INDIA AND CHINA

India and China: Attractiveness And Risks To A Business



India and China: Attractiveness And Risks To A Business

Introduction

For many Australian businesses looking to expand overseas, both China and India appear to be favorable destinations. An appropriate question, then, seems to be a very necessary one: which country is a more attractive one in terms of foreign expansion? China's membership of the WTO in 2001 seemed to make it a sure bet with reduced tariffs levels and easier-than-ever, more accessible free trade. But India, too, has its own promising figures such as the “worlds fastest growing credit card market in the world” (Kong 2005: 35-59). Rising manufacturing costs in China seem to be deferring potential business away and are causing some manufacturing firms to have to leave the country, which is reason for some to believe that perhaps India is the most favorable country of the two Asian giants. However, these arguments are tempered by the fact that many “companies still see China as a strategically important manufacturing base because of its domestic market potential” (Yahuda 2004: 74-85). Thus, it seems as if China remains the most attractive destination for foreign expansion. (Wan, 2001: 31-42)

Discussion

It is crucial to note that, in many cases, worldwide companies actually rely on both China and India to rake in their profits. An example of this is Samsung Electronics, whose “net profits jumped 37 per cent in the first quarter amid strength in mobile phones and flat-screen televisions. Samsung earned 2.19 trillion won ($A2.32 billion) in the three months ended March 31, compared with 1.6 trillion won in the same period last year” (Wan, 2001: 31-42). Samsung executive vice president for investor relations Chu Woo-sik said that the growth of 33 per cent year-on-year can be attributed to emerging markets, including China and India, because they “continued to be the main driver of growth” (Dwijendra 2004: 371). However, if a company had to choose just one country to expand into, that country should be China.

Some critics of Chinese expansion, such as the American Chamber of Commerce (AmCham), say that “China is loosing some of its attractiveness to foreign investors as rising costs are forcing some US manufacturing firms to leave the country” (Ludden 2009: 15-20). Norwell Coquillard, the chairman of AmCham in Shanghai, also noted that “the seemingly endless supply of low-cost unskilled labour may be approaching its limits,” which would indeed shy Australian business away from either investing in or relocating to China (Kong 2005: 35-59). The Chamber of Commerce's recent report went on to suggest that manufacturing companies are looking to other countries such as India and Vietnam because in China “the competitive labour market poses difficulties for export-oriented manufacturers, especially in low-margin sectors such as toys, garments and shoes” (Kong 2005: 35-59).

However, all of these seemingly damning statistics do not speak to the level of success that is present in China. AmCham ends its report by declaring that “74 percent of companies were either profitable or very profitable in China and 89 ...