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Everyone wants a pie of China and India

July 4, 2011

With news of an imminent economic slump, drop in valuations and a growing urge to open their markets to foreign investments, India and China are witnessing a surge of foreign financial funds keen to exploit their burgeoning markets.

In India, FDI in retail the much debated, pondered and sought after dilemma might finally see light of day by the end of this month, China is seeing foreign firms keen to buy out well entrenched Chinese companies, which until now have been extremely recluent to sell to foreign powers.

As both India and China weigh the consequences of further opening up their markets, Inchin Closer looks into the dilemma at hand –

FDI in Indian retail – Global retailers such as Wal-Mart Stores , Carrefour , Tesco and Metro AG have long sought greater access to a fast-growing but restrictive Indian retail sector that is dominated by mom-and-pop operators. A traditionally socialist economy, India is fighting its urge to open retail in India but also wants to bring down inflation and ease pressure on the disorganized agriculture supply chain. Top government officials have been quoted across several media stating that FDI in multi brand retail could be allowed into India as soon as March next year, albeit with conditions. Multinationals will only be allowed entry in cities and towns with a minimum population threshold, and will need to follow strict sourcing and selling rules. India currently allows 51 percent FDI in single-brand retail and 100 percent in wholesale cash-and-carry operations.

Nestle to buy out Chinese candy maker Hsu Fu Chi International Ltd. Talks between Nestle SA and Hsu Fu Chi, which makes chocolate and other candy are at a delicate stage now as the two firms are discussing details of the buy out. If the deal does go through, it would be one of the biggest foreign takeovers of a Chinese company. Coming from a traditionally domestically dominated market, the Chinese have been very protective of their home grown companies.  In 2009, Chinese authorities rejected a US$2.4 billion bid by Coca-Cola Co. to buy all of Chinese soft drinks maker Huiyuan Juice Group Co. It took U.K. liquor giant Diageo PLC 16 months to win Chinese regulatory approval  for its bid to take control of Chinese baijiu brand Shui Jing Fang, a local Sichuan white-spirits maker. Diageo’s approval to buy, announced this past week, could indicate that Chinese authorities are more open to such deals. Hsu Fu Chi had a profit of 602 million yuan (US$93 million) on revenue of 4.3 billion yuan in the 12 months ended June 30, 2010. The company’s shares are traded in Singapore.

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