By Tim Foster, Managing Director, APAC, Chainalytics
China and India both have big economic aspirations: India just surpassed China as top destination for foreign direct investment (FDI). Prime Minister Modi’s “Make in India” initiative has aggressively and successfully marketed the country to multinationals seeking manufacturing and intellectual capacity and market access.
Both countries are developing or sourcing infrastructure like ports and rail to expand and attract investment and business: Initiatives range from India’s extensive port and inland waterways modernisation to China’s Maritime Silk Road global investments (including 24 ports and a 99-year Darwin, Australia port lease) and One Belt, One Road road and rail projects that provide access Asia, Africa and Europe, complete with special economic zones.
Underneath the grand plans are important connectivity, logistics and supply chain trends affecting both countries’ dynamic projected growth, especially given increased internal consumption, trade regionalisation and pacts. On top of regional trade blocs, the two countries signed a bilateral Five-year Development Programme for Economic and Trade Cooperation in September 2014 to promote balanced, sustainable development of economic and trade relations. This ups the ante for both countries.
Here’s what we see ahead:
- As I’ve written before, locating the optimal supply chain talent is part of a longer-term supply chain strategy. Firms doing business in India will continue to be challenged with filling their supply chain talent needs–especially as the government lowers barriers to market entry for highly experienced international competitors. The Wall Street Journal reports that domestic and foreign-funded companies are having a difficult time finding qualified supply chain and logistics professionals in both China and India.
- The rising middle-class in both countries is doing a lot more online shopping. Chinese shoppers’ increasing personal income means they are taking advantage of relaxed import rules to buy more from foreign brands via retailers’ websites and Chinese online sites that broker orders for foreign goods. Online orders can be shipped from abroad or stored in special free-trade zones in about a dozen Chinese cities. And India now permits 100 per cent FDI in marketplace e-retailing, a move that will boost domestic as well as foreign players like Flipkart and Amazon. Of note: For both countries, online returns will likely emerge as a thorn in the side of the cross-border commerce (CBC), leaving room for supply chain and logistics improvements.Shopping and consumption changes will affect affect supply chain and logistics in both countries for years to come. 2016 Georgia Logistics Summit panelist Chen Peng has noted that in China’s larger cities, retailers are exploring a more interactive ways to attract potential customers. Online-to-offline (O2O) shopping is popular in China now. Alibaba and Jindong are not only seeking to improve end-to-end supply chain processes and logistics systems to increase supply chain efficiency, but also create a complete commercial eco-system to meet their market demands literally everywhere–cooperating with convenience stores, gas stations and property offices at housing estates and building high-tech locker-banks to help customers retrieve their online orders more conveniently via a QR code or order number.Given China’s increased online shopping, demand for fresh food delivery and better safety controls, the government is attempting to rein in formerly highly fragmented, hit-or-miss cold chains via standardised health and safety regulations. Proposals on the table would establish a national cold-chain association to regulate the industry’s development.
Meanwhile, “Digital India” projects mean India is targeting a huge range of goals–from electronic manufacturing to broadband highways, digital infrastructure and publicly accessible wi-fi, to ensure India’s connectivity progress is far ahead that of many other countries
These are truly interesting times for these two nations. China’s top three trading partners are the United States, Hong Kong and Japan (in 2015, 50.8 per cent of China’s total exports by value in 2015 were delivered to other Asian trade partners). I think we will continue to see trade increase in the APAC and ASEAN regions and even new fintech approaches that support mobile payments and digital services. These changes will be what force supply chain and logistics innovation in China and India over the coming years.
About the Author
Tim Foster is managing director of Chainalytics Asia-Pacific. He has more than 20 years of supply chain experience across the APAC region. He stays abreast of the local, regional and by-country picture across Asia—from macro-economic factors impacting the region to each market’s unique logistics demands and business complexities. Contact him via email@example.com or learn more about Chainalytics at www.chainalytics.com.