India needs to sharpen its export strategy for the Chinese market, with the country fast emerging as a major global economic driver even as giants like the US and Europe struggle to recover from the recession. Addressing the visa issue for Chinese workers would go a long way towards building mutual confidence and expanding access for Indian exporters in the Chinese market.
With China now focusing on creating domestic demand, in a marked shift from its traditional dependence on export-led growth, will offer an opportunity for Indian companies to capture the unexplored Chinese market.
?The time is ripe for Indian companies to explore and capture the Chinese market as the dragon focuses on creating domestic demand in a change of its traditional export-led economic growth strategy post-recession,? says Anil Bhardwaj, secretary-general, Fisme, a trade body representing small and medium-size enterprises.
Chinese banks had shown interest in financing infrastructure projects in India. With the Indian government envisaging a $1-trillion investment in the infrastructure sector in the 12th Five Year Plan, this offers a big business opportunity for Chinese banks. The Indian infrastructure sector, especially power is facing a serious fund shortage. Availability of cheaper Chinese financing could help infrastructure projects here facing fund crunch.
India?s trade deficit with China, which was just $1 billion in 2001-02, rose to $16 billion in 2007-08 and is further expected to go up to $24-25 billion this year. The rising trade deficit remains a sore point in India-China bilateral trade relations. However, this should not be a worrying factor for Indian policymakers given the keenness China has shown for investments in India in recent months.
For example, Chinese state-owned banks were earlier not keen to finance power projects in India. But now they seem to have changed their mind. In a first for any Indian company, Reliance Power has tied up a Rs 5,000 crore financing for its 4,000 mw Sasan ultra mega power project from Chinese banks for procurement of equipment from Shanghai Electric Corporation.
Indian companies have to import from somewhere products which are not manufactured in India. China is an attractive import market for Indian companies for its cost-competitiveness.
Chinese companies have contributed significantly toward improving availability of power equipment in the Indian market. Power equipment supplied by Chinese vendors are 15-20% cheaper compared to equipment supplied by domestic manufacturers Bhel and L&T. Chinese suppliers like Dong Fang and Shanghai Electric Corporation have contracts worth over 1.5 lakh crore in hands to supply equipment to power projects in India.
Chinese vendors are implementing about 25% of the 78,700 mw capacity addition envisaged by the Indian government under the 11 th Five-year plan. Meanwhile, the government has envisaged capacity addition of 100 gw during the forthcoming 12 th Plan. Of this, orders for equipment supply to projects worth 62,550 mw have already placed on contractors. Chinese suppliers have bagged contracts worth 15,430 mw.
Chinese export-import banks had until recently kept away from financing power projects being implemented by Chinese suppliers. Indian companies have not explored the Chinese market. Hence the low penetration of Indian export in China.
?Indian companies are yet to explore the Chinese export market in the same way as Chinese have explored the Indian market,? Bhardwaj said.
Traditionally, China has exclusively focused on export as its economic growth strategy. But now the realisation has dawned that this is not a sustainable strategy, with its trade surplus with key trading partners like the US fast becoming a political issue post global economic recession.
Chinese banks approve loan to Sasan project
A consortium of Chinese banks ? Bank of China, China Development Bank and the Export-import Bank of China along with Standard Chartered Bank ? has approved sanction of Rs 5,000 crore loan for Reliance Power?s 4,000 mw Sasan ultra mega power project and the final commitments letters are likely to be signed by the two sides on Wednesday during Wen Jiabao?s visit.
