Indian firms can thrive with competition

Chinese investments in India are growing in a number of diverse fields. Most are still in infrastructure, raw materials, and white electronics. However, over the past three years, Chinese companies have started to enter India's service industries such as healthcare, finance and IT.

As these Chinese companies consolidate their own strength and increasingly internationalize, they will have more input and development opportunities in India.

Their biggest advantage, in my eyes, is that as they've accumulated precious experience in China, they're able to provide products and services that better suit India's market demands and are more cost-effective than local and Western competitors.

It's not simply that Chinese products or services are "cheap." After two or three decades of growth at home, Chinese companies know better than their Western counterparts about competing in low-priced Indian markets, similar to Chinese ones. Meanwhile, compared with local companies, Chinese firms can provide more advantageous, effective and mature solutions. As a result, Indians can buy more suitable products, services, technologies and experiences at lower prices.

The Indian government obviously welcomes and supports Chinese investment, especially at a time when foreign investment continues to flee from India. It's an important opportunity that Chinese company should seize, so as to push the Indian government to practice their rhetoric of welcome and win more and rare supporting policies.

Besides the government, there are miscellaneous stakeholders in India. Each member of parliament, industrial organization and media outlet may represent a different area, industry, corporation or political force. Their attitudes toward Chinese investment depend on their own interests. It's hard to say which stakeholder is stronger. There's a constant rivalry among multiple interest groups.

Generally, the entrance of Chinese companies leads to a loss of interests for other foreign or local companies. As a result, their entry is always accompanied by opposition from some industrial organizations or media outlets.

We do not need to pay too much attention to these negative voices. Instead, we should conduct specific analysis of industrial interest chains. Sustainable development in India is possible only when a win-win situation among multiple stakeholders is achieved.

At the grass-roots level, a certain resistance against foreign investment exists among some Indian people. This mainly stems from the colonial period when the British East India Company exploited India.

Some Indians believe that foreign companies will end up evacuating sooner or later after they have made all the profits they can from India. This is also why many foreign companies, especially Western ones, highly value their corporate social responsibilities in India and seek to build a good image as local corporate citizens.

But I have to point out that nationwide attention to certain foreign investment items often stems from resistance by parliament members, industrial organizations and media outlets. Usually those foreign companies that do not shake interest groups are barely noticed by the public.

The biggest challenge that Chinese companies face in India, as I mentioned above, is to thoroughly understand the stakeholders in the industry and fix the interest chain undermined by their low-price entrance.

Before Chinese companies arrive, these local industries already have a relatively harmonious, win-win business ecosystem. Besides buyers and sellers, there are various stakeholders including the government, industrial organizations, media, financial groups, investors, supply chains, employees and communities.

However, Chinese companies in India usually only pay attention to buyers and ignore other stakeholders who decide their future sustainable growth. In their first couple of years in India, they can have a short-term, rapid growth in sales. But within three to five years, they will face all kinds of resistance from other stakeholders, because their entrance damages the original interest chain.

This certainly takes time. Meanwhile, in order to understand the local ecosystem, Chinese companies have to localize successfully.

This is bound to be a long process. Besides a few multinational companies like Huawei, ZTE, Lenovo and Haier, which have been aiming at globalization for a long time, most Chinese companies in India have just moved beyond the domestic business environment. They are still far from considering how to adopt localized management and employ local staff.

These Chinese companies should localize themselves both their thinking and professional business understanding.

Chinese companies in India should learn to adapt Indian habits, culture and food. Otherwise, they will hardly understand local codes of behavior and business rules. Chinese companies should also do specific research on India's business regulations and law concerning issues like labor and tax.

As outsiders, Chinese companies may easily fall into all kinds of traps, and suffer great losses due to their own negligence. Their interests can be guaranteed and maximized only when they completely understand and obey local business rules and related laws.