A GLOBAL / COUNTRY STUDY AND REPORT ON

Information & Communication Technology of China

Subtitled: Foreign trade of the peoples of Republic of china Submitted to K.P. PATEL SCHOOL OF MANAGEMENT AND COMPUTER STUDIES, KAPADWANJ
IN PARTIAL FULFILLMENT OF THEREQUIREMENT OF THE AWARD FOR THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION

In

Gujarat Technological University

Under the Guidance of Miss Disha Bhagat Asst. Professor Submitted by Tejas Joshi 107240592001 Zalak Brahmbhatt 107240592041 Kinjal Soni 107240592052 Darpan Patel 107240592030 Rohit Ila 107240592044 Harishchandra 107240592017
MBA SEMESTER III K.P.PATEL SCHOOL OF MANAGEMENT AND COMPUTER STUDIES KAPADWANJ Affiliated to Gujarat Technological University Ahmedabad November, 2011

Students Declaration

We TEJAS, ZALAK, KINJAL, DARPAN, ILA, HARISH , hereby declare that the report for Global/ Country Study Report entitled Foreign trade of the peoples of Republic of China is a result of our own work and our indebtedness to other work publications, references, if any, have been duly acknowledged.

Place: KAPADWANJ

(Name & Signature of Student)

Date:

23-11-2011

TEJAS JOSHI ZALAK BRAHMBHATT KINJAL SONI DARPAN PATEL HARISH CHANDRA ROHIT ILA

Institutes Certificate

ii

PREFACE

Being an M.B.A. student, it is necessary to prepare a global country report. Their object of practical training & knowledge is to develop atmosphere and all other business practices. The preparation of the whole report was a great opportunity for us to explore ourselves to the practical field. All analysis done by us regarding the CHINA country could make us all confident enough & prove ourselves. We could come out of the bookish knowledge. Preparation of such type of report calls for intellectual nourishment, professional help and encouragement. Due to report, we are exposed to the method and practices being use in the field of applications. With the help of country CHINAs information, we are come to know of style of functioning & operating activity of CHINA. We also know how our knowledge is to be transformed to venality inform of country. It is indeed a golden opportunity for every in management.

iii

ACKNOWLEDGEMENT:

Preparation of such type of report calls for intellectual professional help and encouragement. So, During the preparation of this report many people had helped us and we very much thankful to them all. We are highly thankful to our faculty to taking knowledge of finance. We are also highly thankful for helping me in our practical studies of finance in M.B.A. We are indented to our director sir, Prof. M. S. Tridevi for giving us a guidance of practical unit in different areas. We are also thankful to our faculty guide Ms.Disha Bhagat. All gave valuable time and provide us with essential information.

PLACE: Kapadwanj

DATE: 20 12 2012

iv

INDEX
NO. PARTICULARS Import-Export of China 1 2 3 4 5 6 7 8 9 10 11 History Of Import Export china Trade Relation With China Import Export License system Import Requirement of China Logistic services India-China Comparison Exim Policy 2009 to 2014 Highlights Completive Position of India & China Tax Regime Company Development & Mgmt. Capabilities Bibliography 1 5 6 8 12 14 16 17 19 20 22 PAGE NO.

Graphs & Tables 1. 2. 3. 4. 5. 6. Logistic services Competitive positions of India and china Comparison G.D.P Comparison of Import Comparison of Export Tax regime 13 17 17 18 18 19

Foreign trade
History of Chinese foreign trade Chinese foreign trade began as early as the Western Han dynasty (206 BCE-9 CE), when the famous "Silk Road" through Central Asia was pioneered by Chinese envoys. During later dynasties, Chinese ships traded throughout maritime Asia, reaching as far as the African coast, while caravans extended trade contacts in Central Asia and into the Middle East. Foreign trade was never a major economic activity, however, and Chinese emperors considered the country to be entirely self-sufficient. During parts of the Ming (13681644) and Qing (16441911) dynasties, trade was officially discouraged. In the mid-eighteenth century, the government restricted sea trade by setting up the Canton System. In the nineteenth century, European nations used military force to initiate sustained trade with China. From the time of the Opium War (183942) until the founding of the People's Republic in 1949, various Western countries and, starting in the 1890s, Japan compelled China to agree to a series of unequal treaties that enabled foreigners to establish essentially autonomous economic bases and operate with privileged status in China. One classic account of this period is Carl Crow's 400 Million Customers, a humorous but realistic guide which has lasting insights.[1] Foreign privileges were abolished when the People's Republic came into being. Foreign trade did not account for a large part of the Chinese economy for the first thirty years of the People's Republic. As in most large, continental countries, the amount of commerce with other nations was small relative to domestic economic activity. During the 1950s and 1960s, the total value of foreign trade was only about 2 percent of the gross national product (GNP). In the 1970s trade grew rapidly but in 1979 still amounted to only about 6 percent of GNP.

The importance of foreign trade in this period, however, far exceeded its volume. Foreign imports alleviated temporary but critical shortages of food, cotton, and other agricultural products as well as long-term deficiencies in a number of essential items, including raw materials such as chrome and manufactured goods such as chemical fertilizer and finished steel products. The acquisition of foreign plants and equipment enabled China to utilize the more advanced technology of developed countries to speed its own technological growth and economic development. During the 1950s China imported Soviet plants and equipment for the development program of the First Five-Year Plan (195357). At the same time, the Chinese government expanded exports of agricultural products to repay loans that financed the imports. Total trade peaked at the equivalent of US$4.3 billion in 1959, but a sudden decline in agricultural production in 1959-61 required China's leaders to suspend further imports of machinery to purchase foreign grain. Under a policy of "self-reliance," in 1962 total trade declined to US$2.7 billion. As the economy revived in the mid-1960s, plants and equipment again were ordered from foreign suppliers, and substantial growth in foreign trade was planned. But in the late 1960s, the activities of the Cultural Revolution (196676) caused trade again to decline.

The pragmatic modernization drive led by party leaders Zhou Enlai and Deng Xiaoping and China's growing contacts with Western nations resulted in a sharp acceleration of trade in the early 1970s. Imports of modern plants and equipment were particularly emphasized, and after 1973 oil became an increasingly important export. Trade more than doubled between 1970 and 1975, reaching US$13.9 billion. Growth in this period was about 9 percent a year. As a proportion of GNP, trade grew from 1.7 percent in 1970 to 3.9 percent in 1975. In 1976 the atmosphere of uncertainty resulting from the death of Mao and pressure from the Gang of Four, whose members opposed reliance on foreign technology, brought another decline in trade. Beginning in the late 1970s, China reversed the Maoist economic development strategy and, by the early 1980s, had committed itself to a policy of being more open to the outside world and widening foreign economic relations and trade. The opening up policy led to the reorganization and decentralization of foreign trade institutions, the adoption of a legal framework to facilitate foreign economic relations and trade, direct foreign investment, the creation of special economic zones, the rapid expansion of foreign trade, the importation of foreign technology and management methods, involvement in international financial markets, and participation in international foreign economic organizations. These changes not only benefited the Chinese economy but also integrated China into the world economy. In 1979 Chinese trade totaled US$27.7 billion - 6 percent of China's GNP but only 0.7 percent of total world trade. In 1985 Chinese foreign trade rose to US$70.8 billion, representing 20 percent of China's GNP and 2 percent of total world trade and putting China sixteenth in world trade rankings.

The table below shows the average annual growth (in nominal US dollar terms) of Chinas foreign trade during the reform era. Period Two-way Exports Imports trade +12.8% +10.6% +19.5% +11.0% +24.6% +27.2% +25.6% +17.9% +8.6% +17.8% +19.1% +10.9% +25.0% +19.9% +20.8% +17.4% +16.1% +4.8% +19.9% +11.3% +24.0% +23.8% +23.4% +18.5%

1981-85 1986-90 1991-95 19962000 2000-05 2006 2007 2008

Trade relation data with china

Here is Trade related data between India & China. The below table indicates the Indian Import Export with China.

India-China trade (2001-2008) Year 2004 Growth 2005 Growth 2006 Growth 2007 Growth 2008 Indian Imports 5925.58 77.15% 8934.64 50.5% 14588.04 63.23% 24036.44 64.7% 31500 (approx) 31% Indian Exports 7672.51 80.41% 9768.34 27.2% 10469.18 7.05% 14658.79 40.02% 20300 (approx) 39% Trade Volume 13,598.09 78.99% 18702.98 37.4% 25057.22 33.87% 38695.64 54.42% 51800 (approx) 34%

Import / Export License System

The import and export license system is an important administrative measure in China's foreign trade management. In 1950, the Central People's Government issued the "Interim Regulations on Foreign Trade Management,'' in which it was stated, " While importing and exporting any goods, the importer and exporter must apply to their local foreign trade administrative department for an import and export license." This represents the beginning of the import and export license system after the founding of the People's Republic. From 1959 to 1979, all imports and exports were put in the hands of the special national import and export companies under the former Ministry of Foreign Trade and their branch companies. These companies handled imports and exports in strict accordance with state plans, thus the role of import and export licenses was reduced. During this period, the import and export license system was mainly directed at those departments outside of foreign trade enterprises, which, with the approval of the state, wanted to import a small amount of equipment and goods for scientific research, educational, cultural, sport and publish health purposes, and export a small amount of non-trade commodities. Since adopting the policy for reform and opening to the outside world, China's foreign trade has witnessed continuous development, and the operation of import and export business had expanded the specific national import and export companies under of Ministry of Foreign Trade and Economic Relations to the foreign trade companies in various localities and under various ministries. While bringing some vitality to the work of foreign trade, this had also resulted in some confusion in the normal order of foreign trade and incurred certain losses to the state. Therefore, the government again decided to re-institute and strengthen the import and export license system.

In June 1980, the Ministry of Foreign Trade and Economic Relations enacted the "Interim Rules on the Export License System." The document stipulated that firms that engage in export business must file in advance applications to the Ministry of Foreign Trade and Economic Relations or the foreign trade administrative departments under in the various provinces, autonomous regions and municipalities directly under the central government that have been authorized by Ministry of Foreign Trade and Economic Relations. Having been approved, they must register with the local foreign trade administrative departments and the relevant customs houses while presenting the documents of approval. Only then could they engage in export business. In January 1984, the State Council issued the "Interim Regulations of the People's Republic of China on License System for Imported and Exported Goods." It stated that for the import of all goods that need licenses to import according to state regulations, it is necessary to apply for import licenses beforehand and only then orders could be placed with the relevant foreign trade companies. It also stipulated that that the Ministry of Foreign Trade and Economic Relations was responsible to draft and adjust the list of goods whose import calls for licenses. In this period, the control was enforced on all foreign trade enterprises dealing with import and export business. Since 1992, China gradually relaxed the control over import. For instance, it abolished or reduced the range of import licenses, import quotas as well as import control. In January 1994, the Ministry of Foreign Trade and Economic Relations again issued the "Interim Provisions Regarding Import Quota Control over Commonplace Commodities." It marked that China's import management system was reformed in line with the relevant regulations of GATT. In 1998, China removed control by import licenses and import quotas over the overwhelming majority of commodities that needed licenses to be imported formerly, while only continuing to enforce import license control over the products of a small number of infant industries that call for special protection.

China Import Requirements

As a move to liberalize trade, China has continued to reduce administrative barriers to trade. By end-1997, the categories of import commodities subject to licensing controls were reduced to 35 (including 374 items), and most commodities, except 16 crucial ones which are currently under state monopoly, were open to all enterprises given the import & export rights. The Chinese government has also gradually abolished the state monopoly of foreign trade and liberalize its foreign trading system. By end-June 1999, China had more than 185,000 foreign trade enterprises, including 13,224 foreign trade and economic cooperation companies, 12,143 local manufacturing enterprises and scientific research institutes, and 160,000 foreign-invested enterprises having import & export rights. In January-February 1999, 61 private-owned enterprises were given the import & export rights. According to the Chinese government, the average tariff on imports of industrial products will be lowered to 15% by year 2000 and 10% by year 2005. At present, the average tariff rate is less than 17%. In April 1997, China announced its first anti-dumping and anti-subsidy regulations enacted to maintain order and fair competition in foreign trade and protect relevant domestic industries. Under the new regulations, China can impose anti-dumping duties on foreign goods if there is evidence showing that they are sold at dumping prices.

China uses both tariff and non-tariff measures to regulate imports. Tariffs imposed include import duty (applied on the import CIF value and a few specific and compound duties on the volume imported), value added tax (VAT) and consumption tax; non-tariff measures include import licenses, quota control, restricted import list, etc. In general, tariff rates on raw materials and industrial supplies are relatively low, less than 20% (in most cases), higher on consumer goods mostly 20-50% and can reach 100% in a few selected luxury items. The specific duties are calculated by multiplying the number of units of the imported goods by tax payable per unit; while the compound duties are a mixture of ad valorem tariff and specific duty. Both Hong Kong and countries which have concluded trade treaties or reciprocal favourable tariff treatment agreements with China can enjoy the preferential rate tariff duty; while other the general rate. Value added tax (VAT) is imposed on all commodities in addition to import tariffs. The basic rate is 17% and 13% on the following commodities: food and edible vegetable oil; drinking water, heating, natural gas, coal gas, liquefied petroleum gas; books, newspapers and magazines; feedstuffs, chemical fertilizer, pesticides, agricultural machinery and agricultural plastic sheeting. In addition, 11 categories of goods are also subject to consumption tax when entering China. These include: cigarettes, liquor, cosmetics, skin- and hair-care products, jewellery, firecrackers and fireworks, petroleum, diesel, motor vehicle tyres, motorcycles and small motor vehicles. The tax rates range between 3% and 45%.

Current policies regarding imports of equipment by foreign-invested enterprises are:

For enterprises approved on or before 31 Mar 96, the original preferential policy applies until contract expires. However, imports of 20 specified categories such as vehicles and office supplies are subject to their relevant tariffs and regulations.

For enterprises approved between 1 Apr 96-31 Dec 97, as "encouraged" or "restricted (II)" in the "Catalogue of Industries for Guiding Foreign Investment", production equipment imported are exempted from import duties, except those listed in "Catalogue of Non-Duty-Free Commodities to be Imported for ForeignFunded Projects"

As of 1 January 1998, equipment imported by foreign-invested enterprises which are engaged in projects classified as "encouraged" or "restricted (II)" in the "Catalogue of Industries Guiding Foreign Investment" as contribution to their investment are exempted from import duties upon presentation of a letter of project confirmation except for those listed in the "Catalogue of Non-Duty-Free Commodities to be Imported for Foreign-Funded Projects".

Customs tariff, VAT and consumption tax may be imposed on the following 20 commodities if applicable, regardless of the form of trade, geographical location or entry of imports, namely: television set, video camera, video cassette recorder, video cassette player, hi-fi system, air-conditioner, refrigerator, washing machine, camera, copying machine, programme-controlled telephone switch, micro-computer, telephone, radio pager, fax machine, electronic calculator, typewriter and word-processor, furniture, lighting fixture and foodstuffs. Normally, documentation requirements are handled by the Chinese importer (agent, distributor or joint venture partner). Necessary documents include the bill of lading, invoice, shipping list, sales contract, an import quota certificate for general commodities (where applicable), import license (where applicable), inspection certificate issued by the State Administration for Import and Export Commodity Inspection (SACI) or its local bureau (where applicable), insurance policy, and customs declaration form.

10

As for non-tariff measures, China has introduced the licensing system and the quota system to control imports: at present, imports of 35 product categories (374 items) are subject to import licensing control. Importers are required to obtain in prior the approval and licence from the different government departments, namely the State Development Planning Commission, the Ministry of Commerce (MOFCOM)--formerly the MOFTEC-and the Mechanic and Electronic Products Import and Export Department. In addition, certain imports into China are subject to both licensing and quota control. Imports into China are classified into two major categories: 1. 15 machinery and electronic products; and 2. 13 general commodities. The quota management system is enforced by the State Development Planning Commission responsible for import quotas of general commodities and MOFCOM responsible for import quotas of machinery and electronic products as well as export quotas. In principle, all import and export commodities are subject to inspection. Twenty categories of import commodities are subject to mandatory inspection by the China Commodity Inspection Bureau (CCIB) and 47 categories subject to safety control. Applicable standards for inspection should normally be specified in the contract of sale, including standards for quality, weight, quantity, packing and inspection methods. Such standards must not be lower than the corresponding Chinese national standards. For those products without the CCIB safety marking, they are forbidden importing into the country. Imports of wastes for dumping, stacking and disposal within its territories are prohibited. Imports of wastes that can be used as raw materials are also restricted. On 15 November 1999, China and the US signed a bilateral agreement on China's accession to World Trade Organisation, paring its way for China to join this multinational trade body. Substantial market access commitments cover the agricultural, industrial and service sectors.

11

LOGISTICS SERVICES International Transportation Logistics - China Global Freight Shipping Service - Logistics Integrated
International logistics is an important element in China global trading. Proper shipping logistics handling can avoid many unnecessary expenses, assure prompt order deliveries and in the end, contributes to the success of international trade. Whether you plan to import goods from China to other countries or export products to China from where they are manufactured, you must always consider how to deal with the international transportation freight shipping logistics. Even if you have Cost Insurance and Freight (CIF) as the shipping term arranged with your freight logistics forwarder, you still needs to understand the entire process in which your freight shipping and transportation are handled in order to prevent possible losses and maximize your profitability. Any international trades cannot succeed without help of high quality international transportation and international logistics services. International transportation and freight shipping may not be as easy as one would think. International logistics is much more complicated than shipping goods domestically. International logistics services must deal with many different originations including ocean and land carriers, ports, transit warehouses, customs clearing houses and government inspections agencies. China global logistics is of no exception. Whether you plan to use our one stop import from china service and export to china services, or decide to deal directly with supplier or manufacturer in China, you are always welcome to use our third party international logistics integrated services. In the past two decades, Amlink has done large amount of business and established strong relations with leading international shipping logistics handlers, freight forwarders, ocean carriers, warehouses and customs clearing houses in China and in many major cities across the world, which enables us to provide you with quality essential, cost effective, time efficient international shipping freight handling and other logistics integrated services
12

Flow Chart of International Logistic Services - China Global Shipping Logistics Integrated

13

INDIA AND CHINA LOOKING BELOW THE SURFACE TO COMPARE THESE TWO RISING ASIAN BUSINESS GIANTS

India has emerged as a trading superpower and as an increasing magnet for FDI. Its role in the international economy to this point has been less remarked than the rise and dominance of China but increasingly India will be appreciated for the opportunities it is creating for its citizens, employers and foreign and domestic firms. At first glance, India doesnt look like a major trading superpower or a place where your company should be considering siting a factory. Major complaints heard by visit execs often involve the poor state of infrastructure, the chaotic traffic, that the democratic process hinders development, that corruption is endemic and that bureaucracy is rampant. To this, many manufacturers must factor in that relations between China and India are formal but not warm and that apparently neither side trusts the other, which to this point has limited either location from generally serving the other for exports. To better understand what India is and what it is not, lets compare it to China. First, forget the hype about both China and India. Keep in mind that despite all the talk of China or Indias rising status, both China and India are still desperately poor countries with large disparities in incomes across each country. In China nearly half of the country's labor force remains in agriculture (about 60 percent in India). Also, despite all the talk about Indian software engineers and Nobel laureates and Chinese engineering whizzes, India has the largest number of illiterate people in the world and China also is burdened with a large number of rural poorly educated who will offer continued challenges for economic development. (Indias illiteracy rate is nearly 40 percent and Chinas is nearly 10 percent according to World Bank statistics.) Of the total of 2.3 billion people in these two countries, nearly 1.5 billion earn less than US$2 a day, according to World Bank calculations. substantial; the challenges are also large. The opportunities in both countries are

14

With this in mind, lets compare the two countries by size: China is the worlds thirdlargest country after Russia and Canada and is the second largest country by land area. India is about a third of Chinas size. In terms of population, China tops India at 1.3 billion people compared to India at just over 1 billion but India is growing at a faster rate and has a younger population. In terms of political systems, China is a communist country which economically is following market reforms that encourage free trade and capitalist-based business models. India, by comparison, is the worlds largest

democracy, but with a system of commerce that until the 1980s was based on the Soviet model and has since been reforming itself to follow more free trade and capitalist-based models. China has been reforming its economy since 1978; India has been working since 1991 but at a faster rate of speed. Am link provides the following third-party international transportation China global trade logistics integrated services: Source reliable China shipping logistics company and freight forwarder that specialize in international transportation Service of your product category, in China, America and Europe. Plan a complete logistics integrated service.

Coordinate between shipping logistics freight forwarders, importers and exporters in China throughout the entire shipping, transportation and other logistics integrated process.

Coordinate customs clearing and logistics warehousing at port, including the duty bond application. Coordinate government freight inspections when they becomes necessary.

Coordinate transportation, warehousing and distribution of the goods either imported from or exported to China. Locate proper domestic and local land or rail carriers; arrange inland freight shipping logistics and final delivery. Provide compliance documentations. consulting services of international logistics related

15

Coordinate purchasing transportation.

proper

types

of

insurance

policies

for

international

Coordinate resolutions of the issues that may encounter during the shipping logistics process, such as freight delays, service controversies, loss and damages claims and settlement

EXIM Policy 2009 to 2014 Highlights Some key highlights of this EXM policy 2009 to 2014 revisions are:
Market Access and Export Market Diversification Incentive schemes have been expand to cover new markets and new product categories. New markets, sixteen from Latin America and ten from Asia-Oceania have been added as part of the Focus Market Scheme. The incentives available have increased from 2.5% to 3% for these new markets. New Product Incentive Scheme This covers a wide variety of products ranging from engineering, plastics, textiles, Green technology, Jute & Siscal, technical textiles, project goods, vegetable textiles and some electronics. The incentives increased from 1.25% to 2%. Technology Upgrades For companies in certain sectors such as engineering and electronic products who want to upgrade their technology, zero duty will be assessed. Gems & Jewelry Sector Gold Jewelry exports will be permitted to receive Duty Drawbacks. This is where the duty collected on the export will refunded. Value added Manufacturing To increase Value added Manufacturing exports, a 15% minimum value addition on imported inputs has now been prescribed. Procedure Simplification Increase from 15 to 50, the number of sample pieces allowed to be imported by exporters at duty free rates.

16

Further, in terms of manufacturing Chinas lead over India in terms of manufacturing is considerable. China is the worlds third largest nation in terms of manufacturing after the U.S. and Japan. India is a still impressive, but much further back 12th place in the same list according to Global Insight and the Financial Times. This points out the fact that to this point, Indias success in expanding its service industry has yet to be as firmly demonstrated in the manufacturing sector. In terms of performance, here are some charts comparing and contrasting the two economies in terms of first GDP, then exports and finally imports

Top 15 Comparative Position of India & China

2006 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 US Japan China Germany France UK South Korea Italy Brazil Canada Russia India Spain Mexico Indonedia 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 2025 China US Japan Germany South Korea France India UK Italy Brazil Russia Indonesia Mexico Taiwan Canada

17

As can be seen, China is by far the bigger economy, the bigger exporter and the bigger importer but dont assume that all the advantages go to China. Here are some differences to consider:

18

Tax Regimes

China:

India:

Corporate Income Tax: 24% Tax-Incentives for high-tech industries: 15%

Indias tax system is being reformed as we write this. Following is the tax system for Indias Special Economic Zones:

Tax Holidays for manufacturing industries:

Corporate Income Tax: 15% First five years of profitability: 0% tax

Initial two years of profitability: 0 percent tax

Next three years of profitability: 50% of tax rate (This is assumed to be 12%)

Second five years of profitability: 50% tax (This is assumed to be 7.5%.)

Third five years of profitability: 50% of tax rate for any invested dividends that are invested back into India

As can be seen, India has introduced a tax regime that is vastly more advantageous in the Special Economic Zones than China. Another benefit of India over China with respect to locating in the Special Economic Zones is that India does not discriminate between manufacturing and services and either can offer the above incentives, which is not the case in China. (Service companies are treated less favorably in China for incentives.)

19

COMPANY DEVELOPMENT Tax incentives are not the only area that India is ahead of China in. Generally, Indian capital markets far exceed their Chinese counterparts in terms of transparency and predictability. Indian companies can list domestically on the Bombay Stock Exchange, Asias oldest exchange.

China has both the Shanghai and Shenzhen stock exchanges. Shanghai is larger than Bombay in terms of capitalization (Bombay has US$1 trillion with 4,833 companies and Shanghai has US$1.7 trillion with 849 companies) but what differs the two exchanges is not just their size but that Bombay is run to international standards and has tremendous stability in the quality of its companies. On the other hand, Chinas Securities Commission has no powers to impose punishments, which must be imposed by the courts. Further as the government is the major stockholder of its State-owned enterprises all these firms are not subject to independent policing and true financial analysis meaning that the value of many of these firms is suspect. This means that generally India has the more transparent economy.

Company Management Capabilities

India, however, is not only ahead in financial transparency. Although there are many excellent Chinese companies, generally the management abilities of many Chinese businesses is not as strong as their Indian counterparts. Part of this is due to the fact that reform in China started barely 30 years ago and that management training has not become of interest till recently. Also, it is a factor that in many respects it is the rest of the world that came to China to produce in the last decade and not Chinas homegrown export industry that has driven exports.

20

In fact, if one looks at cross-border activity, China has yet to become active in acquisitions to-date, although there is indications this is starting to change. On the other hand, Indian companies have been on a tear building up international assets and expanding throughout the world. Recent examples:

Tata Steels $13.6 Billion Acquisition of Corus Mittal Steels even larger $31 billion purchase of Arcelor Tata Groups acquisition of U.S.-based Glaceau, a health drinks and water manufacturer, for US$677 million Tata Teas purchase of a controlling stake in Britains Tetley for US$407 million Indias wind energy firm Suzlons acquisition of Hansent Transmission for $324 million Infosyss $28 million acquisition from Phillips of BPO centers in Chennai; Lodz, Poland and Bangkok, Thailand. Indian Phamaceutical giant Ranbaxys acquisition of Romanias Terapia Ballarpur Industries (an Indian Paper and Pulp company) and JP Morgans acquisition of Malaysias Sabah Forest Industries

As can be seen from the above examples, Indian companies are actively becoming world players. Chinese companies really cant match the breadth or the depth of acquisitions and this is giving Indian companies a lead over their Chinese counterparts.

21

Bibliography
www.chinainfo.com www.ictmarket.com www.comparativedataofchina.com

22