Even as fresh questions on the vulnerability of foreign businesses in China emerged with the Rio Tinto case, Indian businesses continue to flourish there.
Setting up business in China has never been easy, with the constraints such as language, vast differences in cultural experiences and a form of government radically different from most of the western and Latin American countries where Indian businesses have firmly established themselves.
However, Indian players in China have adapted to the customs, laws and needs of the government and most are looking to expand their businesses.
“We have had no problems. We got excellent co-operation from the Chinese government. We have plans for fresh investment and we are going ahead with that,” said A Choudhari, president, farm equipment sector, Mahindra & Mahindra. The company has two joint venture companies in China, which manufacture tractors.
Indian companies, nevertheless, do face difficulties in setting up businesses in China, though experts say that when a company is looking at a market like China’s, they factor in the challenges while setting up base. “From the feedback we have, there are difficulties in China which need to be taken into account. When people move in to tap such large markets, companies already take these into account,” said an official at the Federation of Indian Chambers of Commerce and Industry (Ficci). The official was earlier part of the Indo-China working group.
Indian companies have set up sourcing hubs, manufacturing and export units in China, primarily in the automobile and information technology sectors. According to an estimate of the Confederation of Indian Industry (CII), the Indian investment in China is about $300 million (Rs 1,400 crore).
Most feel the recent problems faced by Rio Tinto and private steel miners in China are a singular incident which does not affect the overall business sentiment in the country. “These are just a few instances, we will wait and watch how it impacts the business at large,” said a senior executive at Bajaj Auto, who did not wish to be named. Bajaj Auto manufactures its low-cost Boxer motorcycle in China, which it then exports to Nigeria. It also has a sourcing base in China which it uses for its Indian operations.
Indian businesses continue to see huge untapped market potential in China. Which, coupled with cost and geographic advantages, makes the country a lucrative destination despite policy and cultural challenges. Most also say their Indian employees there do not face any major problems in acclimatising to the Chinese milieu.
“A company sending employees overseas generally briefs them about the customs and culture of that country. Having said that, IT firms in general have risk councils in place that look into political, economical and cultural risks. This also does not mean that one such incident would derail all business activity,” said Ganesh Natarajan, Vice Chairman and Chief Executive Officer, Zensar Technologies and ex-chairman of Nasscom, the IT industry’s apex association.Zensar would, by the end of the first quarter of 2010-11, set up a centre at Shanghai.
