The author is a reporter with the Global Times.
Following recent reports from the Indian media that the Modi administration is wooing more Chinese component firms to begin manufacturing in the South Asian nation, observers have turned their eyes to China to see whether the country will be willing to go for it.
The Chinese government has not expressed opposition to the general industrial transfer from China to India. In fact, the authorities have rolled out concrete measures to encourage Chinese enterprises to go abroad and explore overseas markets, including India.
Currently, India is on track to hold on to its spot as one of the world’s fastest growing emerging countries, and Chinese manufacturers are salivating over this fast-growing consumer market. Furthermore, the Chinese economy will likely gain momentum from the formation of a new cross-nation industry chain between the two neighbors.
Considering the above factors, China’s government is unlikely to deter India’s effort to woo Chinese component companies, despite the possibility that this could cause job cuts in the manufacturing sector at home.
However, none of this necessarily means the outbound investment by Chinese component enterprises into India will be plain sailing. The greatest challenge of setting up plants in India lies in the hesitation of Chinese entrepreneurs to step up local production.
As Chinese component enterprises become more deeply entrenched in the Indian economy they will soon encounter a number of differences between the two countries in terms of commercial ecology. For instance, Indian labor unions ensure workers have a voice in corporate governance, while Chinese entrepreneurs usually lack experience dealing with strong unions. And while India’s low labor cost advantage has caused some Chinese manufacturers to show an increasing interest in setting up assembly lines in India, efforts by component firms to expand local production can be hampered because of the lack of skilled workers.
Additionally, with little economic cohesion between states in India, it is even more urgent and necessary for Chinese component firms to familiarize themselves with the local economic environment and legal system as they expand in the country.
As China-made products gain greater market shares in the Indian consumer markets India may still have a long way to go in persuading Chinese component enterprises to step up local production. Additionally, private investment in the South Asian nation continues to shrink at an increasing pace, according to media reports. If Indian private enterprises have misgivings about investing in the country, India may struggle to persuade Chinese firms to invest extensively in India in the short term. http://www.globaltimes.cn/content/1013483.shtml
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