Shanghai is the most popular investment destination for Indian companies in China, according to a survey by Confederation of Indian Industry and Evalueserve.
The survey looked into the investment and operation conditions of 57 Indian companies doing business in China during the period between end-January and end-April 2019.
"The survey of Indian companies working in China shows cautious optimism and confidence as compared to the previous survey last year. Most companies do not see significant impact of the current trade situation between the US and China on their business," said Chandrajit Banerjee, director general of CII.
According to the report, 98 percent of the respondents plan to make some investments in China in 2019 with two-fifths considering ramping up their investments over 2018.
Notably, over 50 percent of respondent companies in the information technology industry and the business process outsourcing sector are planning to make additional investments in 2019.
Two-thirds of the respondents said that their business was "very profitable" or "profitable" in 2018, with higher earnings before interest and taxes than in 2017.
Of the surveyed companies, 30 percent generated revenues higher than 100 million yuan (US$14.16 million) from China in 2018, while four of five respondents stated that their revenues in 2018 were no less than in the previous year.
As for location, 72 percent — the largest proportion — of Indian companies invested in Shanghai, making the city the most popular destination. Beijing and the provinces of Jiangsu and Guangdong are other popular destinations.
Meanwhile, 72 percent of respondents have up to 50 employees and hired more than half of their workforce locally, the report said. Of note, 50 percent of the surveyed companies have a dedicated team for government and regulatory affairs, while over 80 percent companies have at least 10 employees dedicated to business development.
The survey also highlighted the fact that more than half of the companies said China’s innovation is more favorable than the worldwide average, and 44 percent respondents believe that Chinese firms are more innovative in product/service and business model than Indian companies.
About 70 percent of the Indian companies said the key success factors are quality of products and services and operations efficiency, followed by quality of management team (51 percent), brand and awareness creation (39 percent), as well as R&D and product innovation (37 percent).
Rising labor cost, finding and retaining talent, and stricter regulations, however, are the top external challenges, according to the report, while in terms of management challenges faced by Indian companies in China, around 74 percent of the respondents pointed out "finding and retaining talent."
At the same time, more than 80 percent of the companies rated stricter regulations and unclear changing regulations as the main concerns over the business environment in China, followed by macroeconomic policy adjustments (72 percent), obtaining required licenses (67 percent), and environmental protection policies (60 percent).
Seventy-four percent of the companies said that trade friction between China and the US has had no impact on their business. Of these, 26 companies have business presence in the US.
"Enduring US-China trade war has opened new avenues for China enhancing its economic partnerships with India. This is triggering not only a continued boost for their bilateral trade but also mutual investments," said Swaran Singh, professor of International Relations at New Delhi’s Jawaharlal Nehru University, as reported by CGTN.
The survey is "an attempt to continuously gauge the performance of Indian companies in China, to understand the challenges they face and help Indian companies and Indian CEOs prioritize their resource allocation to their China engagement," said Kamal Dhuper, chairman of CII India Business forum China and president of NIIT (China) Ltd.
"The results of survey clearly indicate that the deep economic relationship between India and China will continue to grow. It is evident from the growth plans that Indian companies have for the Chinese market," according to Sumeet Chander, head of Evalueserve China.