral relations with India and expressed hope that an effective
method could be found to resolve their vexed and long-standing
border dispute. According to agency reports, the Chinese side is
willing to work with the Indian side to expand cooperation in all
fields of bilateral relations to higher levels. "We believe
that so long as the two sides adhere to the five principles of
peaceful co-existence, enhance trust, expand consensus, strengthen
coordination, Sino-Indian relations can go further," said
Foreign Ministry spokesman Liu Jianchao early this week, adding,
"Friendly relations and cooperation between the two countries
not only conforms with the common interests of the two sides but
also to peace and stability in the region and the world at
large."
Friendly
relations and cooperation, though, are already on the move. For
instance, Indian exports to China in the first quarter of the
current financial year grew briskly at 96 percent. Last year, Indian
exports to China stood at US$5 billion. Bilateral trade has also
been on a rise. The growth has prompted the industry association to
state that the $10 billion mark will be achieved in 2005, instead of
the original estimate of 2010. Moreover, several segments of Chinese
business, such as banking and retailing, are now reportedly open to
setting up shops in India.
But
besides eyeing stakes in China's success, Indian industry
representatives accompanying Vajpayee have other issues on their
agenda. Primary among them is the removal of non-tariff barriers on
Indian exports to China. "Indian companies must move forward
more aggressively as changing regulations and economics open the
window of opportunity in China," said Sudhir Jalan , an
industrialist. "Indian companies should enter China's market as
soon as possible to best take advantage of China's exponential
economic growth."
Yet
another important agenda, according to the FICCI, is formulation of
a mechanism such as "the exchange of tariff lines" between
India and China, which would help formalize nearly $2 billion of
trade currently undertaken through "unofficial" routes.
"We have suggested that governments of the two countries should
consider exchange of tariff lines similar to the Bangkok Agreement.
This will boost our official trade from $5 billion to $7 billion in
one year without making much effort," said Amit Mitra,
secretary general, FICCI. The Bangkok Agreement ratified by India,
Bangladesh, the Republic of Korea and Sri Lanka allows preferential
tariff concessions to products originated in any of the four
countries.
The
FICCI has also suggested that a Free Trade Agreement (FTA) should be
considered between the two countries. "China already has FTAs
with ASEAN countries, and India is looking at a FTA with ASEAN as
well, so, why can't India get into a direct FTA with China?"
queried Mitra.
Indian
industry is expected to take up its concern on the movement of
Chinese capital and manufacturing expertise into India, which its
feels faces a number of problems. The country doesn't want that the
Chinese should swamp India with exports, but, like India, should
commit financially as well by investing in the country. "There
should be sustained efforts to make Chinese companies seeking to
expand understand that India is too large and sophisticated a market
to be serviced solely by exports in the long run except in very
limited products areas," says the CII. "On the other hand,
it should be emphasized that it is not difficult to claw into and
develop market share if manufacturing is done in India."
The
Indian prime minister's visit may indeed open many doors for the two
countries, but what is most significant is that it is leading to a
new realization that could have an immense effect on global trade -
the two countries together could form a powerful lobby to address
shared external interests. "Tariff barriers, access to
developed markets, environmental policy and patent protection are
major irritants in both countries' relations with the rest of the
world and coordinated efforts between the two countries could
generate greater tangible success, with significant economic
implications," said the CII.
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