China-India, where to go?

We have already mentioned the attractiveness of Vietnam for producers and large groups. In recent days, the spotlight has been on India.

Apple and India
In fact, some articles in the Chinese press are based on Indian information, which refers to talks already started at the end of 2019 between the Indian government and Apple. The American company would like to move 20% of its production to India, which would represent 40 billion dollars of products in India – 200 billion are manufactured in China today. A large part would be destined for export, the American giant expects to improve its market share with 1.5 billion sales in India; as for the Chinese Xiaomi and the Korean Samsung, they are far ahead.

Production Incentive Scheme
Its Taiwanese partner Foxconn, based in Shenzhen, already produces some of the Iphone XRs in India. Theyhad already tried to set up a larger scale production system but negotiations had failed to find common ground. The Delhi government learned from this failure and decided to stimulate the manufacturing sector by introducing new measures in March in a plan called the Production Incentive Scheme. This policy, which will simplify procedures and provide tax benefits, will take effect in August 2020.

Why India?
What are the reasons for large groups to migrate to India? Let’s first avoid the reasons that are not specific to India: the trade war with US taxes has increased costs in China and putting your eggs in several baskets is good management; too much dependence on China, as for Apple, is not advisable. 

China India

The differences between India and China :
1. Wages are much lower in the former, but this cost-wage advantage may be somewhat penalized by the fact that the infrastructure is still not very developed, whereas China is already well ahead, both in terms of the country’s network and speed. Speed is money!
2. China has a greater resource of raw materials and its supply is very well established.
3. India does not generally have control of production on a very large scale for an international company. Foxconn, Apple’s largest subcontractor, has more than a million employees in China.
4. English is more widely spoken in India, a former English colony.

China would like to retain all the major groups established on its soil, but the direction of economic history could be stronger . The country has already understood long ago that it must move upmarket and not remain totally Made in China. You don’t govern by twittering in China, you put in place very long-term plans, which are not called into question every 4 or 5 years by elections full of demagogy. China has invested in the future, in digital technology, artificial intelligence and renewable energy, where it could quickly take first place in every sector, not to mention the Silk Roads, a long-term economic development strategy. China has not said its last word, far from it.

16 May 2020

Posted on Categories Economy

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