India wants to bring businesses back from China

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Indian Prime Minister Narendra Modi wants the country’s companies to embrace their homeland as a manufacturing base. It’s a hard sell for businesspeople like Himanshu Baid.

Baid can still make more money in China even though he pays his workers three times more than at his two factories in India, which supply the domestic market. Congestion at ports, a lack of skilled workers and a shortage of raw materials offset any advantage India has with cheaper labor costs, he said.

“It was a risk for a small company like ours, but it worked as China is an easy place for business,” said Baid, head of Poly Medicure Ltd, a New Delhi-based company with an annual sales of $53 million. “It’s a struggle in India.”

Modi has sought to reverse those perceptions since taking office last May with a policy initiative to entice companies called “Make in India”. Industry groups are now looking for him to fill in the details when his government presents its budget on Saturday.

“What India must demonstrate is a convincing vision and the means to implement it,” said Jean-Pierre Lehmann, a professor of international political economy at the IMD, a business school in Lausanne, Switzerland.

“There is a lot to be done that will require profound transformation in policies, structures and attitudes.”

As part of “Make in India”, Modi plans to raise the share of manufacturing in the economy to 25 percent by 2022 from the current 18 percent. Doing so will create 100 million jobs, the government estimates, enough to absorb the world’s largest working-age population.

In the seven decades since India achieved independence from the British in 1947, the share of industry in the economy has remained largely unchanged. Services have replaced farming as the dominant growth driver, and now account for 65 percent of the economy, according to the Finance Ministry.

While China emerged as the world’s factory with manufacturing accounting for about one-third of its economy, India suffered from stifling bureaucracy that required permits to produce goods until 1991. English-language skills and an edge in information technology have allowed India to win back office business from a range of multinationals since then.

“The goal should be to strengthen Indian manufacturing so it can stand on its own and compete effectively in domestic and world markets,” said Eswar Prasad, a former chief of the International Monetary Fund’s China division and now an economics professor at Cornell University.

“Compared with China, India has a cheaper and younger workforce that could boost the country’s attractiveness to foreign investors.”

Modi has taken some steps to make it easier for companies to do business, including moving the application process for industrial licenses online. Investors planning to set up a factory can leave queries on the “Make in India” website and they will be answered in 72 hours.

Still, much more needs to be done. India fell to 142 of 189 countries on the World Bank’s latest Ease of Doing Business Index, falling behind Ethiopia, Yemen and Sierra Leone. China improved several notches to 90th on the index.

It still takes 30 days and 12 clearances to get a company registered in the industrial hub of Noida, near Delhi, for instance, according to the World Bank-three times longer than it takes on average in the 34-member grouping of Organization for Economic Cooperation and Development.

Modi’s administration must clean up a maze of tax rates in which rates for components in some sectors are higher than those for the finished product. Business groups are also calling for the end of the minimum alternate tax, which offsets any financial incentives exporters get from investing in special economic zones.

Attracting investment is key for Modi to provide jobs for the 64 million new entrants to the jobs market in the five years ending 2016. By 2021, almost two-thirds of its 1.2 billion people will be of working age, according to the Finance Ministry.

As India becomes more productive, it will be in a better position to compete with China. By 2020, India will have an average age of 29 years old, eight years younger than China.

Manufacturing share in output surges when a country’s average income in terms of purchasing price parity is about $5,000 and peaks at $10,000, according to a study by McKinsey and Co.

India’s per capita income is $5,850, while in China it is $11,850, according to the World Bank.

 

Source : China Daily | February 26, 2015

Thomas D’Innocenzi

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US experts upbeat on sustained China-US cooperation

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As the Chinese Lunar New Year of the Goat was ushered in on Thursday, experts in the United States cautiously predicted a year of sustained dialogue and substantial cooperation between China and the US in 2015.

Optimism about a more amicable year for China-US ties was generated in early February when the two sides announced a state visit to the US by Chinese President Xi Jinping in September. This will be the first state visit to the US by Xi, who already held an informal summit with US President Barack Obama at the Sunnylands estate in California in 2013 and another summit in Beijing last November.

The early announcement of this visit was interpreted by many as a desire by both sides to set the tone for a more smooth and fruitful year for the China-US relationship, which is often set back by recurrent tensions and disputes despite increasingly intertwined economic and trade ties and deepening cooperation on many international issues.

“What it does indicate is that there is a sustained dialogue between the US and Chinese leaders which is significant in the face of the tensions we’ve seen over the past year and the areas that both sides see as potential realms for cooperation,” said Mark Cozad, senior defense policy analyst at the Rand Corporation.

“I think it’s a realistic understanding by both sides that these high-level dialogues are essential for managing tensions and identifying and pursuing areas where cooperation might be possible,” Cozad told Xinhua in an interview.

He said that despite the contentious issues of human rights, cyber security and territorial disputes in Asia, the leaders of China and the US have cooperated on climate change, denuclearization of the Korean Peninsula, the Iranian nuclear program and economic cooperation, where the “continued dialogue between the two presidents is essential.”

Robert Daly, director of the Kissinger Institute on China and the United States at the Wilson Center, told Xinhua Xi’s visit is expected to “advance cooperation in certain areas” because impending visit “can spur action and good behavior on both sides.”

Douglas Paal, vice president for studies at the Carnegie Endowment for International Peace, said the China-US deal on climate change reached last November by the two presidents during Obama’s visit to Beijing has already set the tone for “substantial cooperation” between the two nations.

“And that’s going to continue through the year (ahead of the) Paris conference on climate change,” Paal told Xinhua, referring to the United Nations-sponsored climate conference scheduled for late November in Paris, which aims to reach a universal deal on tackling climate change.

 

 

Source : China Daily | February 21, 2015

Thomas D’Innocenzi

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Indonesia’s central bank cuts rate to spur growth

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Indonesia’s central bank unexpectedly cut its key interest rate by 25 basis points on Tuesday (Feb 17) to spur growth as inflation slowed in Southeast Asia’s biggest economy.

It was the first time in three years that the bank had moved to trim the rate, to 7.50 per cent from 7.75 per cent.

The cut effectively cancelled out the quarter-point rate increase in late November. Bank Indonesia said that increase was aimed at stemming inflation, due to a more than 30 per cent increase in subsidised fuel prices.

“The policy is taken because Bank Indonesia is confident that inflation will remain under control,” the central bank said in a statement.

In January, Indonesia’s annual inflation rate was 6.96 per cent. The central bank sees inflation easing to 6.3 per cent in February, and then reach the lower end of its inflation target of 3 to 5 per cent at the end of the year.

Economists said the rate cut was likely made to spur growth, which fell to 5.0 per cent in 2014, the lowest in five years.

“The imports volume was surprisingly low in January, and this means there’s much lower economic activity at the start of this year, and this is probably the concern,” said Bank Central Asia’s chief economist, David Sumual.

New President Joko Widodo has set the growth target for this year at 5.7 per cent.

 

 

Source : Channel News Asia | February 17, 2015

Thomas D’Innocenzi

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Energy ties with Russia ‘important for China’

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The nation should maintain close cooperation with Russia in the energy sector and accelerate a new natural gas pipeline project, said Vice-Premier Zhang Gaoli on Friday in Beijing during his meeting with Alexei Miller, president of Russia’s state-owned natural gas giant Gazprom OAO.

Zhang said the two neighbors achieved great success in the energy industry last year and will focus on making their cooperation more effective for mutual benefit.

Based on bilateral agreements, China and Russia will accelerate the construction of a western natural gas pipeline linking Russia’s Siberia and northwestern China.

“The two nations should also actively explore cooperation opportunities in upstream resources development, energy project construction and equipment manufacturing,” Zhang said.

Miller said Russia would like to explore further energy cooperation.

Han Xiaoping, chief information officer of China Energy Net Consulting Co Ltd, said facing political pressure from the West and domestic financial difficulties, Russia needs to swallow its pride and cooperate with China intensively.

“The first item on Russia’s agenda should be opening up its energy market for Chinese companies, which will be beneficial for both countries,” Han said.

As a strong manufacturing country after years of development, China can contribute more to Russia’s energy sector. For instance, PetroChina Co Ltd, the nation’s biggest oil and gas producer, can bring advanced exploration technology to Russia.

“Chinese companies’ oil and gas exploration equipment can also be brought to Russia for its energy industry growth,” he said.

China and Russia signed a $400 billion natural gas supply contract in May, under which Gazprom will supply China with 38 billion cubic meters of gas annually for 30 years, starting in 2018, through the planned eastern pipeline.

The pipeline will connect Russia to China’s northeastern Heilongjiang province and from there connect with the industrialized cities along China’s eastern coast.

Russia and China intend to use their national currencies to settle more energy deals to guard against instability in a world energy market dominated by the US dollar, Russian President Vladimir Putin said on Nov 10, 2014.

“Direct settlement between the rouble and the yuan is very promising in the long run,” Putin said in a speech at the Asia-Pacific Economic Cooperation CEO Summit. “If we can settle large deals in this way, it will mean the influence of the dollar in global markets will decrease.”

Putin said China is a “priority partner” of Moscow, and the two countries are studying the possibilities of increasing the use of the Russian and Chinese currencies in bilateral trade and investment, in particular the energy sector.

Diversification in trade settlement will create greater stability in the world’s financial and energy markets, Putin added.

His remarks were seen by analysts as a signal that the yuan is making sound progress toward becoming an established international currency as Beijing actively promotes its global profile.

Last month, China and Russia agreed on a currency swap worth 150 billion yuan ($24.5 billion), a move widely viewed as an effort to reduce the dollar’s influence in both bilateral and international trade.

Jing Ulrich, vice-chairman of Asia-Pacific at investment bank JP Morgan, said, “Putin’s mention of direct trade settlement between the rouble and the yuan makes sense as the yuan’s internationalization is making good progress in global markets, and the trend will continue.”

But she said the dominance of the dollar as a global reserve currency will not disappear overnight, and China needs to make the yuan fully convertible for it to be more accepted internationally.

In his speech, Putin said Russia has made the Asia-Pacific region a priority in its trade and investment policies. Trade with APEC members currently accounts for 25 percent of Russia’s total trade volume, and Moscow is willing to raise the portion to 40 percent.

Russia also expects to boost investment in the Asia-Pacific region, which reached $1 billion over the past year, he added.

On Sunday, Russia and China signed a $400 billion deal for the construction of a pipeline that will supply 30 billion cubic meters of natural gas a year to China.

The two countries have also agreed to the purchase by China National Petroleum Corp of a 10 percent share of Vankorneft, a subsidiary of Russian oil giant Rosneft and operator of the lucrative Vankor oilfield.

 

Source : China Daily | February 14, 2015

Thomas D’Innocenzi

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UAE ready to be gateway to better ties of China, Arab world

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The United Arab Emirates (UAE) would like to serve as the gateway to better ties between China and the countries in the Gulf region and the Arab world, a senior UAE official said on Saturday.

UAE Vice President Sheikh Mohammed Bin Rashid Al-Maktoum made the remarks while meeting with Chinese Foreign Minister Wang Yi in Dubai.

Mohammed, also Dubai ruler and UAE prime minister, said his country highly values its relations with Beijing, adding that it welcomes more investment and travelers from China.

He also said the UAE is ready to join China in carrying out the Belt and Road initiatives.

The Belt and Road Initiatives were put forward by Chinese President Xi Jinping during his overseas visits in 2013, which includes the Silk Road Economic Belt – from China via Central Asia and Russia to Europe, and the 21st Century Maritime Silk Road – through the Strait of Malacca to India, the Middle East and East Africa.

The UAE leader also noted that the Asian Infrastructure Investment Bank (AIIB) would benefit the development of regional countries, and accord with the interests of all sides.

On Oct 24, up to 21 Asian countries signed a memorandum of understanding on establishing the AIIB, an initiative proposed by President Xi in a bid to finance infrastructure projects across Asia.

Wang said the UAE has now become a key country linking China and the Arab world, and has a unique position in the Gulf region, adding that China is willing to step up its strategic partnership with the Middle East country.

The Chinese foreign minister also hoped that the two sides can expand their traditional cooperation to more emerging sectors and industries.

China is also ready to work with the UAE in enhancing their coordination while dealing with global and regional affairs so as to safeguard the legitimate rights of the developing nations, he added.

Also on Saturday, Wang Yi, who is on an official visit to the nation, also held a meeting with his UAE counterpart Sheikh Abdullah Bin Zayed Al-Nahyan in Abu Dhabi.

Before his arrival in the UAE, the Chinese foreign minister also visited Pakistan. He will travel to Iran after the UAE trip.

 

Source : China Daily | February 15, 2015

Thomas D’Innocenzi

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More investment from China likely : Thailand

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AS THAILAND and China started the second round of talks on a joint railway project yesterday, the Chinese ambassador to Thailand reiterated his optimism that the project would spur more investment and allow Thailand to be the centre of China’s much-touted Maritime Silk Road.

 

In a speech to a Bangkok Bank event, “China and the AEC under the New Silk Road”, Ning Fukui shared his belief that if Thailand should want to develop industrial estates along the route, Chinese companies would be ready to join in.

 

“Thailand is the centre of Asean, a natural linkage of the regional trade,” he told the audience. “Thailand’s infrastructure is ready to some extent, but more should be done, particularly in the aspect of railroads. This will be a win-win deal” for Thailand and China.

 

His comment followed the Thai junta’s agreement with China for the joint development of a high-speed train to link Bangkok and Nong Khai. The first round of discussions on technical issues was completed in Thailand two weeks ago.

 

While the ruling Thai generals are upbeat that the project could be kicked off late this year, the ambassador cautioned that it depended on the discussion of other non-technical aspects, such as funding and assessments of environmental and social impacts.

 

“The rail project is a vital part of the 21st-century Silk Road. It could be a development model and allow Thailand to be the centre of the region,” Ning said.

 

In his speech, the ambassador did not hide China’s ambition in harnessing neighbours in all aspects — from trade, investment to cultural and socio-environmental areas — under the Silk Road project.

 

With the vision to build a road/rail link stretching from the west of China to the South China Sea and the maritime link, the Silk Road of the 21st century demands huge investment in infrastructure — roads, railways and seaports. Thailand is at the connecting point of the land and maritime belts.

 

To fulfil this dream, China is ready to invest financial and non-financial resources, particularly in Asean, with whom China shares a 4,000km border.

 

Ning was referring to a study showing that for every US$1,000 (Bt32,600) invested in infrastructure, 18,000 jobs would be created.

 

China has also signed up facilities with Malaysia and Thailand to enhance direct trade. Public support would then be the integral part. In this regard, it plans to award 15,000 scholarships in Asean countries for studies in different areas.

 

“China wants to strengthen cooperation in every aspect with Asean,” he said, citing possible cooperation in such areas as maritime transport, aviation, fibre optics, education and technology.

Academics have said domestic imbalances are driving China down different economic paths.

 

Excessive investment in the past that allowed gross domestic product to grow by more than 10 per cent per annum resulted in economic and environmental problems. As domestic demand drops, manufacturers also need to find new markets for their products.

 

The Silk Road will open up such markets, to make “China’s new normal economy” goal a reality.

At the same event, Blaise Godet, a former Swiss ambassador to China, noted that the Silk Road could bring China closer to its neighbours. However, he is concerned how the investment involved would be shared, as numerous construction projects would be created.

 

“If only Chinese companies are involved in the project, it’ll be counterproductive. It won’t bring these countries closer to China,” he warned.

 

Godet also noted that European countries were closely monitoring the progress of the grand scheme. They welcome the shorter transport time that new railroads connecting Asia and Europe will offer, but contentious issues include poor cohesion between China and Europe in foreign policies.

 

“Success also depends a lot on Russia and its influence on Central Asia,” he said, highlighting Russia’s blockade of roads to the area in retaliation to European Union sanctions.

 

He also said that if bribery along the route becomes a problem, the Silk Road might be avoided by truck drivers.

 

 

 

Source : The Nation | February 12, 2015

Thomas D’Innocenzi

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China eyes high-speed rail deals with 28 nations

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CNR Corp is in talks with 28 countries, including the US, Russia and Brazil, about high-speed rail projects, said executive of the Chinese trainmaker on Wednesday.

Yu Weiping, vice president of CNR, said the merger of the country’s top two trainmakers will further strengthen its competitiveness in the global market.

Yu revealed that the CNR is in discussions with countries about new railway projects. The company scored a 68.6 percent year-on-year increase in export in 2014, totaling $3 billion.

However, cost performance, trade barriers, financing cost and working permits hurt its global drive, according to the company. The CNR has a successful bid rate of 50 to 60 percent.

The CNR and CSR announced their plan to merger in December to become the world’s largest trainmaker. Shareholders will vote on the move on March 9.

The merger is to “improve the scale of operations, increase profitability and construct a large, comprehensive, world-leading industrial group centered on rail-transportation equipment with multinational operations,” CSR and CNR said in a joint statement on Jan 20.

China’s railway equipment exports accounted for 10 percent of global market share in 2014, said Wang Xiaotao, vice minister of the National Development and Reform Commission, on Feb 6.

Total exports of railway equipment hit $4 billion in 2014 and major markets include Asia, South Africa and Latin America, said Wang at a press conference.

“There is a global enthusiasm for infrastructure projects, particularly railway building, both in developed and developing countries, providing a good opportunity for China’s railway firms to go global,” added Wang.

Dai Tian contributed to this story.

Related story: China turns to rail , nuclear to energize exports, by Zhao Yinan, China Daily

China will lift sluggish exports by promoting rail, nuclear power and surplus products in overseas markets after trade growth fell short of its target last year.

The exploration of overseas markets for railways, nuclear power and other sectors involving the use of large-scale equipment will be upgraded through joint-ventures and public-private partnerships, top members of the State Council decided on Wednesday. Premier Li Keqiang presided over the executive meeting.

Industrial resources in those sectors should be integrated, according to a statement released after the meeting. The decision was in line with the ongoing merger of the country’s top two train makers, hinting that a similar overhaul in related industries could be possible.

Industries with overcapacity, including steel, nonferrous smelting, building materials and textiles, are also included in China’s latest plan to reach out to overseas markets, the statement said.

The statement said the plan will become another engine to drive the country’s exports and help with needed upgrading of domestic industries.

China has relied heavily on the export of large-scale equipment, such as railways and nuclear power facilities, to boost trade after missing its growth target for the third consecutive year.

The country’s foreign trade rose by 3.4 percent last year, far behind its target of 7 percent. Exports grew by 4.9 percent last year to 14.4 trillion yuan ($2.32 trillion), and the surplus widened to 2.35 trillion yuan.

In its latest move, China CNR Corp, a leading manufacturer of locomotives in China, announced an export contract for subway trains with the United States on Jan 27. It was the first foray into the US rail transit market, Xinhua News Agency reported.

The manufacturer will sell 284 subway trains worth 4.12 billion yuan to equip Red and Orange subway lines in Boston, the announcement said.

Wang Mengshu, an academic at the Chinese Academy of Engineering who specializes in rail and infrastructure projects, said China boasts the longest rail lines in the world-proof of its technological success-and Chinese rail companies’ prices are more competitive than Japanese and German companies.

“Railway exports invigorate the whole industrial chain, including the manufacturing of locomotives, parts and signals,” he said.

Chinese companies are more competitive since they are able to offer a whole package of services, including infrastructure construction, locomotive manufacturing, maintenance and professional training, Wang said.

Wednesday’s executive meeting also brought a decision to build more business incubators to provide logistics, legal and accounting services for startup companies.

It asked local governments to streamline the administrative procedures for small and micro companies, and to provide offices at low cost or subsidize their rent, Internet and other fixed expenses.

The meeting pledged to use government-backed funds and tax exemptions to support early-stage scientific and technological companies, which often face difficulties in borrowing capital because of their lack of tangible assets.

Angel investors, crowd funding, a regional stock exchange market and intellectual property mortgages will also be encouraged to support startup businesses.

 

Source : China Daily | February 11, 2015

Thomas D’Innocenzi

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