CHINDIA: China All Over India

CHINDIA: China All Over India

By B. Raman

It is well known that the bilateral trade between India and China is galloping towards the targeted figure of US $ 60 billion and that China has already emerged as India's largest trading partner.

2. What is not that well known even in India is the inroads which Chinese business companies have been making into key sectors of the Indian economy for the last four years----and particularly since the visit of President Hu Jintao to India in November 2007.Not only Hu, but also some leaders of the Communist Party of India (Marxist) were reported to have taken with the Government of India the inordinate delay in the issue of work visas to Chinese employees of Chinese construction companies which had won contracts in India. The Marxists were particularly upset over the delay in the issue of visas to a large number of Chinese employees of a company, which had won a contract for the construction of a gas pipeline.

3. Between 2004 and 2008, the Government of Dr. Manmohan Singh was dependent on the Marxists for its survival in office. The Chinese and the Marxists took full advantage of this to sort out the difficulties faced by Chinese companies. This was the time when the Chinese inroads into the Indian economy started in a big way and it has continued even after the Marxists stopped supporting the ruling coalition in the second half of last year. Now, there is not much love lost between the Congress (I) and the Marxists. The Government is no longer dependent on the Marxists for its survival.

4. Despite this, there has been no slowing-down of the Chinese inroads into the Indian economy. This is because many Indian corporate houses find it easier and more profitable to do business with Chinese companies than with companies from other countries, including Japan. They manage to persuade or pressure the Government to approve their decision to award construction and equipment-supply contracts to the Chinese.

5. Contracts with the Chinese are more profitable because Chinese construction companies bring their own engineers and labourers, who are allegedly prepared to work for less emoluments than their Indian counterparts and do not resort to strikes. The Chinese too insist on bringing their own work force in large numbers from China because this solves their problems arising from the poor command of the English language of the senior Chinese executives. The Chinese companies also claim that if they bring their own work force they could ensure timely completion of the projects and the quality of the construction. Nobody had challenged their arguments till now.

6. This has been creating resentment among unemployed Indian engineers and other skilled personnel who complain that at a time when there is growing unemployment in India due to the economic melt-down the Chinese companies should be bringing in thousands of their workers. Uncorroborated allegations have been made by those critical of the Chinese inroads that in order to get over difficulties in getting work visas some Chinese companies bring their employees on three-months tourist visas. It is alleged that after three months they are replaced by a fresh lot of Chinese workers with tourist visas.

7. For the first time, an indirect reference was made to the resentment over Chinese companies bringing their own nationals to work in India by S. Jaishankar, India’s new Ambassador to China, during a seminar organized by the Federation of Indian Chambers of Commerce and Industry and the China Council for Promotion of International Trade in the third week of September. The "Times of India" quoted him as saying as follows: “An India-specific approach will have to be thought through by Chinese companies. I have personal experience in working with many of India’s other major economic partners. I cannot recall their investments and projects requiring such large manpower support from home. It is possible that business models of non-Chinese investors are based more heavily on collaborating with local Indian capabilities.” He was replying to complaints from Chinese businessmen about difficulties in getting work visas from the Indian diplomatic and consular missions in China.

8. Apart from the resentment from unemployed Indian engineers and other skilled personnel, there is also some resentment among Indian construction companies, which had lost out to Chinese companies while bidding for contracts for the construction of power stations. On July 27, 2009, the "Times Now" TV channel reported that in a letter written to the Finance Minister in June before the Union Budget, Larsen & Toubro's Chairman and Managing Director A M Naik had expressed concerns over the import of Chinese power equipment to India that totalled nearly $8.3 billion, while Chinese taxation model struck down any hopes of Indian exports to China. The TV channel quoted his letter as complaining that India is following the 'buy Chinese' policy in which international tenders are not floated to give China advantage. It also said that "Indian power companies changed specifications to suit Chinese manufacturers and that the Indian manufacturers are being overlooked and Chinese exporters incentivised."

9. There have also been complaints about the inadequate quality of construction by the Chinese companies. Such allegatuions of poor construction quality were being denied vehemently by the Chinese companies. But, they have been embarrassed by the collapse of a chimney in a power plant under construction in Central Chattisgarh by China's Shandong Electric Power Construction Company. Forty-one people were reported to have been killed in the accident on September 26. The Chinese company, which was engaged in the project with some other non-Chinese companies, has reportedly brought in 80 Chinese workers to work at the site. A news agency has reported that the Chattisgarh Police has told the owners of the project that the Chinese personnel should not be allowed to go back to China till the enquiry into the accident was completed and the responsibility for the accident fixed.

10. Apart from the power sector, Chinese companies have also come in a big way in the telecommunications sector as suppliers of equipment and hand sets and for laying networks. It is said that for security reasons the Government has allowed the Chinese companies to participate in telecom projects mostly in South India away from the border areas. While this is in respect of construction, there are no geographical restrictions on their selling their equipment and hand sets anywhere.

11. In a New Delhi datelined report of September 14, 2009, the Reuters news agency reported as follows: "China's ZTE Corp said on Monday (September 14) it has started selling mobile handsets free of usage contracts in India, having previously sold them only through tie-ups with local mobile operators. ZTE, China's second-largest telecoms equipment maker, said it wanted to raise its Indian sales to 20 per cent of its global handset sales from 16 per cent currently. Nokia, the world's top cell phone maker, dominates the Indian market with an about 60 per cent market share. About 120 million mobile phones are sold every year in India and this is expected to rise to 160 million a year by 2013. "

12. There have been reports that the Indian intelligence agencies have been concerned over the security implications of the growing Chinese inroads into the telecom sector. They do not accept the explanation that since the Chinese telecom companies operate mostly in South India, the security implications will not be serious. They reportedly want stricter security-related guidelines to be laid down in respect of the Chinese companies.

13. Concerns such as these were there even earlier, but they have grown since last year because of the allegedly aggressive manner in which Chinese companies have started winning contracts in India. Participating in an interactive session on ‘India and China to drive global economic growth’ at Kolkata in April last, the Consul General of China in Kolkata, Mao Siwei, said, as reported by "the Hindu" of April 12, 2009, that while China had now become India’s largest trading partner, for the first time, (with bilateral trade of $51.8 billion in 2008), India had become the largest overseas market for Chinese companies undertaking contract projects. According to him, in 2008, Chinese companies were awarded contracts worth $12.9 billion for various construction projects in India.

14. Critics of China allege that the Chinese companies are treating India like they treat African countries, where they have a free run importing their own work force and bringing Chinese construction equipment when ample skilled Indian personnel and good quality equipment are locally available in India.

15. The Chinese authorities and the Government-controlled media in China have started noting with concern the growing resentment in India over the inroads made by Chinese companies, particularly in the telecom sector. Chinese critics of the campaign in India have been deploring the allegedly imaginary fears being created in the minds of the Indian public about the dangers of a Chinese mole in every computer and mobile handset bought from China.

16. Xinhua, the Government-controlled news agency, came out with a detailed despatch from New Delhi on this subject on September 9, 2009. A copy of it is annexed.

(The writer is Additional Secretary (retd), Cabinet Secretariat, Govt. of India, New Delhi, and, presently, Director, Institute For Topical Studies, Chennai. He is also associated with the Chennai Centre For China Studies. E-mail: seventyone2@gmail.com)

ANNEXURE

The Xinhua-circulated despatch of September 9,2009

Restrictions on Chinese telecom equipment good for India?

www.chinaview.cn

by Mao Xiaoxiao

NEW DELHI, Sept. 9 (Xinhua) -- Telecom and electric power equipment are two fields where Chinese c0ompanies have made the most breakthroughs in Indian market over the past several years.

However, some voices about "Chinese products threat" have been rising recently from some government bodies and business groups here in the name of safeguarding national security and interests of Indian industry.

Restrictions imposed upon Chinese products equipment will no doubt increase the risk and costs of Chinese companies operating in India. But by doing so, will India gain in the fields of security, commerce and economic development?

Escalating Tone of "Chinese Products Threat"

On Aug. 28, the Department of Telecommunication (DoT) of India held a meeting with top executives of local telecom companies. DoT officials reportedly asked Indian telecom companies to stop using China-made telecom equipment in sensitive border areas, as the Home Ministry and intelligence agencies are concerned that these equipment could have spyware or malware built into them capable of tracking voice and data traffic from a location outside the country.

At the end of July, India's leading industry body Association of Chamber of Commerce and Industry of India (Assocham) asked the government to levy import duty on Chinese power equipment. It said the domestic industry is being hampered by the products from China.

Assocham also accused Chinese power equipment producers of offering very low prices under the government subsidies. It said that India imported 8.3 billion U.S. dollars worth of Chinese power equipment in 2008, and therefore asked the government to restrict such imports.

Xinhua has learned from local sources that recently, there has been a trend that some Indian government bodies have been raising the tone of "security threat" from Chinese products.

While expanding its regulation list from state-run telecom companies like the BSNL to private telecom companies, the Indian government on Aug. 28 organized the meeting of telecom companies, making the issue clear and public.

Market Competition Behind Threat Tone

An expert on telecom security told Xinhua that Chinese equipment producers are committed to meeting domestic and international standards of security and post-sale security issues are actually taken care of by the local vendors. If there exists a potential security threat, the vendors will have all responsibility.

He said as most media people lack real knowledge of technological issues in telecom production, they have become unconsciously a collaborator in producing the fiction of "software spy".

The Chinese telecom companies are now worried that restrictions on the using of their products could suffocate their development in the Indian market.

Like the telecom industry, Chinese power industry has been known with a similar story of high growth and is facing direct competition from domestic industry, such as India's heavy electricity machinery Producer BHEL.

BHEL previously protected by government granted monopoly, has lost all leverage against outside competitors due to lack of competitive capability, and its production has been on the decline.

Some local analysts believe, the flawed government policy and poor productive forces are main reasons behind India's failure to realize half its goal to increase electric power in the past five-year-plan.

Restrictions Good For India?

According to local media reports, many Indian private telecom vendors have openly expressed opposition to government plan to ban Chinese equipment.

They warned government officials that such measures could only hurt Indian telecom industry itself, because most of them have signed contracts with such Chinese producers as Huawei Technologies and the ZTE.

They said the price of Chinese telecom equipment is lower than those of Ericsson, Nokia and Siemens. Most Indian telecom companies newly entering the local market signed buying contracts with Chinese companies because of the high competitiveness in price, while some established old brand companies are using Chinese price as a bargain in talks with European producers.

Local news reports said some DoT officials have already hinted that the government might soften "compulsory measures" against Chinese products into "security guidelines", and might also minimize the number of states to be designated as "sensitive border area" banned from Chinese products.

Editor: Xiong Tong