This report is for any MNC looking for geographic expansion to expand its international operations, and whether it is worth entering the Chinese or Indian markets.
Presently, many companies are looking for new emerging markets to expand their international operations. There are lots of emerging markets in Asia and in the Middle East, but the main interesting ones seem to be India and China. In this paper, we will analyze the situation in both countries (economical, political, financial and demographical) to know where it's better to invest for potential investors.
The People's Republic of China is the third biggest country worldwide in terms of surface, after Russia and Canada. It's the most populated country, with 1,321,851,888 inhabitants who share 9,326,410m². There are 14 border countries (North Korea, Russia, Mongolia, Kazakhstan, Kirghizstan, Tajikistan, Afghanistan, Pakistan, India, Nepal, Bhutan, Myanmar, Laos and Vietnam).
The average growth rate last year was around 8%, which has attracted foreign companies.
The Republic of India is located in Southern Asia. Its total surface is 3,287,590 sq km.
The country shares borders with Pakistan in the Northwest, with China, Nepal and Bhutan in the North, and with Bangladesh and Myanmar in the Eastern part of the country. The country has borders with the Arabian Sea in the West, as well as with the Bay of Bengal and the Indian Ocean in the South.
There is one main river, which is the Ganges river in the East (Ganges is the holy river).
[...] That's why the Indian government has put in place some reforms and investment plans to fight against poverty and improve infrastructures (electricity, roads, etc.). India is the number four country worldwide regarding agriculture and is one of the number one producers for milk, fruits, vegetables, rice, tea, sugar and cotton. Raw material resources are quite important in the energy sector. Coal is the main resource of energy in the country (4th producer worldwide). Textile is the key activity in manufacturing, and chemical industries represent 12% of the GDP today. [...]
[...] An important knowledge based element for examining the opportunities and risks in China deals with the legendary Chinese willingness to work hard and to achieve individual and social goals. Surveys contribute to our understanding of how work ethics are changing. -Chinese lifestyle shows the ups and downs of investing in Chinese companies: $19 a share, IPO $23 one day later bad report from government $32 in November $35 in December (Earnings growth) Credit risk China represents a difficult market for lending to companies. [...]
[...] Risks - India has a very slow moving commitment in building infrastructures - Financial markets are not yet reformed - There are protectionist policies India is also one of the few markets in the world which offers high prospects for growth and earning potential in practically all areas of businesses. But until now, India has not attracted as many investors as it should have and as many as in China. One of the reasons for the inability to attract is that India developed a highly protected, semi-socialist autarkic economy just after its independence from Great Britain. [...]
[...] Pollution is present in big Chinese cities and affects many people cities out of the 10 most polluted cities are in China) It's difficult for China to find good balance between modernization and local habits, without having environmental and globalization problems. Why establish in China? China's market represents more than 1.3 billion potential customers. The costs of production are much lower, because labor costs are cheaper in China than in Europe but it's the same for wages. To establish a long term relationship with suppliers and then benefit from their know-how in this market. [...]
[...] Wages are, generally speaking, lower in India than in China. To sum up, we can say that China offers more cooperation from its government. The achievement of the various reforms in India is very important for the country to enable it to compete for investments, but it's not advanced enough. Indian companies have more return on investments than Chinese companies. While China has great macroeconomics, growth, and government policies, India has good companies that are focused on costs. But the country's [...]
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