Why China Remains Relevant and Where is India’s Opportunity

It’s about a decade and little more that I first time experienced China Phenomenon during a visit to South China in the famous Canton fair. Most of the progress or the Scale I saw was from sidelines  and just got impressed and came back to India with the same.

In 2007 when I landed up there for a long term (About 3 years assignment till 2010), that i went t through understanding of the capabilities, experiencing Strength of the culture, Speed at which things can happen or not and what makes China the world factory. The size and scale and ambition of the business has been truly Global, whilst keeping simple business thinking by the whole system. Truly it was the cheapest and most productive space to manufacture and with unparalleled supply chain along-with other advantages like lack of distraction from religion, Mult Party Political system etc. Etc. In 2008 , Labour Laws were introduced in China and the cost of labour acquisition started going up and then 2008 Global recession hit Chinese factories with some consequences. 

Chinese regime however responded by infusing hundreds of Billions to Economy and development of new areas which could fuel demand again. At the same time however, Cost of manufacturing kept going up due to inflation and increase in Labour cost. At that time, my assessment was that in 15 years Manufacturing will go back to where it came from as we could see some manufacturing activities in Eastern Europe , Earstwhile USSR and Latin America apart from pockets in Far east.

A decade later nothing much has changed though. China still is factory of the world and they responded very positively to all economical pressures around the world. In August 2015 Chinese Government devalued their currency . The commodities going down also reduced cost of the products manufactured and before India could say China is irrelevant we were back there on cost where we were in 2008-09.

Indian Loss and how can we rebound : Whilst India has been beating the drum of being a manufacturing hub, it has not waken up from its mindset of a service economy. It could not work on Chinese Scrae (Temporary ) to move to India for manufacturing and too much time has been spent in deleberations as win;win is not in our culture. Chinese on their parts are also very conservative on moving into a new territory especially considering hostility of political incumbent in both the countries as well as their on confidence to manage a business from a distance into a country where they do not understand language.

Government on their part has not been able to push through the reforms and another major hinderance is red tape  as well as huge cost of acquisition of land in developed industrial areas. The areas which are under developed and developing ( Telanagan’s and Andhra Pradesh ) for instance do not give enough business to the investors. Any company whilst investing would like to minimize the start up cost and risk of doing business to minimal. Now that could not happen in India yet and so we blocked the new entrants.

Course Correction : Lies in the fact that we have to rebuild our case of manufacturing economy and look at opportunities to collaborate with Chinese dispensation as well as private players and provide an environment conducive to collaborative working where partners are protected against fraud by local players, Opportunity to go 100%. Minimal regulation. At the same time various developed Industrial Estates and Parks in India are in bad shape despite good infrastructural development, largely due to high cost.

Government should take proactive steps to pit up incentives to fill these up for the people having facilities as well as though occupy them and real single window for foreign companies. It will take a decade of pursuance to do a mini China in India, but is it worth doing? You bet it is.