Trade Analytics

    India and China

  • India and China

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June 25, 2010

India and China will witness steady high growth rates of 8.8 and 10 per cent respectively in 2010, and Asia will continue to lead global recovery, according to the latest communication by International Monetary Fund (IMF) officials in April 2010.

Furthermore, India and China continue to attract high rates of investment. At 35 per cent and 42 per cent of gross domestic product (GDP) respectively in 2008-09, the levels of gross domestic fixed capital formation in India and China are the highest in the world. The rising rates of investment in India and China, as opposed to declining rates in Japan and South Korea, have led to the former replacing the later as Asia's powerhouses.

Moreover, according to the global management consulting firm, Boston Consulting Group's (BCG), in its10th annual Global Wealth Report released in June 2010, India and China will generate triple the growth of other countries from 2009-end to 2014.

Furthermore, Moody's Analytics predict that led by India and China, most of the Asian economies will expand in 2010 and 2011. As per the report released in June 2010, "China will lead (growth in Asia this year), expanding around 10 per cent followed by India and Vietnam at around 8.5 per cent".

According to PricewaterhouseCoopers (PwC), Indian and Chinese firms will lead a host of new multinational firms from emerging economies over the next 15 years. India and China will account for 42 per cent of the new multinationals over the next 15 years, with India overtaking China in producing multinationals from 2018. More than 2,200 Indian companies are expected to open operations overseas over the next 15 years, overtaking China because of easing foreign investment rules.

Trade

Trade has been the vital part of strengthening the bilateral economic relationship between the two countries. In 2008-09, China was India's second largest trading partner after the UAE. Bilateral trade engagement between India and China stood at US$ 41.85 billion in 2008-09, an increase of nearly 10 per cent over US$ 38.02 billion in the year ago period, according to data available with the Ministry of Commerce and Industry.

Imports from China expanded 19 per cent and stood at US$ 32.5 billion in 2008-09, while exports were at US$ 9.35 billion. During April-December 2009, exports to China have been US$ 7.3 billion, while imports from China have been US$ 22.57 billion. During April-December 2009, China has overtaken the UAE to become India's largest trading partner.

Investments

With increased mergers and acquisitions (M&A) both India and China are aggressively redrawing the global landscape through their M&A deals.

According to UK-based Chartered Management Institute's study released in March 2008, India and China (along with Brazil and Russia) would exert a greater influence on business markets and transform the business landscape by 2018.

In addition, India and China are expected to see the highest-ever rise in private equity (PE) investments from new and existing investors over the next two years, according to a survey by global PE firm Coller Capital, titled "the Global PE Barometer" report, which was released in June 2010. As per the bi-annual survey of trends PE, investors — mainly from Europe — plan to boost their exposure to the Asia-Pacific region over the next three years. "Of those, China and India will see by far the largest increase in PE investment from new and existing investors ....over the next two years," the report stated. The survey further revealed that 44 per cent of the global PE investors studied, want to either expand or invest in India, while 53 per cent plan to do the same in China.


India and China with their rapid economic growth rates have bettered their rankings as preferred investment destinations, while Europe has taken a hit, according to the global consultancy firm, Ernst & Young's 2010 European Attractiveness Survey, released in June 2010. India is the fourth most attractive foreign direct investment (FDI) destination for this year with 22 per cent of the 814 leading global investors voting for it. China tops the list with 39 per cent.

The survey ranks India as the most attractive destination second only to China, three years from now. "For the next three years, investors continue to see China, India and Central and Eastern European (CEE) nations as their route to future riches," the report further highlighted.

Singapore-based DBS Group is looking at operations in Greater China and India. According to Sanjiv Bhasin, General Manager and CEO, DBS Bank India, "China, India, Indonesia and Taiwan will be growth pockets for DBS. And being two of the largest economies, India and China will obviously govern the growth path of the bank."

Siemens Group plans to invest US$ 43.25 million by 2013 in India and China to strengthen local operations of its wholly-owned metal and mining technology solutions firm Siemens VAI. The investment will fund expansion of local production, engineering and project handling capabilities.

In India Siemens VAI has one plant and employs around 800 people across its operations in Kolkata and Mumbai.

France's Sodexo is looking at double-digit revenue growth in India and China over the next couple of years, according to Michel Landel, Chief Executive of the company.

According to Franklin Templeton Investments, India offers better long-term returns on stocks than China, given the outlook for economic growth and corporate earnings.

India's economy may sustain faster expansion from a smaller base as "favourable" demographics boost consumption, said Stephen Dover, Managing Director and International Chief Investment Officer for Franklin Templeton Investments' Local Asset Management Groups. According to him, India is still quite underinvested. India offers an opportunity to investors to participate in its growth.

Increasing synergies

Both India and China provide huge investment opportunities across a range of sectors. Significantly, many Indian and Chinese companies are collaborating to create a new competitive force.

  • TKM, the wholly-owned subsidiary of TM International Logistics, the JV between Tata Steel and Germany's Martrade, has opened an office in Shanghai to undertake freight forwarding business.
  • Two-wheeler maker, Bajaj Auto, has begun production of its bikes in China for exports to Nigeria, a potential market for low-cost and unbranded bikes.
  • The India-China Business Technology Summit took place in March 2010 in Beijing and was attended by officials of over 300 top-end Chinese companies, including those of government-owned undertakings. Officials of top Indian IT firms made presentations in an attempt to showcase India's IT prowess and to attract the local Chinese companies.
  • Mr KV Thomas, Minister of State for Agriculture on a visit to China in June 2010, said that India and China will extend mutual support in the field of food grain storage. Technical experts and engineers from India's leading agriculture warehousing and storage agencies, including the Food Corporation of India (FCI), will visit China to study modern warehouse construction and preservation methods for food grain storage. Similarly, a group of technical experts from China will be invited to visit India during October-November 2010 to visit storage facilities in India and interact with the officials of FCI.