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India, China unite with flying
colors
By Priyanka Bhardwaj
NEW DELHI - For anybody with doubts about
Sino-Indian business links, last week's Holi
celebration was an eye-opener. From water guns to
balloons to confetti to colored powder,
nearly every good involved in the Indian festival
of colors had the "made in China" label - and all
came at prices much lower than those made in
India.
The
trend of Chinese goods inundating
the Indian festival market was first spotted
three years ago; it has only firmed up in the
years since. Over time the Chinese have become adept
at manufacturing typical Indian festival items
such as idols, like rounded Ganeshas, garlands,
fairy lights and firecrackers, apart from lamps and
toys. All of these form the basis of any Indian
celebration, be it Holi, Diwali - which celebrates
King Rama's coronation - weddings or birthday
celebrations.
Chinese goods are not
confined to festive items either. Cut-price,
look-alike Rolex watches, designer furniture,
dragon-print bed sheets, curtains, pearls and
diamonds all have the "made in China" tag. The
prevalence of Chinese goods is also noticeable as
one goes up the value chain. Chinese white goods
such as microwaves, washing machines, food
processors and cell phones have made their
presence felt in the Indian market. And what sets
them apart from Indian products is their
incredibly cheap price, though questions about
quality refuse to go away.
The Haier
Group, which has a 30% market share for
refrigerators, air conditioners and washing
machines in China, has driven down the prices in
India, to the delight of consumers. The company
has 30,000 retail outlets in China and sells its
products in more than 100 countries. In India, the
group has tied up with Bajaj, Usha and Polar for a
range of household items. With hardly any local
competition in India so far, multinational cell
phone manufacturers such as Siemens, Sony Ericsson
and Nokia are facing the heat from China's largest
mobile phone manufacturer, Bird, which has
launched mobiles with a price tag lower than
US$100 - $20 less than India's lower-end phones -
causing prices to dip in one of India's
fastest-growing markets.
Beyond consumer
durables, Chinese footprints are evident in
products ranging from pharmaceuticals to power
generation. Shanghai Electric (Group) Company, one
of the largest companies manufacturing and
designing power generation and mechanical
equipment in China, is among the firms seeking a
foothold in India.
In the past, India and
China pursued paths that didn't meet, and they had
hardly any significant economic contacts. Apart
from a very few exceptions - such as a Ranbaxy
pharmaceutical production unit set up in Guangzhou
in 1995 - Indian companies kept as far away as
possible from their low-cost and rapidly
modernizing neighbor. Chinese companies, on the
other hand, thought they had nothing to learn from
India.
Positive bilateral economic and
trade relations have now replaced the diplomatic
chill that dominated the previous decades. This
change is reflected most in Sino-Indian trade
figures that have grown to more than $1 billion a
month compared to $1 billion a year a decade ago.
The Chinese have discovered that most consumer
goods cost at least three to six times more in
India than China and can be easily brought into
India given the open general licenses that have
dispensed with the maze of government permissions
required in pre-reform India.
Indian
companies, in turn, are slowly increasing their
investment presence in China in diverse areas such
as information technology (IT), pharmaceuticals,
auto components, chemicals and engineering. Indian
IT giants Infosys, Satyam and Wipro have
established a toehold in China's fledgling
software industry, while NIIT has been there for
quite some time, teaching software to students in
franchised training centers. For the third
consecutive year Aptech has been ranked No 1 in
the IT training market in China, where it earned
$40 million in revenue in 2004. More than 52,000
students are enrolled in Aptech's courses through
150 centers in China. According to the China
Center for Information Industry Development
report, Aptech has doubled its market share to
around 15% while NIIT commands a market share of
7.9%.
Faced with rising business from the
West, the spiraling salaries of high-cost,
job-hopping Indian employees and a predicted
shortage of skilled workers, Indian IT firms are
even outsourcing work from the US to China. Apart
from Infosys, Satyam and Wipro, Tata Consultancy
Services has also established bases there. TCS set
up shop in China in 2002 with plans to employ more
than 250 people a year after making a foray into
the country. Infosys (Shanghai) has more than 200
staffers to cater to clients in Europe, the US and
Japan. Wipro set up its China unit in August.
The Indian industry is also apparently
trying to make cheap Chinese labor work in its
favor rather than cry hoarse against it. JK
Industries is making tires in Guangzhou while
Videocon is producing Internet televisions in
Shanghai. Many small Indian manufacturers now find
it more convenient and profitable to just fly down
to Shanghai or Beijing and sign contracts for
supplies instead of producing the same goods at a
much higher cost in India.
One result of
the burgeoning Sino-Indian business links has been
an increase in travel. Just a couple of years ago,
few Indians would go to China. But business has
turned that all around. Chinese consular offices
in Delhi and Mumbai issued 70,000 business and
tourist visas to Indians in 2004 alone - a jump of
almost 50% over the previous year. Another 200,000
Indians traveled to China from other countries,
such as Singapore, Malaysia, the United States and
Europe the same year.
The Indian
government estimates that visas issued to Chinese
last year were in the range of 30,000, and that
only includes business visas. It was not until
2003 that Beijing added India to the list of
"approved destinations" where Chinese could to
travel for vacations - and that only became law at
the end of 2004. One can only imagine the extent
of tourist inflow that India can expect from China
this year.
Business travel between the two
countries started with the establishment of
manufacturing synergies after India lifted
quantitative restrictions four years ago. Indian
manufacturing firms quickly established backward
and forward linkages to take advantage of the
Chinese market and resources. China opened up a
whole new avenue for India's steel exporters while
Bajaj Auto saw a huge market in two-wheelers in
China. Importing components, especially for
home-appliances, which are manufactured cheap in
China, also caught on quickly. Apart from these,
hordes of Indian businessmen with interests
ranging from cell phones to refrigerators to
sportswear to bicycles constitute the growing army
of Indian business travelers to China.
But
niche and business travelers still fall short of
tourist traffic. More and more Indians, fed by a
growing services sector, want to see the world for
themselves - China included. After scouting out
Singapore, Indonesia, Thailand, Malaysia, Europe
and the US, rich - and even middle-class - Indian
tourists have begun to try out China. Travel
packages widely advertised by tour operators now
rarely exclude China, a country that didn't exist
for Indian travel agencies even as recently as a
few years ago. The advent of private and budget
airlines in India and China, as well as the "open
skies" policy, has only added steam to the
industry.
Priyanka Bhardwaj is a
New Delhi-based writer
(Copyright 2005
Asia Times Online Ltd. All rights reserved. Please
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