China Outbound: From New York to Shanghai, All Eyes Are on India
Our Latest Round-Up of Business News Affecting China-Based Businesses Investing in Asia
In this edition of China Outbound, we highlight the growing importance of India in global investment trends, as supported by the launch of Prime Minister Narendra Modi’s “Make in India” campaign for promoting high-tech enterprises to invest in the country. At the other end of the spectrum, we outline why India is poised to inherit low value-added manufacturing to serve China’s domestic consumer market, and review the results of President Xi Jinping’s recent South Asian tour in terms of infrastructure investment in India and Sri Lanka. These projects, together with streamlined customs initiatives in China such as those in the Shanghai Free Trade Zone, will facilitate the smooth flow of both goods and investment between these two Asian powerhouses.
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It is demographic dynamics that truly dictate where the future of manufacturing investment lies. For the past twenty-five years, this has been China. But India is now poised to take up that mantle as the China price rises, its workforce diminishes, and global consumer demand increases. This was exactly the case twenty-five years ago – substituting American and European manufacturing costs for China – and it remains so today. Rising China manufacturing costs mean it is losing production competitiveness, while only India is capable of stepping into a volume gap of that size. It is now time to get prepared.
As part of Prime Minister Narendra Modi’s new “Make in India” campaign to expedite India’s transition to a high-tech, developed economy, Communications and Information Technology Minister Ravi Shankar Prasad is championing plans to create a “Digital India.” These initiatives are part of a new wave of government policies aimed at encouraging foreign electronics and high-tech companies to invest and establish new branches in India.
Speaking to a crowd of 20,000 mostly Indian Americans at Madison Square Garden in New York, Narendra Modi said the country would be moving ahead at a “very fast speed”, and that “no stone will be left unturned” in its efforts to streamline services and remove outdated procedures. The Indian prime minister said that the regulations currently in place for foreigners seeking to do business in India would be completely revamped, with the aim of making the system far easier to navigate.
Until recently the Indian government has been hog-tied in its own democratic process and unable to get major reforms in place, opening a significant infrastructure gap on India’s east coast. China has been quick to bypass this, turning to a friendly Sri Lanka for assistance. The result has been the redevelopment of Sri Lanka’s main port in Colombo, which China not only financed, but also owns the majority stake in.
India and China have signed a number of agreements aimed at strengthening their respective economies, the most important of which will see $US 20 billion invested into India’s infrastructure over the next five years. The money is expected to be invested primarily into India’s railways and industrial parks – two key sectors that the new Indian government is actively seeking to improve.
The benefits of the Shanghai Free Trade Zone (FTZ) for the logistics industry have the potential to affect all businesses that rely on moving goods to or from China. In terms of numbers, prior to their incorporation as the Shanghai FTZ, the city’s four designated bonded areas were home to over 11,000 trade and logistics-related enterprises, based on CBRE figures.
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Dezan Shira & Associates
Meet the firm behind these publications. Dezan Shira & Associates is a specialist foreign direct investment practice providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the award-winning firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam, in addition to partner alliances in Indonesia, Malaysia, Philippines and Thailand, as well as liaison offices in Italy, Germany and the United States. For further information, please email email@example.com or visit www.dezshira.com.
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