Consolidating its commitment to China, Indian engineering and construction heavyweight Larsen & Toubro (L&T) opened a Beijing office today, the company’s second office in mainland China.According to L&T Managing Director A.M. Naik, with the inauguration of the Beijing office, the first phase of L&T’s China strategy is almost complete. The second phase, which the company aims to implement within the next few months, will entail the positioning of 4-5 key sourcing personnel in the country. “So far, we have merely been selling stuff in China. That phase is over and now we want to move into sourcing in a big way,” said Naik. According to him, sourcing from China is key to global companies’ attempts at remaining competitive. L&T will look to source raw materials, machinery and electrical components from the mainland.The third phase of the company’s China’s strategy, which is still at the conceptualization stage, will involve setting up manufacturing bases in the mainland. “China is a huge market so that if any company wants to truly be a big player, they must be in China,” said Naik. He further explained that establishing manufacturing capabilities in China would enable L&T to “de-risk” itself. ‘‘If we only manufacture in India, we have all our eggs in one basket.’’Predicting that the skyrocketing Chinese economy will slow down by a few percentage points in the future, Naik said the resulting overcapacity in the domestic Chinese market, would force Chinese companies to look beyond their borders. In such a situation, Indian companies would face fierce competition that could be deadly for them. ‘‘But if we are also in China, then we reduce the risk,” he said. L&T is undertaking feasibility studies regarding the best mode in which to start manufacturing operations in the mainland. Both joint ventures and wholly-owned enterprises are being considered.
