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India names its fast-growing mobile phone market and low labour costs as two good reasons for Chinese companies to move to India, although China fears such migration could lead to job losses at home. 

India is aggressively wooing Chinese multinational corporations in the electrical and electronic manufacturing and textile sectors to shift to India, extending an invitation to Chinese firms at the fourth India-China Strategic Economic Dialogue in New Delhi on October 6-7.

China has run out of surplus labour, and wages are rising fast. As wages are substantially lower in India, Chinese firms are expected to migrate to take advantage. China has already expressed keenness to participate in the flagship ‘Make in India’ programme launched by prime minister Narendra Modi in 2014.

The Sino-Indian dialogue on the theme of ‘Development, innovation, cooperation and mutual benefit’ took place at NITI Aayog, the official think tank that replaced the Indian planning commission. Addressing the meeting, Arvind Panagariya, vice-chairman of NITI Aayog, said India needs to learn from China and develop coastal economic zones similar to Shenzhen.

“With China promoting outbound investments and India seeking foreign capital and technology, it should enable us to take advantage of the synergies and put in place a vigorous framework to strengthen bilateral investment relationships,” said Mr Panagariya, according to the Indian Express.  

China’s smartphone manufacturers are attracted by India’s fast-expanding mobile market and low labour cost advantage. The world’s largest electronics contract manufacturer, Foxconn, has entered into an understanding with Finnish giant Nokia to revive the latter’s mothballed manufacturing plant near the capital city, Chennai, in Tamil Nadu and convert it to a global hub for mobile phones and telecom network equipment.

Lenovo and Xiaomi are also producing locally assembled smartphones. Most recently, Huawei announced it planned to make smartphones in India from October, with the Indian arm of the electronics manufacturer Flextronics International also in Chennai. 

Chinese state-run daily Global Times voiced concern in an article entitled “China needs to worry about effect of India industrial transfer on production chain” published on September 26. Many Chinese workers are involved in the production chain for smartphones, and face potential job cuts if the country’s smartphone makers transfer the industrial chain of mobile production from China to India. The reports added: “Frankly speaking, China cannot afford that.”

This relocation of other industries over a decade will raise China’s FDI from equity inflows of $1.358bn from April 2000 to March 2016, according to the department of industrial policy and promotion.

This article is sourced from fDi Magazine
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