The Dragon's just got a bit costlier

NEW DELHI: Top Indian investment destinations may gain considerably, as cost advantages of Chinese commercial cities such Shanghai and Guangzhou are shrinking. In fact, monthly wage of workers for general industries in and around New Delhi and Mumbai are now lower than Shanghai and Guangzhou, recent investment-related cost comparison survey by Japan External Trade Organisation (JETRO) said.

The survey was conducted in 30 major cities and regions in Asia. Though China’s low personnel costs are cited as advantages by investors, the survey has shown that the wage levels in East and South China are higher than those in Bangkok, Kuala Lumpur and Jakarta. Significantly, for the Japanese manufacturers operating in Asia, the worker wage increase is considered to be a major problem. In fact, most Japanese companies operating in Asia anticipate wages to continue this upward trend.

Vivek Mehra, executive director of Pricewaterhousecoopers (PwC) told SundayET that India must act fast and take the advantage of China becoming costlier. “Chinese cities are becoming very expensive. India should try to be a major manufacturing hub and attract mobile investors who look for cheap destinations for their world-wide requirements. India’s SEZ policy may help in this respect though labour reforms must be initiated very fast,” he said.

According to Japanese government statistics, total Japanese investment in China amounted to $6169 mn in 2006, a drop of 6.2% from $6575 mn in 2005. Contrary to that, Japanese investments to India registered a growth of 92.7% from $266 mn in 2005 to $512 mn in 2006. These FDI figures include reinvested components as well. “The wave is in favour of India. The survey has demonstrated that China is losing its earlier charm in many comparative indicators of cost,” a senior JETRO official told SundayET.

Though in monthly wage of mid-level engineers, New Delhi and Shanghai fare the same, Indian cities particularly New Delhi and Bangalore score advantages in lower housing rent for foreigners, the survey pointed out. However, for Mumbai, it’s no advantage as housing rent for foreigners in Mumbai are rather marginally higher than that of Beijing. Also, from the Japanese perspective, the international call charges from India is less than that from China.