Gujarat industry talks of 'threat', 'risk' as Chinese prez Xi Jinping comes calling

Written by Avinash Nair | Ahmedabad | Updated: Sep 17 2014, 04:05am hrs
Xi JinpingChinese president Xi Jinping (Reuters)
In a state where business houses look at the Chinese more as a threat than competition, industry representatives in Gujarat are "cautious" about a possible influx of capital from dragon land that is expected to flow into Gujarat during the maiden visit of Chinese president Xi Jinping on Wednesday.

"Any relationship with Chinese is fraught with risk. We have to be cautious because Chinese in itself is an FDI based economy and it is the manufacturing hub of the world," said Bhagyesh Soneji, chairperson of ASSOCHAM (Associated Chambers of Commerce and Industry of India) in Gujarat.

"Moreover, Chinese control 65 percent of the world's ceramic market and is a leader in Chemicals. The USP of Chinese is their ability to mass produce. Any Chinese investment in sectors like ceramics, chemicals, plastics and Active Pharmaceutical Ingredients (API) is a possible threat to the local industry (in the state)," added pointing to India's USD 36.21 billion trade deficit that exists with China.

"We have an extremely negative balance of trade with China. During the upcoming meetings with the Chinese president, we should focus more on exporting products like pharmaceutical formulations, raw cotton, bioagents for fertilisers and IT-Software to our neighbour," she said referring to the Jinping's Gujarat visit where Chinese is expected to sign an MoU for setting up an industrial park in the state.

Glass manufacturers in South Gujarat also feel that the capex-rich Chinese companies has also been posing stiff competition to the units that are spread between Vadodara and Valsad. "The Chinese products, especially solar glass (glass used in manufacturing solar panels) that are currently imported in to Gujarat are about 20 percent cheaper and pose a lot of competition to the local industry. If the Chinese glass manufactures decide to set up base in Gujarat, then we may have to compete with industries that will have a lot of capex at their disposal," says Ashok Jain, vice-president of South Gujarat Small Gas Consumers Association (SGSGCA) and the whole-time director of Gujarat Borosil Ltd. The glass manufacturers are currently battling a shortage of APM natural gas for their units.

The Chinese also presents a lot of competition to pharmaceutical companies in Gujarat and other parts of the country who are into manufacture of Active Pharmaceutical Ingredients.

"We are keeping a close watch on the kind of agreements that will be made with the Chinese especially in Delhi. We have already started a movement against the Chinese companies who push in a lot of low cost pharmaceutical products into India, especially in the API segment. There have been several instances of API units in the country shutting down due to the competition from the Chinese," said Dr R S Joshi, executive secretary, Indian Drug Manufacturers' Association (Gujarat State Board). Pharmaceutical companies in Ahmedabad, Ankleshwar, Bharuch and Vapi are into APIs.

Meanwhile, in order to attract more Chinese companies to set up base in Gujarat, a team of state government officials and representatives associated with the business in Gujarat just returned after a tour of China on Wednesday. The officials had visited Shanghai, Beijing and Xiamen to promote the Vibrant Gujarat 2014. "There is a significant amount of interest among Chinese companies to come to Gujarat," said an official who was part of the trip.

Prime Minister Narendra Modi in 2011 had himself visited China ---- Sichuan Province, Shanghai, Beijing and Chengdu --- as the chief minister of Gujarat. At present, there is already a significant presence of Chinese on Gujarat's soil. The Chinese firm TBEA Energy (India) Pvt Ltd, is developing a Green Energy Park in Karjan near Vadodara with an investment of about Rs 2500 crore, while China Steel Corporation is setting up an Electrical Steel Plant on a 145-acre plot at Dahej GIDC Estate at a cost of Rs.6,000-crore. Another Chinese company, TWBB has signed a memorandum of understanding with Gujarats Atlanta Transformers and Electrical to set up an ultra mega high voltage power transformers and reactors plant on Padra-Jambusar Highway near Vadodara at a cost of Rs.400-crore as a joint venture.