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India Inc. hits the Wall in China journey

business Updated: Oct 07, 2010 11:35 IST
Reshma Patil

The Jammu-based industrialist was surprised to secure a visa --- unstapled --- for his first China visit while fresh political tension simmered between India and China over Beijing’s visa denial to an Indian army commander whose purview includes Kashmir.

Last month in Nantong, an east China city unheard of in India, businessmen were seen forcing bangles on the wrists of Chinese officials and pasting bindis on their foreheads in their eagerness for business deals. The group included a 28-year-old Gujarati who was the first Indian opening a small factory in a one-million-sized city near Shanghai.

On the surface, the fifth and second-largest economies seem determined to pursue business together despite major disagreements. But India Inc. is hitting a wall in its hunger for bigger business with its largest trade partner whose state-owned firms prefer to work with global companies with scale and years spent in China. Most Indian entrants in China this year are small and medium-sized factory operations hoping to sell to the domestic market.

“Insiders believe there’s a minimum eight-year barrier in China to prove you can be trusted,’’ a Shanghai-based Indian business head told HT, requesting anonymity. “And you need to build a large-scale operation for the Chinese to trust your business.”

Jammu-based Taranvir Gujral, director of T V Super Filter Industries, joined the Nantong delegation to pursue a deal with a Shanghai factory owner he met at a Delhi expo. “Importing filter paper from China will be much cheaper than the US and Korea, but the issue for me is quality control which I’ll check in their plant,’’ he said. “The Chinese concern is mainly my volume of business.”

That day in Hyderabad-sized Nantong, several businessmen owning small and medium-sized factories came looking for their first-ever Chinese deals. Mayor Ding Dawei told them his city already has 9,000 foreign companies --- only 15 are Indian. “When I visited India, I was impressed by your prosperity, software and desire to improve relations,’’ said Ding, at a conference organised by the India China Economic Council.

When HT asked other Chinese including an official wearing new bangles about India, none had an opinion because they never worked with Indians or heard of India Inc. besides its IT. The Chinese are known to question Indians starting factories in smaller Chinese cities if they will pack up once border tension flares up. On trade, the Chinese openly complain that Indians don’t pay a good price.

From April-October, the Indian embassy sent the first-ever branding excursions to the interiors as far as Kashgar, a Silk Road town in northwest Xinjiang. A 50-company delegation will visit a trade fair in southwest Chengdu this month to convince the Chinese that the Indians mean business.

This year’s Indian expansion in China is limited to a few big brands. Infosys has trained five batches of Chinese software engineers at its new training centre since March, said COO Rangarajan Vellamore. The Jiangxi centre is located between its Shanghai and Hangzhou offices where Infosys is expanding to 2,000 people each.

Indian IT expansion has made little progress expanding in China, said ambassador S Jaishankar in Shenzhen last month in a forceful criticism of China’s business climate.

“Indian companies struggle every day to overcome barriers posed by regulations, policy and market practices,” Jaishankar said, bluntly indicating that India offers a more level playing field.

American software giants in China have a 15 to 25 year head start over India. India is only China’s 14th largest trade partner and most of the 250 Indian companies started operations here under a decade ago.

“The Chinese say they want to work with us both don’t know how,’’ said the Indian CEO in Shanghai. Chinese state-owned enterprises provide large contracts mainly to local companies, discriminating against foreign-owned companies whether American, Indian or European.

The emerging market in China is for R&D and luxury goods, said Yuan Yue, CEO of Horizon Research Consultancy in Shanghai. India sells neither in China.

Yuan advises Indians to penetrate the less-developed central and western China for cheap labour and enthusiastic officials. “Indian investors should concentrate in some areas like the Japanese, Taiwanese and European clusters,” he said. “If you have a big problem and you’re alone, you will be defeated.’’

Indians are grouping in east China where one-third of India’s trade with China comes from Shanghai, Jiangsu and Zhejiang. Total bilateral trade could top 60 billion dollars this year. India’s deficit is 11 billion dollars of the 40 billion dollar trade this year.

The Indians and Chinese remain inexperienced in working together. At every business event, including Nantong, the first Chinese question is usually about Indian visa delays. The fact that India recently eased a one per cent cap on skilled foreign nationals per workforce after Chinese investors complained, is not well known.

“A Chinese department head recently came to India and wasn’t being taken seriously,’’ said Nazia Vasi, CEO of Inchin Closer consultancy in Mumbai. “Indian companies need to realise that a Chinese manager in a state firm can make decisions unlike an Indian manager.” Some Indians in Shanghai get duped, said Vasi, because of contextual errors in Mandarin contracts they cannot read.

The Indian businessmen in Nantong finally went sightseeing after exiting IT and renewable energy meetings because translation services were not available. They found common ground in a museum displaying farm tools. “Arrey! This is like our Punjab and Rajasthan!’’ they exclaimed.