India-China business ties stumble on quality
As Indian and Chinese government officials brainstorm over a broad spectrum of sectors to pitch-fork bilateral trade to $100 billion by next year, niggling disputes in routine trade dealings are emerging as irritants in mending the relationship. Mahua Venkatesh reports.business Updated: Feb 10, 2013 23:43 IST
As Indian and Chinese government officials brainstorm over a broad spectrum of sectors to pitch-fork bilateral trade to $100 billion by next year, niggling disputes in routine trade dealings are emerging as irritants in mending a relationship that is already fraught with misgivings, businessmen here say.
Sample this: After years of purchasing products from China, Gyan Chand, who runs a small-scale chemicals and plastic company in Delhi, Manya International, now prefers Korea to source raw material. Reason: Chinese vendors have repeatedly shipped products that were much below the standards specified in the original contracts.
"The quality of products that I was sourcing from China was so sub-standard that it was turning into a nightmare, as the specifications were never followed and I lost crores (of rupees) in the process," he said.
Chand is not alone. Dozens of entrepreneurs have similar tales to tell. And like Chand, several of them are shifting their import base to other countries to ensure that more money is not lost.
India is trying to crack down on the flood of counterfeits and cheap products using globally agreed-upon laws to prevent dumping - the practice of a manufacturer exporting a product to a country at a price below the one prevalent in the home market, or even the cost of production.
The 900-odd shops in the Old Lajpat Rai market here are filled with cheap unbranded Chinese goods, as are thousands of markets across India.
All that has made China, which fought a brief and bitter mountain war with India in 1962, its largest trading partner at $75 billion in 2011-12.
It is also the single largest source of imports at $57 billion, accounting for more than 10% of India's total imports in 2011-12.
India has put quality restrictions on mobile phones, dairy products and toys, and believes that the Chinese government is blocking the entry of fruits and vegetables - on grounds not necessarily economic.
"Quality has always been an issue with the Chinese. There is no accountability and it is difficult for us to get any compensation once the materials are imported," said an official working at a medium-sized power plant.
A recent study by industry body Confederation of Indian Industry (CII) underlined that India is stuck as an import-heavy partner in a fast-growing trade relationship.
Importers complain that after the material is imported into India, there is no forum to launch any complaint or seek compensation.
The Federation of Indian Micro and Small & Medium Enterprises (FISME), an association representing India's small firms, said language remains a barrier. It plans to set up an office in China to help its member companies on issues of quality and prices of products.
"There are a few issues which naturally need to be ironed out for bilateral trade to boom," said Anil Bhardwaj, secretary general, FISME. "And since China has turned out to be one of our major trade partners we must look into these issues at the earliest and protect the SME segment, especially at a time when money has become dearer."
In November India and China, both engines of global growth, decided to set up a joint working group to address all their trade related issues to strengthen economic relationship.
"The joint working group will give its recommendations and assessments soon... We have also agreed to work on a five-year plan on economic co-operation," a government official said.
The two countries had agreed to establish a Strategic Economic Dialogue to enhance macro-economic policy coordination during Chinese Premier Wen Jiabao's three-day visit to India in December 2010.