Economy & Trade

India: Your China Plus One?

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By Dezan Shira and Associates
Editors: Nishant Maddineni and Rainy Yaoindiachinapin

During his 14-16 May trip to China, Prime Minister Narendra Modi will attempt to put a dent in India’s US $37.8 billion trade deficit with China. Chief ministers from Gujarat, Karnataka and Maharashtra will also be in the country to attract investment into their states. Modi and his support cast may face a tough sell when China compares India to Southeast Asian countries, but the economic relationship between China and India is changing in important ways. Neither China nor India can afford to accept the status quo.

The headlines will focus on large bilateral trade and investment deals; the local media report that Modi is set to win US $10 billion in deals from Chinese President Xi Jinping. While the importance of these bilateral trade and investments deals should not be understated, the real impact of Modi’s trip to China will be felt by the private sector. Modi’s ability to change the way businesspeople in China think about India is the key to his trip’s success.

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City Spotlight: Investing in Jakarta

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By Edward Barbour-Lacey

Located on the northwest coast of Java, Jakarta is the capital of Indonesia and the largest city in the country. Strategically located in the archipelago, Jakarta serves as the gateway to the rest of the country. The city is a special territory holding the status of a province, and consisting of Greater Jakarta, which covers an area of 637.44 square kilometers.

With a population of almost 10 million, the city is the political, economic, and cultural center of Indonesia. Jakarta serves as a melting pot for the country’s diverse range of ethnic groups, over 300.

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China’s AIIB – The Facts To Know

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By Steven Elsinga

March 31 2015 was the deadline for countries to join the Asia Infrastructure Investment Bank. This cut-off date was met with a rush of last minute applications from countries around the world.

The Asian Infrastructure Investment Bank (AIIB) was first proposed when Xi Jinping and Li Keqiang visited Southeast Asian countries in October 2013. The AIIB will finance infrastructure projects throughout Asia, such as roads, railways and ports.

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Quality and Cost of Living Reports Point Towards Emerging Trends in Asia-Pacific

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By Rebecca Choong Wilkins

Mercer’s 2015 Quality of Living Rankings confirm some well-established insights into Asian cities. Singapore once again ranks the highest for quality of living, coming 26th globally. While Europe continues to dominate with Vienna securing the top spot, Singapore beats Washington, London and Tokyo. It will also come as no surprise that Mercer’s 2014 Cost of Living Rankings rate Singapore as one of the costliest Asian cities.

While these rankings reaffirm general patterns, they also point towards emerging trends on the cost of living vs. quality of living in key Asian cities. However, rankings alone can be notoriously superficial. In this article, we explore the trends which stand up to scrutiny.

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Asian Investment in Europe’s Shipping Sector, Part 2: Asian Shipping Centers & Routes to Watch

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By Rebecca Choong Wilkins

Asian shipping centers continue to go from strength to strength with Hong Kong, Singapore and China all looking to improve their value-adding services. This is in its nascent stages in China, where state sanctioned investment is focused on moving its shipping industry up the value chain. The Chinese government is also committed to establishing China as a major player in the more lucrative sector of offshore energy equipment. 

Meanwhile, Singapore and Hong Kong are keenly aware of the need to stay ahead of European and Asian competitors. Responding to the Xinhua-Baltic Shipping Center Index Report, Anthony Cheung Bing-leung – Hong Kong’s Secretary for Transport and Housing in HK – was eager to emphasize that “Hong Kong is moving towards high value-added services and a knowledge-based economy, matching up with the rapid economic development in Asia and the global development trend.”

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It’s Wait and See for the Mooted China-India-Sri Lanka Partnership

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Hambantota Port, Sri Lanka. Commissioned by the ex-President, being constructed by the Chinese with costs running into billions. Serious doubts remain over its viability.

Hambantota Port, Sri Lanka. Commissioned by the ex-President, being constructed by the Chinese with costs running into billions. Serious doubts remain over its viability.

By Chris Devonshire Ellis
Dezan Shira & Associates 

Tiny Sri Lanka found itself in the faintly odd position of being feted by two superpowers last week, as new Sri Lankan Foreign Minister Mangala Samaraweera met with Chinese Foreign Minister Wang Yi in Beijing. Coming on the back of last month’s Sri Lankan Presidential elections, which turfed out long-term China ally Mahinda Rajapaksa,  the meeting gained significance due to China’s interest of Sri Lanka as part of its “String of Pearls”  policy – wanting to have the island on friendly terms and able to use it as a naval base.  Not surprisingly, that does not sit especially well with India, just an hour away from Sri Lanka’s west coast.

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Choosing a Sourcing Model in China and Vietnam

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By Chris Devonshire-Ellis
Dezan Shira & Associates

China and Vietnam both allow foreign entities to operate  representative offices (ROs). Because these types of offices cannot undertake any commercial or industrial activities, receive payment in local currency, or manage export/import activities, they are considered an ‘indirect’ method of managing a sourcing operation.

‘Direct’ sourcing requires that a foreign firm establish an office from which they will be able to directly manage procurement. This entails that the company’s office be in control of various levels of the sourcing operation and be able to receive payment in the country’s local currency. Although this option inevitably necessitates a greater financial and legal burden for the investing company, it is an effective means of ensuring higher performance levels from an Asia-based sourcing operation. Unlike representative/liaison offices, which have similar functions across China and Vietnam, the types of direct platforms a firm can operate vary significantly from country to country.

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Quality Standards in Asia: Regional Differences and Long-Term Trends

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By Renaud Anjoran
Operations Manager
at China Manufacturing Consultants 

A typical assumption made by purchasing managers is that quality standards applying to products made in Asia for export are similar to those of the West. After all, no consumer wants widgets that don’t work, garments with broken stitches, or electrical appliances that cause electric shocks. However, there are strong differences between the quality control standards in different countries and between purchasers, both on the demand and the supply sides.

The Buyer’s Quality Requirements

Quality control standards imposed by importers on their suppliers can be broken down into two categories:

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Wage Comparisons and Trade Flows Between China, ASEAN and India

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By Chris Devonshire-Ellis, Dezan Shira & Associates

As the cost of manufacturing in China continues to rise, the search for ever-more competitive products becomes increasingly important. While the China situation has an upside – the creation of a 600 million strong middle class consumer base by 2020 – the reality is that a combination of rising wages, welfare and operational costs is encouraging the Asian supply chain to move.

However, there are some important qualities about this shifting dynamic. With high productivity levels, China has largely proven itself as a capable manufacturer for global supply. The country has a relatively well-developed infrastructure – certainly along its coastline – when moving toward inland manufacturers. Although these do begin to deteriorate when moving toward inland manufacturers, the coastal regions remain a hotbed of global production and supply.

These locations, and the manner in which they have matched low wages and taxes with a well-constructed supply chain infrastructure, have served both the global consumer and foreign manufacturers in China for well over the past two decades. China’s cost-effectiveness has benefited foreign investors very well, to the extent that many MNCs have, over the years, moved an increasing percentage of their overall global manufacturing capability to the PRC.

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A Guide to Foreign Investment in China in 2014

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By Nishant Maddineni

Foreign direct investment (FDI) in China experienced an increase of 1.7 percent in 2014 to reach US$119.56 billion. While the rise in itself is not noteworthy, the direction of investment is significant. Changes to FDI trends over the course of last year reflect alterations in not only China’s economy, but also in where opportunities in the country can currently be found. These changes can be broken down by sector, country of origin, and region of destination.

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