'Chinese businesses can make huge profits in India'

Arguing that anxieties of Chinese businesses in investing in India are "overblown", official media today said investors can make "fat gains" by cashing in on the rapid growth in India's manufacturing sector and staying away is indisputably an "unwise choice".

PTI| Last Updated: Oct 28, 2016, 12:54 PM IST
'Chinese businesses can make huge profits in India'

Beijing: Arguing that anxieties of Chinese businesses in investing in India are "overblown", official media today said investors can make "fat gains" by cashing in on the rapid growth in India's manufacturing sector and staying away is indisputably an "unwise choice".

Making a strong case for why Chinese should rush their investments to India, an article in the official daily Global Times said "the rapid growth in India's manufacturing sector has thus far had little to do with Chinese capital".

"In other words, China does not have the capability to limit India's manufacturing development. What China is capable of is preventing Chinese investment from capitalising on India's admired growth outlook, indisputably an unwise choice," the article written by Ge Cheng, Research fellow at the National Institute of International Strategy of Chinese Academy of Social Sciences, said.

The article titled 'Chinese investment can capitalise on India's growth' said Chinese capital invested in the Indian market is "likely to reap fat gains in the future, which is a de facto win-win for all parties".

"The recently concluded eighth BRICS Summit in Goa has again thrust India into the spotlight, giving the world a breath of fresh air amid almost endless populist fights haunting the US and Europe.

"Since 2014, India's domestic reforms have come to fruition and its economic growth has been impressive, thanks to efforts by Prime Minister Narendra Modi, which include regulating the manners of government employees, eliminating corruption, degeneration and outdated conventions as well as addressing deep-rooted social and economic problems," it said.

However, in light of the "robust momentum in India's economy", confusion prevailed in China over whether businesses should shift their manufacturing into India, it said.

"Those opposing the shift argue that the relocation of manufacturing operations will inevitably prompt Indian companies to outpace their Chinese counterparts in producing low- to medium-range goods, and consequently force Chinese businesses to compete against companies from the US, Japan and Europe in the high end of the value chain," it said.

In the worst-case scenario, China might be left in the precarious position of being incapable of competing against its Western rivals in high-end manufacturing while also being challenged by a dominant India in the lower end.

"However, I would argue that this anxiety over Chinese investment in India is overblown. Rather, there are many reasons why investing in India could boost the clout of Chinese capital in the Indian economy," Ge said.

Outlining India's growth figures specially the GDP, it said the "growth numbers might be inflated".

"Behind the brilliant figures, however, were the dramatic drop in oil prices between 2014 and 2016 and a 2015 change to India's GDP calculation method," it said.

But at the same, "investing in India is an inevitable choice of capital, which essentially pursues profits. The accelerated flows of foreign direct investment (FDI) into India do not seek to make contributions to India, but instead are allured by the promising profit prospects enabled by the economy's growth and an array of favourable policies".

"Based on realist thoughts, India is simply striving to improve its investment environment and revise rules and regulations. The Modi government also updated FDI rules, raising the foreign investment cap to 49 percent from 26 percent, except for in state-owned banks and state-owned listed companies.

"The threshold limit for automatic approval has also been loosened to 500 billion rupees (USD 7.4 billion) from 300 billion rupees. If India can continue its current growth momentum, quicken (or at least maintain) its current pace of reform, the Chinese capital that has entered the Indian market is likely to reap fat gains in the future, which is a de facto win-win for all parties," the article said.

Also, China cannot effect whether or not its low-end manufacturing will be overtaken by India.

"The rise of various emerging economies after World War II has shown that the economic takeoff pivoting around manufacturing requires external capital, foreign technologies, massive orders in the US and European markets, a competitive labour force in the emerging country as well as a relatively stable international environment.

"China neither controls nor monopolises these necessary components," it said pointing out that India's manufacturing so far had little to do with Chinese capital.