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Investors look beyond China

At Davos, you just cannot escape CHINDIA ? China and India. But even as delegates hammer in the emergence of these regional powers on the economic horizon, there is an equal emphasis on developed nations trying to diversify their investment basket beyond China.

india Updated: Jan 28, 2006 03:14 IST

At Davos, you just cannot escape CHINDIA — China and India. But even as delegates hammer in the emergence of these regional powers on the economic horizon, there is an equal emphasis on developed nations trying to diversify their investment basket beyond China.

The cash carriers of the world are trying to make their investment portfolio a two-legged stool which effectively means China plus one. And that is where India is vying for the mindspace of the investment community here. Come 2006 and China will see rapidly changing labour costs and that will inevitably lead to a shift in the FDI equilibrium with India, Indonesia and Vietnam emerging as the second leg of the stool. China has attracted over $15 billion FDI but investors in recent times seem to be spreading out their risks wider.

Speaking at a session on Integrating Asia’s economies at the WEF 2006, Finance Minister P. Chidambaram said, “Japan, for instance, is looking at diversifying its investment basket and we expect the bulk of the fresh investments to come to India, given the inherent strengths that our country has to offer vis-à-vis our peers in the Asian region.”

China may have become the funnel for manufacturing system, but the world is also acknowledging the Indian strength in services. “However, this in a way masks our prowess in manufacturing. Since most of our investment has come from domestic sources and most of our consumption is domestic as well, we may not have been able to communicate our manufacturing success story outside of India,” the minister added. The Indian skills in high-end manufacturing had already given the country an edge over China which had positioned itself more like a mass production factory, he added.

“With China having some trade problems to handle domestically, buyers are looking for alternatives and we see Chinese investment relocating,” said the Indonesian Minister of Trade.

But till that realignment in the region happens, the greatest concern for the countries is the lack of an institutional framework. The bond market in the region has grown by 20 per cent but that is on a very small base, he added.

First Published: Jan 28, 2006 03:14 IST