Currently China boasts global cost competitiveness. The country has an abounding local market with economies of scale. The country also maintains adequately developed infrastructure to support mass production and manufacturing. As of late the government has favorable policies toward exports and the country enjoys the presence of nearly every global player.
Unfortunately, some of the weaknesses associated with this country including their technological dependence on other global players. Knowing how to invest in China means that you know China focuses on large volumes which inherently leave out the potential for small and medium business volume production. There remains a large language barrier which increases costs and risks due to challenges and errors in communication. Other problems include the aging population, the weak intellectual property rights which inadvertently ensure that if anything is outsourced to the country someone there steals it in spite of being copyrighted. China also has a weak financial system and companies who outsource to this location find the lack of quality assurance a large challenge.
Nonetheless there remain opportunities in terms of the development of R & D. Knowing how to invest in China means that you know China continues to enjoy increased access to the newest technology and local brands are continuing to expand overseas. At this point China could become a sourcing hub for car manufacturing as well. There are threats from like India, Thailand, Malaysia, and Vietnam . China is also facing currency appreciation, an overheated economy, increased labor costs, and a negative dependency on raw material imports.
Currently India enjoys low cost manufacturing. It has a big local market. There is an adherence to quality standards which is maintained by the young working population. India enjoys a strong legal and institutional frame work. It is also an IT superpower which offers western nations flexibility in small batch production. There is an adequate level of automation and most importantly, English is the most widely language making for improved communication between parties. Unfortunately, some of the weaknesses associated with this country including the inadequate infrastructure. There is a low literacy rate and currently the country is battling with a power crisis. There is a lot of red tape and low spending on R & D. Much like China, India is technologically dependent upon other global players.
However, opportunities are still present as India could become a central source for engineering services, IT services, and manufacturing. The country is slowly moving toward the development of high-end technological products and is moving up in terms of the value chain. There remains a lot of flexibility in government FDI Policies for Enhanced Investments, applicable for many industrial sectors. Some of the threats in terms of outsourcing to India include imports from other LCC throughout Southeast Asia, pressure on the current prices for OEM’s, the presence of a large counterfeit market which has led to a loss of confidence from investors, a high dependency on the importation of crude oil, and inflation.