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China commits to the Indian market, with largest investment ever

May 2, 2011

Marking the highest foreign direct investment by a Chinese company into India, China’s largest commercial vehicle maker Beiqi Foton has said that it will invest US$ 380 million (Rs 1,676 crore) for a  one-lakh unit per annum plant including fixed assets and equipment in India. The manufacturing facility, the company’s first outside mainland China, will be located in Western Maharashtra.  Foton is currently exploring options to sell light, medium and heavy trucks in India. The company also recently announced to build a sales company in Mumbai with investment of  Rs 100 million.

Trumping General Motor’s backdoor Chinese entry into India, Foton sees a huge opportunity in the Indian market. “India is a big opportunity and we plan to start rolling out vehicles by 2013 from the plant,” the company’s executive vice-president for India operations R Shankar said after Foton and the Maharashtra Government inked an MoU to set up the facility.

While Foton has already zeroed in on three potential sites for the plant ,the parts and components will mainly be sourced from local producers.  Beiqi Foton Motor is expected to take concrete steps in the second half of this year.

The Beijing-based company exports to over 100 countries across the world and operates six manufacturing plants in China, apart from running KD (knock-down) operations in Russia, Iran, Pakistan, Vietnam, Indonesia and Kenya where vehicles are assembled. Foton has  sold more than 600,000 vehicles in 2009 – the largest in the world.

According to Inchin analysts, the deal is significant for two reasons – one that the Chinese market having saturated in many industries, is now looking at India as another major market to sell to. Putting aside petty politics and bugging bureaucracy, the two countries understand the amity of trade. While China recently sanctioned its largest loan to India, for US$1.93 billion for acquiring Chinese telecom equipment, China is also willing to invest in India regardless of the frustrating pace of work, because she realises the long term benefits of aligning with a large market similar to hers.

Another reason this deal is significant is that it marks the maturing of the Chinese economy. Having grown and understood their own varied market thoroughly, Chinese companies are now consolidating and internationalising their businesses. Besides the bevy of Mandarin automobile companies that are making a beeline for India, fashion companies, retain chains and raw material companies are all vying for an entry point into India.

While it’s still early days, Inchin Closer has listed three significant industries where synergies between India and China are high. Look out for these, lay your money on them and reap in the profits –

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