Mainland manufacturers dim toward India

Boycott, rupee crunch dent interest; technology firms gain

India’s rupee crunch and social media campaign to boycott “Made in China” goods hasn’t meant big losses for traditional manufacturers from the Chinese mainland, but these events have dampened their interest in the market, Chinese businessmen and investors said.

When talking with the Global Times on Tuesday, Chang Sheng, president of Datong Mechanic and Electric Pvt Ltd, said he has no plans to further his investment in India, a market that has reportedly overtaken China and became the word’s top foreign direct investment destination in 2015.

Chang’s company, which has been doing business with Indian partners for 10 years, opened a factory in India in June 2015 to semi- process steel pipe with an investment of tens of millions of yuan.

“I have faith in the market, which is very like the business environment of China in the 1990s and one that should have lots of opportunities for private companies like us,” said Chang. “But the recent turbulence has worried me as well as my friends, who delayed their plans to enter India.”

During Diwali, the five- day Hindu festival of lights that fell in October this year, Indian buyers were urged via social networking platforms to switch to local products from Chinese goods.

The sales of Chinese goods such as lamps and decorative items dipped 60 percent year- on- year at Diwali, The India Express reported on October 31, citing estimates by the Confederation of All India Traders.

This mainly hurt small, cheap commodities imported from Yiwu, East China’s Zhejiang Province, “but not high- tech goods such as machinery and smartphones,” said Chang.

Xiaomi Inc, for instance, sold a record 1 million handsets in India in the first 18 days of October, despite the boycott campaign.

“Everyone is emphasizing local production and made in India, but it will take time. People who depend on Chinese goods will take time to shift,” Krishna Deorah, a businessman from Alwar City, Rajasthan, told the Global Times on Tuesday.

China is India’s largest trading partner, with the bilateral transactions of more than $ 70 billion in 2015, data from China’s Ministry of Commerce showed. China’s direct investment in India reached about $ 870 million in 2015, six times what it was in 2014.

“The boycott will end with a whimper rather than a bang, because it is just an isolated incident initiated by some politicians to attract public attention,” Jason Wang Chao, founder and CEO of ZDream Ventures in India, told the Global Times Tuesday.

What traditional manufacturers should, however, worry about is India’s decision to scrap banknotes worth 500 rupees ($ 7) and 1,000 rupees, indicating uncertainties and instability for traditional assetheavy companies, said Wang.

Chang agreed with Wang, noting that some companies hadn’t been paid by their Indian clients after the banknote action was launched by Prime Minister Narendra Modi to crack down on corruption.

But Wang applauded Modi’s move, which is expected to eventually bring a healthier business environment.

While Chinese traditional manufacturers are being reserved toward investment in India, Internet and technology companies are showing greater enthusiasm for the market.

Conglomerate Beijing Miteno Communication Technology led a $ 900 million buyout of local advertising platform media. net in August, marking this year’s biggest acquisition in the tech start- up sector.

Tencent Holdings invested in the local messaging field by leading a $ 175 million funding in messaging application Hike in mid- August.

Chinese e- commerce giant Alibaba Group Holding made big investments in Paytm and Snapdeal to further its presence in India’s mobile payment industry.

“The withdrawal of the 500 and 1,000 rupee banknotes from circulation may be a boost to the development of Internet services. Transactions via mobile have surged 300 percent in October from September,” said Wang.

In addition, Wang said it’s a good time for Chinese funds to flow into India’s digital technology industry, as US funds in the sector are slowing.

According to a research note from ZDream Ventures, in the first three quarters of this year, investment in India’s technology, media and telecom sectors, mainly from the US, hit $ 3.6 billion, in comparison with $ 9 billion for the whole 2015.

Chinese investors should be welcome, as they are more understanding of India, a country that has many similarities with China, and their business models are likely easier to be copied by Indian peers, said Wang.