View from China: Why do Chinese co’s invest in India?

Article By : Jim Li

India's decision to hike taxes on mobile devices is probably what has prompted Chines mobile phone factory owners to invest in the country.

« Previously: Can India live its industrial dream?

Editor's Note: The following is a translated excerpt from Jim Li's blog on EE Times China and is based on his recent experiences in India. His post, while originally meant for the audience in China, is an interesting perspective from across the border.

India’s vast population is also an enormous market and an investment opportunity for Chinese manufacturing. If, in the future, China can aid in resolving the problem of eliminating poverty for the people of India and help an Indian middle class rise out of the nation’s huge wealth gap, I believe that this engine of economic growth can also solve our own development problems. It is just like the last few decades of rapid development in China’s market, which actually helped Japan, South Korea and other developed countries resolve their own economic problems.

Therefore, I took a trip to visit India last year. I went together with nearly 100 Shenzhen factory owners whose businesses revolved around the mobile phone supply chain. We wanted to study the development environment in India and look for opportunities to go there and invest.

Why did these mobile phone factory owners want to go and invest in India? The most direct reason is because, last year, the Indian government levied heavy taxes on mobile devices, increasing substantially from the previous 6% to 12.5%. The government should have had able guidance for such a move because, for India to develop as a nation, it must first develop its own manufacturing industries. With a manufacturing sector, in addition to meeting the demand of the Indian market and creating employment, India will also be able to export to obtain foreign exchange. We know that India’s software-outsourcing industry has a reputation abroad, but in fact, it is completely dependent on U.S. and European industrial entities. An IT software industry without a manufacturing industry to rely on is like building castles in the sky.

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Figure 1: India’s “Huaqiang North” (top) and building that is considered India’s Huaqiang Electronic World (bottom).

Phones everywhere

On this trip, therefore, we focused on visiting the Indian capital of Delhi, as well as more than a dozen nearby manufacturing plants. We also went to India’s largest mobile phone wholesale and retail market, “Karol Bagh.” The market has been called India’s “Huaqiang North.” Most of what is sold there, however, are secondhand Apple, Samsung, HTC and refurbished mobile phones.

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Figure 2: Roadside hawkers trying to sell fake versions of Xiaomi phone chargers.

We also went to the headquarters of local Indian mobile phone brands, such as Lava, MicroMax, Intex and Spice. Spice was, in fact, a spice business 100 years ago. India has a great number of such family businesses, handed down over many generations. They also include India’s “Haier” and “Gree,” the home appliance brand Videocon and the nation’s prominent enterprise, Tata.

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Figure 3: Manufacturing plants in India

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Figure 4: Chinese delegates visit the Spice headquarters.

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Figure 5: Intex factory

The Tata Group is a bit like giant conglomerates Samsung of Korea and Sony of Japan. From telecommunications to automotive, from medical institutions to making mobile phones, and including energy and real estate, there is nothing that Tata does not do. So when we watched TV in our hotel at night, there was a Tata commercial every few minutes. India’s economic lifeline is in the hands of these large family enterprises.

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Figure 6: Watching India’s late-night TV shopping

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Figure 7: FortuneShip factory

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Figure 8: Gionee factory

Of course, on this trip to India, we also visited the local factories and offices of a number of Chinese mobile phone brands, such as Gionee, Foxconn and FortuneShip, to learn about the hardships of their path-breaking journey to set up factories in India.

On the road

The infrastructure development in India and China certainly cannot be compared; it is rare to see skyscrapers even in the Indian capital of Delhi. The most bustling commercial districts and luxurious hotels are certainly there, but they tend to be concentrated around the periphery of the government and the embassy district. In these places, the environment, sanitation and facilities are done well. But other places appear undeserving of the title of capital. In my personal opinion, most of the districts are the equivalent of a Chinese third- or fourth-tier city or township.

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Figure 9: Construction sites are seen everywhere

If any Indian friends are watching this channel, please do not get angry; before China’s reform and development began, it may have been more backward than what India is today. We also see that Delhi is building infrastructure everywhere; an Indian local told us that today’s Delhi is already very different from a few years ago. We believe that, in another few years, massive changes will take place in Delhi.

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Figure 10: Maruti Suzuki has become the best-selling car in India.

In addition to insufficient infrastructure, Delhi gives one a feeling of many people, many vehicles and a lot of smog. These three attributes are consistent with the status of a national capital.

There are dense crowds everywhere and the streets are filled with Japanese and Korean cars. With its economical, low-emission vehicles, Maruti Suzuki is probably India’s most successful Japanese car model; at least half of the cars we saw on the streets were Suzukis. There were also quite a few South Korean Hyundai cars. I cannot help expressing that the Japanese and South Korean automakers have localised their brands quite well here in India, which, for Chinese brands, is worth learning from.

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Figure 11: Bus stop in India

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Figure 12: If this can be considered a means of transportation

Occasionally in the embassy or hotel district, there will be a small number of German cars or luxury British cars whose brands start with “B,” but these are not considered mainstream. For India’s middle- and lower-income people, I suppose that owning a car is considered their “Indian Dream”; most people still cannot afford a car. When Indians travel, therefore, they mainly use public transportation like buses, taxi cabs and three-wheeled taxis. Delhi has a subway, but because we were using a tour bus for our trips, we did not try it. This, I can say, is a big regret. Most of India’s taxis are classic cars; the mirrors have even come off of some of them, yet they are still on the road.

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Figure 13: The “tutu,” the local name for a three-wheeled taxi, is a ubiquitous and very cheap mode of transportation, costing only ₹10 per ride.

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Figure 14: Traffic jams are a common occurrence in Delhi.

We were a bit surprised by the high level of private car ownership in Delhi, but it also brings traffic disasters to the city. We believe that Delhi’s infrastructure is not prepared for so many cars. During the evening peak period, it takes a very long time to drive from the airport to the city centre. This capital city truly has a world-class traffic problem. In the evening, cars are parked haphazardly along the curbs and we did not seem to see many parking instructions. We also often saw rusty, scrapped automobiles along the sides of the roads, with nobody coming to deal with them.

I have talked about the many cars and many people; now I will add a few words about the smog. We were under a gray and hazy sky from the first day that we arrived in Delhi. We originally felt that the smog in Beijing is bad enough, but Delhi is worse. Delhi, like Beijing, is a northern city and has the same dry climate. The vegetation has been severely damaged; adding in the infrastructure construction all around the city, the pollution in Delhi is quite serious.

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Figure 15: At any rate, after a few days in Delhi, we felt that there was dust everywhere; even the trees were covered with dust.

In terms of local properties in India, current real estate prices in Delhi are probably closer to the level of second- and third-tier cities in China, but in India, the ownership of real properties has no time limit and property taxes are low.

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Figure 16: Modern urban life illustrated on billboards stands in contrast with the reality; this actually embodies the “Indian Dream."

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Figure 17: In 2015, the World Health Organisation listed Delhi as the world’s most polluted city.

People don’t mind

We passed several large real estate development projects and all had pungent-smelling sewage ditches nearby. If we needed to get out of the vehicle and move around, our noses would be assaulted if we did not wear masks—with almost no exceptions. Fellows from Beijing would probably be able to adapt if they came to Delhi.

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Figure 18: A residential community being built, with its infrastructure facilities unfinished.

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Figure 19: Does India have buildings abandoned before they are finished and real estate speculators?

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Figure 20: Indian locals do not seem to think that environmental pollution and smog is a big problem.

The young Indian guide travelling with us graduated from the Chinese Department of Jawaharlal Nehru University and had studied Chinese at Peking University. He could be considered part of India’s elite.

He had great patriotic enthusiasm. During our journey, he told us that people are very grateful to the Modi government because Modi’s new policies have brought enormous changes to Delhi and across India. People’s incomes have greatly increased and they also have more employment opportunities. Of course, he also referred to the job opportunities brought about by Chinese people coming over to invest.

He used himself as an example. Because he spoke Chinese well, he specialised in taking care of Chinese tour groups. His monthly income could reach ₹2.00 lakh or nearly 20,000 yuan. This is a very high income for the working class in India. By comparison, the monthly salary of a skilled factory worker is only ₹8,000.00 to ₹10,000.00. Learning Chinese has now become a hot item in India; if you can speak a little Chinese, it is easier to find a job.

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