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Is small town China India’s cup of chai?

American CEOs scouring sites in China’s small towns that are being built into boomtowns, worriedly ask local communist officials a standard question.

business Updated: Dec 15, 2009 20:37 IST
Reshma Patil

American CEOs scouring sites in China’s small towns that are being built into boomtowns, worriedly ask local communist officials a standard question. "Is there a Starbucks? It’s the first question everybody asks," Juliet Yao, the Chinese manager of southeast Changzhou city’s Euramerica division for foreign trade told Hindustan Times.

The challenges for the new Indians coming to China cannot be as easily solved as finding cappucinos or cutting chai. This year, a decades-old Coimbatore-based textile machinery major sent a dozen Indians to a small town near Shanghai to establish the company’s first foreign factory.

Few Indians have heard of Wujiang, an industrial hub home to eight lakh people. "We’re the first Indian company here," said K. Soundhar Rajhan, chairman, LMW Textile Machinery (Suzhou). “To grow, we need to go to a country where there is a market.’’

Wujiang has no other Indians or Indian restaurants but Rajhan said that its highways provide his team access to clients within an eight-hour distance minus the steep business cost of Shanghai. "Our focus is to make our project a success," said Rajhan. "We’re getting adjusted to what is available."

Indian and Chinese businessmen face bigger adjustments as both nations try to expand bilateral business despite political and trade disputes. "There seem to be factors of unease in our ties which need to be addressed. As the saying goes, there is no smoke without fire," said India’s ambassador S. Jaishankar at the Sichuan University in southwest Chengdu this week.

"A country that is otherwise competitive in manufacturing and services finds that three-fourth of its exports to China comprise commodities and raw materials," Jaishankar pointed out at a business seminar in Chengdu on Wednesday.

"Our Chinese partners, on their part," he said, "contend that Indian products are not adequately competitive in China or that Indian companies have not devoted sufficient energies to make an impact on the market."

Despite the uneasy ties, Chinese towns are aggressively marketing for Indian investment. Shanghai’s neighbour Suzhou, known for its silk industry, now has a software park where India’s NIIT will set up a base next year. A grimy factory town called Jiaxing near Shanghai that sends investment officials on marketing trips to India twice a year, will also bag an NIIT next year.

"Despite the recession, we had over 50 per cent growth in China revenue this year," said Kamal Dhuper, NIIT’s China head for individual learning business.

China began constructing 5,148 km of new railway lines this year — over twice India's four-year target for new lines.

"China’s infrastructure improvement has shrunk distances making access to wider supplier bases and ports convenient," said Ashish Vaishnav, China manager of Thermax. "For Indian companies, low-tier eastern China cities are emerging as more cost-effective options than larger cities like Shanghai which are now more focussed on financial, logistic and service industries."

Chinese President Hu Jintao’s hometown Taizhou aims to be a global pharmaceutical city and invited Indian industry heads to tour its new medical city this year. "The governments of Nanjing and Taizhou are showcasing their cities for R&D outsourcing collaboration," said E.B Rajesh, chief China representative of the Confederation of Indian Industry (CII).

"But these cities are not yet at a stage where Indian pharmaceuticals can invest," he said. "For Indian R&D to be interested, China will have to strengthen its IPR regime first."

The CII official spoke to HT on the telephone from a bus full of Indian industrialists touring Chengdu this week in search of new opportunities for India inside China.

(Series concluded)