China is unlikely to deter its firms from investing in India, but it is not going to be an easy sailing for Chinese investors who will have to deal with labour unions which they are not used to at home, official media reported on Tuesday. As India is wooing investments from China, “the Chinese government has not expressed opposition to the general industrial transfer from China to India”, an article in the state-run Global Times said.
Chinese officials have rolled out concrete measures to encourage local enterprises to go abroad and explore overseas markets, including India, it said.
“Currently, India is on track to hold on to its spot as one of the world’s fastest growing emerging countries, and Chinese manufacturers are salivating over this fast-growing consumer market. Furthermore, the Chinese economy will likely gain momentum from the formation of a new cross-nation industry chain between the two neighbours.
“Considering the above factors, China’s government is unlikely to deter India’s effort to woo Chinese component companies, despite the possibility that this could cause job cuts in the manufacturing sector at home. But at the same outbound investment by Chinese component enterprises into India will not be a ‘plain sailing’ as ‘the greatest challenge of setting up plants in India lies in the hesitation of Chinese entrepreneurs to step up local production,” it said.
The article said, “as Chinese component enterprises become more deeply entrenched in the Indian economy, they will soon encounter a number of differences between the two countries in terms of commercial ecology”.
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“For instance, Indian labour unions ensure workers have a voice in corporate governance, while Chinese entrepreneurs usually lack experience dealing with strong unions,” it said.
Despite being a Communist nation, China has no labour unions except the state controlled All China Federation of Trade Union which toes the government line on labour related issues with very few incidents of labour unrest.
In 2010, there was a series of protests by workers in China, demanding a pay rise and improved collective bargaining rights. Workers had clashed with the institutionalised unions that were formed to represent them.
The Chinese investments also will be hampered by lack of skilled workers besides lack of cohesion between the states the article said.
“As China-made products gain greater market shares in the Indian consumer markets, India may still have a long way to go in persuading Chinese component enterprises to step up local production,” it said, adding that private investors in India have “misgivings”.
“If Indian private enterprises have misgivings about investing in the country, India may struggle to persuade Chinese firms to invest extensively in India in the short term,” the article added.