India and China: A winning combination
Even as the world looks with awe at the speed at which the India and China story is unfolding, the two economies appear set to add yet another chapter to the fascinating tale by strengthening their bilateral trade ties.
By TNN |
Even as the world looks with awe at the speed at which the India and China story is unfolding, the two economies appear set to add yet another chapter to the fascinating tale by strengthening their bilateral trade ties. The two of the oldest and once, most prosperous civilisations on the planet are on the path to regaining their erstwhile glory, and are supporting each other in achieving this goal. However, there is a consensus among both the sides that much more needs to be done in this area.
Although trade between India and China has grown manifold since 2002, the figures are nowhere close to the real potential. Realising this, of late, Indian and Chinese governments as well as businesses are stepping up their efforts to understand each other's needs and concerns. Serious attempts are being made towards unlocking the enormous opportunities that lie untapped.
In order to aid these efforts and open the channels of communications between various stakeholders from the two economies, The Economic Times, in association with HSBC, organised a conference on Indo-China trade (with a special focus on SMEs) in Mumbai.
The high profile panel comprising Mr Chen Jin Cheng, economic and commercial consul, Chinese Consulate General, Mumbai, Mr PN Ramachandran, executive director, India China Chamber of Commerce and Industry, Mr Puneet Chaddha, country head, commercial banking, HSBC India, Mr Mark Evans, head, trade services and supply chain, Asia Pacific (ex-greater China), HSBC, Dr Vaijayanti Pandit, director, western regional council, FICCI and Mr RA Venkitachalam, managing director, UL India, put forth their views and narrated their experiences pertaining to the subject. The discussion turned out to be a comprehensive SWOT analysis of Indo-China trade.
Opening the discussion, the moderator for the session, Mr Declan Gavin, partner, outbound tax advisory services, Ernst & Young, briefed the audience about the purpose of the discussion, which was to understand the dynamics of trade between the two emerging economic giants, shed light on the opportunities available and clear the misconceptions regarding doing business with China.
On being asked about his thoughts on the status of Indo-China trade, Mr Chen said that the trade between the two countries was growing very fast. Trade grew by over 50% in the first nine months and India's exports to China grew by more than 30% during this period. He further mentioned that in order to push up exports from India, the Chinese government had created a platform for exhibiting Indian firms' products.
By the end of the year, his government would provide free space and accommodation to Indian companies for selling their goods at trade exhibitions in China, he announced. Mr Chen listed jewellery, agri products, sea products and leather as items of exports from India that are in demand in China.
Dr Pandit noted that the trade was heavily tilted in favour of China, and India would like to equalise the balance. "In value terms, exports from India to China are not in the same order as our imports from China, but in volume terms, India does export a lot to China. Most of the export products are metallurgical-based. Iron ore forms more than 50% of India's exports to China," remarked Mr Chaddha.
Although trade between India and China has grown manifold since 2002, the figures are nowhere close to the real potential. Realising this, of late, Indian and Chinese governments as well as businesses are stepping up their efforts to understand each other's needs and concerns. Serious attempts are being made towards unlocking the enormous opportunities that lie untapped.
In order to aid these efforts and open the channels of communications between various stakeholders from the two economies, The Economic Times, in association with HSBC, organised a conference on Indo-China trade (with a special focus on SMEs) in Mumbai.
The high profile panel comprising Mr Chen Jin Cheng, economic and commercial consul, Chinese Consulate General, Mumbai, Mr PN Ramachandran, executive director, India China Chamber of Commerce and Industry, Mr Puneet Chaddha, country head, commercial banking, HSBC India, Mr Mark Evans, head, trade services and supply chain, Asia Pacific (ex-greater China), HSBC, Dr Vaijayanti Pandit, director, western regional council, FICCI and Mr RA Venkitachalam, managing director, UL India, put forth their views and narrated their experiences pertaining to the subject. The discussion turned out to be a comprehensive SWOT analysis of Indo-China trade.
Opening the discussion, the moderator for the session, Mr Declan Gavin, partner, outbound tax advisory services, Ernst & Young, briefed the audience about the purpose of the discussion, which was to understand the dynamics of trade between the two emerging economic giants, shed light on the opportunities available and clear the misconceptions regarding doing business with China.
On being asked about his thoughts on the status of Indo-China trade, Mr Chen said that the trade between the two countries was growing very fast. Trade grew by over 50% in the first nine months and India's exports to China grew by more than 30% during this period. He further mentioned that in order to push up exports from India, the Chinese government had created a platform for exhibiting Indian firms' products.
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By the end of the year, his government would provide free space and accommodation to Indian companies for selling their goods at trade exhibitions in China, he announced. Mr Chen listed jewellery, agri products, sea products and leather as items of exports from India that are in demand in China.
Dr Pandit noted that the trade was heavily tilted in favour of China, and India would like to equalise the balance. "In value terms, exports from India to China are not in the same order as our imports from China, but in volume terms, India does export a lot to China. Most of the export products are metallurgical-based. Iron ore forms more than 50% of India's exports to China," remarked Mr Chaddha.
Mr Venkitachalam said that there was a high level of interest in China for value-added products like medical equipment, leather etc from India. "Indian companies are becoming more confident now. The fear of cost competitiveness has vanished. They feel that they can compete with Chinese companies if their products are designed correctly," he asserted.
Outlining some of China's strengths, Mr Chaddha observed, "China is investing in infrastructure and has a strong manufacturing side, thus resulting in scale benefits and efficiencies. They are taking advantage of this competitive edge and are exporting to countries like India." Dr Pandit added that since China has a single window system for issuing various clearances, organisations find it easier to do business there.
Mr Evans was of the opinion that Indian businesses should not treat China any differently from other countries. One needs to choose the trading partner carefully - be it in China or any other country; enough due diligence needs to be done while zeroing in on the counterparty and this can be done by seeking information about prospective counterparties from government agencies, accounting firms and bankers, he said.
While pointing out that the biggest risk while transacting business was in terms of getting paid, he advised the exporters to make sure that their documents are compliant and the mode of payment is foolproof to avoid any disputes later.
"To overcome the difficulty of verifying credentials of counterparties, one needs to do the preparatory work thoroughly. One should be careful while drafting contracts. The place of arbitration should be clearly specified and it is advisable to opt for Hong Kong or Singapore," suggested Mr Ramachandran.
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"It is important to find the right company for doing business with," agreed Mr Chen and advocated the use of Letter of Credit as a mode of payment.
"Not knowing technical requirements before entering the Chinese market is a huge risk. It will increase the time required to market your products. This apart you could face setbacks after the goods are shipped. China has a good set of regulations for product compliance, meant for consumer safety. We need to ensure that our product design meets compliance requirements," informed Mr Venkitachalam.
"Understanding regulations is the key. And also, you have to be careful about who you are tying up with. The biggest risk is to think that Chinese market is a risky market and ignore it," stated Mr Chaddha.
When Mr Gavin asked the panelists to recommend the best way of going about doing business with China, Dr Pandit cited the example of an IT company that had set up base in China. They had hired Chinese employees to interact with the Chinese government, while Indians took care of the management part of the business.
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The joint venture model had been successful and other companies could follow the same, she said. She also stressed on the need to visit China, meet people and get first hand information. Speaking to companies that have already set up their businesses there would also help, she said, adding, "Deliverables are 100% in China."
Summing up the discussion, Mr Gavin touched upon the points made by the panelists and advised the audience - which mainly comprised Indian SMEs - against ignoring China. Emphasising the fact that China was a global player, he urged them to make the most of the immense opportunities available in the Chinese market.
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