While political differences may take a while to be ironed out, growing business collaborations between India and China are scripting a mutually benefiting story.
China has shown keen interest to finance India´s infrastructure development, which can give great results in the roads and railway sector. And Chinese entrepreneurs believe that the growth rate of investment by Chinese companies in India will be much faster than the previous year with possible cooperation areas including infrastructure, construction machinery, mining equipment & technology, automobile & auto components and chemicals.
India´s imports from China in 2012-13 stood at $52 billion while exports were at $13.5 billion. Both sides have set a bilateral trade target of $100 billion by 2015. Economic co¡operation between India and China the last decade has seen a tremendous growth, from a very modest beginning in 2000-01 of $2 billion to $73.90 billion in 2011. China has become India´s largest trade partner and India is China´s seventh largest export destination.
According to industry experts, analysis of bilateral trade data from 1980-2011 suggests that India essentially exports low value-added products to China and imports high value-added and technologically sophisticated products, or that Indian imports are capital-intensive while exports are mostly intermediate products.
¨India´s renewable energy sector holds great potential for Chinese investment. Solar and wind energy, in particular, could do with adequate infrastructural investment and technological knowhow,¨ says Prabodh Thakker, President, Indian Merchant´s Chamber (see interview). While high-speed railways feature prominently in the electoral manifestos of leading political parties in India, this is an important avenue for cooperation and the Chinese have shown keen interest in sharing their knowhow in the sector. Power equipment manufacturing companies of China have benefited with the planned capacity additions in the Indian power sector, leading to an increased demand for Chinese equipment.
As per a KPMG-IMC report, both countries in recent years have witnessed revolutions in transportation, telecommunications, technology and infrastructure sectors. While both coun¡tries present complementary strengths, joining hands they could become a force to reckon with and also present opportunities to facilitate mutual trade and business opportunities. According to a recent CII-Deloitte report, many Indian companies have set up operations either in the form of joint ventures or wholly-owned subsidiaries in China. Axis Bank, Union Bank of India, ICICI Bank and Punjab National Bank have representative offices in China while banks like Canara Bank, Bank of Baroda, State Bank of India operate branch offices there. Similarly, companies like Bharat Heavy Electricals Limited (BHEL) and Adani have overseas operations in China; Larsen & Toubro has manufacturing facilities while Engineers India Limited (EIL) operates through a representative office. Pharmaceutical companies like Lupin, Piramal Healthcare and Sun Pharmaceuticals and chemicals companies like Reliance Industries and Jubilant Organosys have also forayed into China.
Chinese companies have also invested in India. ZTE operates in India through a wholly-owned subsidiary. Haier has been aggressive in India and has become a popular name for Indian consumers in the appliances vertical. Sany Group of China has set up a plant and R&D centre in Pune (Chakan) with an investment of $70 million. Construction equipment manufacturer Guangxi Liugong Machinery Co. Ltd has established a wholly owned subsidiary in India. Some other known Chinese companies in India are Huawei, Lenovo, China State Construction and Engineering Corporation, YAPP Automotive Parts Co Ltd. and Zhejiang Yankon Group Co Ltd.
China is presenting itself as a good location for business for Indian IT companies as well. Several Indian IT companies have invested in China to cater to their clients in the Asia-Pacific region especially in Japan and multinational companies located in China. An area of oppo¡rtunity is the growing Chinese domestic market of IT and IT-enabled services and the Indian IT companies should be targeting it. Indian manufacturing companies, especially in the automotive sector both in OEM and component space, are also investing in China to take advantage of the large domestic Chinese market. They can also use China as a low-cost manufacturing base for certain models and components for Indian market and exports to other countries. Anuj Puri, Chairman & Country Head, Jones Lang LaSalle India had shared how India´s political system is more suited for long-term equity investments, while China holds more attraction for mid-term investors. Naturally, this also reflects on the country´s real estate market via a more robust long-term health prognosis. ¨However, interestingly, we have seen two types of corporate occupiers heading to each of these two countries. The services, knowledge talent seeking companies are heading for India - demonstrated through growth in IT and ITES, banking etc., whilst the large scale manufacturing and skill based corporates are expanding their base in China,¨ adds Puri.
According to the CII-Deloitte report, nine Chinese companies, in joint ventures with Indian contractors, are already implementing six highway projects worth $556 million in India. Three highway projects worth $284 million have been completed. It is expected that the Chinese investment in this space would increase three times over the next few years.
Trade Statistics between India and China (Value in USD Million)