A Report on Manufacturing Industry - China

Submitted By:

Raja Siddhi

Enrollment No

23SOMBA21430
(MBA SEM 2)

Subject:

International Business – MBC215

For the Submission of

SEE Examination
Component
Project Report
Supervised By
Dr. Hemali Tanna

Submitted To

School of Management

RK University, Rajkot

1
 Acknowledgment

The success and final outcomes of this project required a lot of guidance & help from
many people & We are extremely privileged to get this all for the completion of our
project. All that we have done is only due to supervision & help that we cannot forget.

We would like to thankful to our project guide Dr. Hemali Tanna who took interest
in our project work & also guided us all along till the completion of our project work
by providing us all the necessary information & developing a good system. We also
thankour project reviewer Dr. Hemali Tanna who has reviewed our project along
with required guidance.

We are thankful to our family & friends to provide us necessary guidance & support
wherever required in this project.

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 Declaration

We the undersigned solemnly declare that the research project report A study on India and
China trade Relations and Scope of Manufacturing in China Country is based on my own work
carried out during our study under the supervision of Dr. Hemali Tanna. We assert the
statements made and conclusions drawn are an outcome of my research work. We further
certify that:

• The work contained in the report is original and has been done by me under the general
supervision of my supervisor.

• The work has not been submitted to any other Institution for any other
degree/diploma/certificate in this university or any other University of India or abroad.

• We have followed the guidelines provided by the university in writing the report.

• Whenever We have used materials (data, theoretical analysis, and text) from other sources,
we have given due credit to them in the text of the report and giving their details in the
references.

Place: Rajkot Signature:

Date: Raja Siddhi

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 INDEX

Sr.No. Particulars Page no.

1 Country profile 5
2 Introduction of China 6
3 Overview Of China 7
4 China demographics 8
5 Current Scenario of the Chinese Government's 9
6 Pestel analysis of China 10
7 Contribution of manufacture sector in India 13
8 Contribution of manufacture sector in China 15
9 Current scenario of exports in China 17
10 India China Trade Brief 21
11 Porter’s five force model for manufacture in China
12 Bilateral trade opportunities between India and China for 25
Manufacture Sector
13 Benefits of good trade relations between India and China 26
14 Conclusions 27
15 References 28

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 COUNTRY PROFILE

Host Country: CHINA

Home Country: INDIA

Name of Sector: Manufacturer

5
 Introduction of the Host Country – China

China is a country in East Asia with a population exceeding 1.4 billion, making it the world's
most populous country. It is a unitary one-party socialist republic led by the Chinese
Communist Party (CCP) China is a founding member of the United Nations and one of the
five permanent members of the UN Security Council
Economically, China has the world's largest economy by GDP at purchasing power parity and
is the second-largest economy by nominal GDP. It is the world's largest manufacturer and
exporter, as well as the second-largest importer1. China is a nuclear-weapon state with the
world's largest standing army by military personnel and the second-largest defence budget.
In terms of foreign relations, China has diplomatic relations with 179 UN member states and
maintains embassies in 174 countries. It is a member of several multilateral and regional
organizations such as the G20, SCO, East Asia Summit, and APEC. China officially
maintains the "one-China principle", which holds that there is only one sovereign state in the
name of China, represented by the People's Republic of China, and that Taiwan is part of that
China.
China has emerged as a global manufacturing powerhouse over the past few decades,
solidifying its position as the "world's factory". In 1995, China had just 3% of global
manufacturing exports, but by 2020 its share had risen to 20%. This rapid growth has been
driven by several key factors:
1. Low Labour Costs: China has a large, relatively young workforce, and labour costs
are much lower than in other developed countries, making it an attractive destination
for manufacturing.
2. Government Support: The Chinese government has provided various incentives,
subsidies, and policy support to attract foreign investment and promote the growth of
domestic manufacturing.
3. Robust Infrastructure: China has well-developed transportation networks, including
roads, ports, and airports, facilitating the movement of goods in and out of the
country3.
4. Technological Advancements: China has made significant investments in developing
its technology sector, enabling the country to stay at the forefront of manufacturing
innovations.

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 OVERVIEW OF COUNTRY:

Beijing
Capital

Single-party socialist republic

Government
Type
Chinese Yuan (CNY)
Currency
Approximately 9.6 million square kilometers
Total Area

Eastern Asia, bordering the East China Sea, Korea Bay, Yellow Sea,
Location and South China Sea
Mandarin Chinese (official), various regional dialects and minority
Language languages
Around 8%
GDP - real
growth rate
Approximately $20,000
GDP - per capita
(PPP)9999

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 CHINA DEMOGRAPHICS:

China is home to 56 officially recognized ethnic groups. The Han

Ethnic Groups Chinese are the largest ethnic group, comprising over 90% of the
population, while the remaining 55 groups are considered ethnic
minorities.
Chinese
Nationality
Adjective
Chinese
Nationality
Noun
China has the world's largest population, with over 1.4 billion people.
Population

The population growth rate has been gradually decreasing due to

Population government policies like the one-child policy, urbanization, and
Growth Rate socio-economic factors.
Mandarin Chinese (Putonghua) is the most widely spoken language
Predominant in China. There are also several other regional dialects and minority
Language languages spoken throughout the country.

China has experienced rapid urbanization over the past few decades.
Urban As of available data, a significant portion of the population resides
Population in urban areas, with major cities like Beijing, Shanghai, Guangzhou,
and Shenzhen being among the largest urban centers.

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 Current Scenario of the Chinese Government's

1. Emphasis on Manufacturing and Exports as Key Growth Drivers:

- The Chinese government has made it clear that it wants to prevent China from de-
industrializing and is emphasizing manufacturing and exports as key drivers of economic
growth.
- The government has been providing various incentives, subsidies, and policy support to
attract foreign investment and promote the growth of domestic manufacturing.
2. Addressing Overcapacity Concerns:
- The Chinese government is aware of the issue of overcapacity in the manufacturing sector
and has expressed a desire to address it.
- However, the solutions adopted are likely to focus on retiring obsolete capacity and
allowing the least competitive companies to shut down, rather than a comprehensive strategy
to address the root causes of overcapacity.
3. Promoting High-Tech and Advanced Manufacturing:
- The Chinese government is focusing on promoting high-technology industries, such as
renewable energy, electric vehicles, and advanced manufacturing, as part of its industrial
policy.
- This is in line with China's push for "new productive forces" and technological self-
sufficiency.
4. Balancing Consumption and Manufacturing:
- The Chinese government is facing the challenge of rebalancing the economy away from
infrastructure and property sectors towards boosting domestic consumption.
- However, in the absence of a clear strategy to prop up consumption, the government is
supporting the manufacturing industry, particularly in emerging sectors, to drive economic
growth.
5. Potential Trade Tensions:
- The Chinese government's policy focus on manufacturing and exports is likely to
exacerbate industrial overcapacity, deepen deflation, and heighten trade tensions with the
West.
- This could lead to a response from a broader set of countries, including the EU and the
US, in the form of trade defence actions and other measures.

9
 PESTEL Analysis of China Country

Political Factors:
Political condition of any country affects the businesses located within its periphery.
Therefore, to provide the organizations with an ideal environment, China must have stable
political status. Here are some political factors that can influence China:
 Though the country has good trade relations with most of the other powerful nations,
its dispute with the US and countries of South China may ruin the political stability.
Hence, disturb the ideal business environment for the investors.
 China has proper strategies to maintain the low cost of the raw materials. The
investors can also have a low labour cost which makes it a good choice for business.
 The government makes plans to promote businesses and subsidizes companies. For
example, the Chinese government is currently promoting e-commerce businesses.

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Economic Factors:
The economic condition of any country is directly related to its growth. As a country, China
has shown impressive economic growth. Thus, making it an ideal location for business
investment.
In China, the labour cost is significantly low, and hence many reputed companies prefer to
hire employees from China. They can also hire experienced labour from this country with a
price much lesser than other countries.
 China has a high GDP. Thus, the purchasing power of the people of the country is also
significantly higher. Therefore, investors find a good market in China.
 The inflation rate in China is alarmingly high, and the cost of property is also
increasing. It can slow down the growth of the economy in the future, which may
impact its growth.

Social Factors:
The socio-cultural conditions of any country indirectly affect the business and economy of
the country. China is not an exception. Here is how sociological factors can impact the
growth of the country:
 It has a massive population of which almost 90% of them are literate. Therefore, the
business can get expert labourers and employees at a lower cost. The high population
is one of the reasons for low labour costs.
 The lifestyle of the people is changing and so are their choices and tastes. As the
urban lifestyle is penetrating most of the land, the businesses are also noticing a
change in social behaviour and purchasing trends.
 China has approximately 420 million internet users, and this number is increasing
rapidly. Due to internet access, the number of people using e-commerce is also on the
rise. It has made the country the best place for budding e-commerce companies.

Technological Factors:
Business and technology are intricately related. Technical innovations affect the capacity of
production, resulting in a surge in business revenue. PESTEL analysis China can point out
how technology can contribute to China’s growth:
 The country has shown advancement in technological innovations. It has changed
their mode of production as well as the distribution. The biggest tech giants like
Baidu, Alibaba, operating worldwide, can allow businesses to increase their sales.
 China is also making strategies to inspire the people to concentrate on innovations
that can be helpful for their growth. These policies can be beneficial for domestic as
well as international companies to have better production.

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  As the country has good technological support, a considerable population prefers to
use e-commerce instead of visiting the store to buy products.

Environmental Factors:
Though ecology does not majorly affect the growth of a country, it may have some indirect
impact. China has experienced rapid growth in the last few decades, and as a result, there is
urbanization. Here are some ecological issues which can impact China:
 The country has set up some guidelines for the business. It aims to secure the
environmental standards of production. It may increase the cost of production and
decrease the profit.
 China is also aiming to make electronic vehicles its primary mode of transport. If they
can successfully incorporate it, the car manufacturing company may get a better
market for production and selling.
 As the country has factories on a considerable scale, they need to work on their
technologies. It can reduce the pollution level and the cost of manufacturing.

Legal Factors:
Certain legal conditions may have an impact on the business of a company. China has some
laws that can show the effect on the growth as a business-promoting country:
 The country has banned social media like Facebook, WhatsApp, Twitter, YouTube,
which has prevented these platforms from earning revenue.
 China also has some restrictions on the investment of foreign companies. It may
decrease the number of international companies investing in the market of the
country.
 The country is currently formulating the laws for the eCommerce business, which is,
to some extent, troublesome. The state has some laws for taxation and IPs, but there is
no law to validate the online contract between the seller and buyer. It may increase the
risk of online transactions to eCommerce sites.
 Manufacturing is emerging as an integral pillar in the country’s economic growth,
thanks to the performance of key sectors like automotive, engineering, chemicals,
pharmaceuticals, and consumer durables. The Indian manufacturing industry
generated 16-17% of India’s GDP pre-pandemic and is projected to be one of the
fastest growing sectors.

 The machine tool industry was literally the nuts and bolts of the manufacturing
industry in India. Today, technology has stimulated innovation with digital
transformation a key aspect in gaining an edge in this highly competitive market.

 Technology has today encouraged creativity, with digital transformation being a

critical element in gaining an advantage in this increasingly competitive industry. The

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 Contribution of Manufacturing Sector in India
 India has the capacity to export goods worth US$ 1 trillion by 2030 and is on the road
to becoming a major global manufacturing hub.

 With 17% of the nation’s GDP and over 27.3 million workers, the manufacturing
sector plays a significant role in the Indian economy. Through the implementation of
different programmes and policies, the Indian government hopes to have 25% of the
economy’s output come from manufacturing by 2025.

The origin of value added is determined by the International Standard Industrial

Classification (ISIC), revision 3. Data are in current U.S. dollars.

 India manufacturing output for 2022 was $456.06B, a 0.03% increase from 2021.
 India manufacturing output for 2021 was $455.91B, a 20.82% increase from 2020.
 India manufacturing output for 2020 was $377.35B, a 1.1% decline from 2019.
 India manufacturing output for 2019 was $381.55B, a 5.14% decline from 2018.

Manufacturing Contribution to GDP (%)

Year Manufacturing Contribution

to GDP (%)
2015 15
2016 15.3
2017 15
2018 15
2019 13.5
2020 14.3
2021 14.5
2022 13.3

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Source: https://data.worldbank.org/

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 Contribution of Manufacturing Sector in China

China is the world’s largest manufacturer, sometimes referred to as ‘the world’s factory’. It
has been an attractive destination for manufacturing in recent decades thanks to its low labour
costs, technically skilled workforce and good infrastructure. But China’s competitiveness and
manufacturing profile are changing, with more developed regions moving up the value-chain
and labour-intensive manufacturing moving inland. Businesses are increasingly choosing to
manufacture in China to service the growing Chinese market, rather than use it as low-cost
option to manufacture export items.

Manufacturing’s percentage share of Chinese GDP has been slipping in recent years, but it
remains a major sector, accounting for 42.6 per cent of GDP in 2014. The sector employs
about 30 per cent of workers in China and has ensured China remains the world leader in
gross value of industrial output. On the more developed Chinese eastern coast, the focus has
increasingly moved to advanced manufacturing, while lower cost and more labour-intensive
manufacturing is increasingly located further inland.

The origin of value added is determined by the International Standard Industrial

Classification (ISIC), revision 3. Data are in current U.S. dollars.

 China manufacturing output for 2022 was $4,975.61B, a 1.36% increase from 2021.
 China manufacturing output for 2021 was $4,909.01B, a 27.15% increase from 2020.
 China manufacturing output for 2020 was $3,860.70B, a 0.97% increase from 2019.
 China manufacturing output for 2019 was $3,823.42B, a 1.16% decline from 2018.

Year Manufacturing Contribution to

GDP (%)
2015 25
2016 28.2
2017 28.2
2018 28
2019 26.8
2020 26.3
2021 27.6
2022 27.9

15
Source: https://data.worldbank.org/

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 Advantages and Challenges of Manufacturing in China

Advantages of Manufacturing in China:

 Access to R&D and science and technology capabilities

 Incentives offered by various government agencies.
 Efficiency gains due to larger economies of scale.

Challenges and Concerns:

 Rising labour costs and skills shortages

 Intellectual property protection issues
 Inconsistencies in the application of commercial law
 Variable quality of logistics and infrastructure systems
 Difficulties in managing contracted manufacturers and subcontractors.

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 Current Scenario/ Possibilities of Exports in China Country

1. China as the World's Manufacturing Superpower:

 China has emerged as the world's sole manufacturing superpower, with its
share of global manufacturing exports rising from just 3% in 1995 to 20% by
2020.
 This rapid growth has solidified China's position as the "world's factory",
accounting for a significant portion of global manufacturing output across
various industries.
2. Dominance in Exports:
 In 2022, China exported a total of $3.73 trillion, making it the number 1
exporter in the world.
 China's top exports include broadcasting equipment, integrated circuits,
computers, office machine parts, and semiconductor devices.
 The major destinations for China's exports are the United States, Hong Kong,
Japan, Germany, and South Korea.
3. Diversification of Export Destinations:
 While the United States and the European Union remain major destinations for
China's exports, the country is also expanding its trade relationships with other
regions, such as Asia and Africa.
 This diversification of export markets could help China mitigate the impact of
potential trade conflicts with Western countries.
4. Continued Government Support:
 The Chinese government has been providing various incentives, subsidies, and
policy support to promote the growth of the manufacturing sector and boost
exports.
 This government support is likely to continue, as China seeks to maintain its
position as a global manufacturing and export powerhouse.
5. Potential Overcapacity Concerns:
 China's focus on promoting manufacturing, particularly in high-tech and
advanced industries, has raised concerns about overcapacity in the sector.
 The Chinese government is aware of this issue and has expressed a desire to
address it, but the solutions are likely to focus on retiring obsolete capacity
rather than a comprehensive strategy.
 This overcapacity could exacerbate trade tensions with the West, as China
looks to export its excess production to global markets.

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 Policies and initiative taken by government for promoting manufacturing
sector of export.

The Chinese government has implemented various policies and initiatives to promote the
manufacturing sector, with a focus on boosting exports. Here are some key policies and
initiatives:
1. Made in China 2025: Launched in 2015, the Made in China 2025 initiative aims to
upgrade the country's manufacturing capabilities by focusing on innovation,
technology adoption, and quality improvement. It identifies key industries, such as
information technology, robotics, aerospace, and new energy vehicles, for strategic
development to enhance China's competitiveness in global markets.
2. Belt and Road Initiative (BRI): The BRI, announced in 2013, is a massive
infrastructure and connectivity project aimed at enhancing trade and economic
cooperation between China and countries along the ancient Silk Road routes. It
includes investments in transportation networks, energy infrastructure, and industrial
parks, creating opportunities for Chinese manufacturers to export goods and services
to BRI partner countries.
3. Export Promotion Policies: The Chinese government offers various export
promotion policies to support manufacturers in accessing international markets. These
policies include export tax rebates, export credit insurance, export financing, and trade
facilitation measures to reduce transaction costs and promote competitiveness.
4. Industrial Parks and Special Economic Zones (SEZs): China has established
industrial parks and SEZs across the country to attract foreign investment and
promote export-oriented manufacturing. These zones offer preferential policies, such
as tax incentives, streamlined regulations, and infrastructure support, to encourage
investment in targeted industries and promote exports.
5. Technology Transfer and Innovation Support: The government encourages
technology transfer and innovation in the manufacturing sector through policies that
promote collaboration between universities, research institutions, and businesses. It
provides support for research and development (R&D) activities, technology
incubation, and intellectual property protection to foster innovation-driven growth in
key industries.
6. Infrastructure Investment: China invests heavily in infrastructure development,
including transportation networks, logistics hubs, and industrial clusters, to support
the manufacturing sector and facilitate exports. Infrastructure investments improve
connectivity, reduce transportation costs, and enhance the efficiency of supply chains,
benefiting manufacturers and exporters.
7. Foreign Trade Zones (FTZs): China has established FTZs in strategic locations, such
as Shanghai, to facilitate international trade and investment. FTZs offer preferential
policies, such as tariff exemptions, streamlined customs procedures, and financial
incentives, to attract foreign investment and promote export-oriented manufacturing.

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8. Trade Agreements and Economic Cooperation: China actively engages in trade
agreements and economic cooperation initiatives with other countries and regions to
expand market access for its manufacturers. Bilateral and multilateral trade
agreements, such as the Regional Comprehensive Economic Partnership (RCEP) and
the China-EU Comprehensive Agreement on Investment (CAI), create opportunities
for Chinese exporters to enter new markets and diversify export destinations.
9. Environmental Regulations and Green Manufacturing: The government promotes
green manufacturing and sustainable development in the manufacturing sector
through environmental regulations, energy efficiency standards, and pollution control
measures. Green incentives and subsidies encourage manufacturers to adopt cleaner
production technologies and reduce environmental impacts, enhancing their
competitiveness in export markets.

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 India – China Trade Brief

The relationship between the two giants of Asia, and the world, has been progressing at a
tremendous pace. On April 1, 1950, India became the first non-socialist bloc country to
establish diplomatic relations with the People’s Republic of China. A Double Taxation
Agreement was signed between India and China on July 18, 1994. The two countries have
also shown interest in taking part in a multilateral trade system as per the WTO
commitments. Today, India and China are top trading partners and maintain significant
economic and bilateral relations.

INDIA-CHINA TRADE
 Bilateral trade between India and China in FY23 stood at US$ 113.83 billion against
US$ 115.83 billion in FY22.
 As of 2022-23, China was India’s third-largest trading partner.
 Bilateral trade between India and China stood at US$ 136.26 billion in the year 2022
and US$ 125.62 billion in 2021 with a growth of 8%.
 In the year 2020, India became the 16th largest trade partner of China.
 In FY23, China had a 13.8% share in India's total imports. India imported goods
worth US$ 715.9 billion from the world, including goods worth US$ 98.5 billion from
China.
 China occupies the 21st position in FDI equity inflows into India with a cumulative
FDI amount of US$ 2.50 billion from April 2000-Spetember 2023.

MAJOR EXPORTED ITEMS FROM INDIA TO CHINA WITH AMOUNT &

QUANTITY

 India exported 4,455 commodities to China in FY23.

 India’s export to China stood at US$ 15.33 billion in FY23 and US$ 21.26 billion in
FY22.

 Major exported items from India to China include iron ore (US$ 1.9 billion), followed
by engineering goods (US$ 1.64 billion), others (US$ 1.25 billion), marine products
(US$ 1.03 billion), and petroleum products (US$ 796 million), etc. April- November
2023.

 India’s export to China stood at US$ 10.29 billion during April-November 2023.

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MAJOR IMPORTED ITEMS BY INDIA FROM CHINA WITH AMOUNT &
QUANTITY

 India imported 7,481 commodities from China in FY23.

 Imports from China to India stood at US$ 98.50 billion in FY23 and US$ 94.57
billion in FY22.

 Major items imported from China include electrical machinery and equipment (US$
19.9 billion), followed by nuclear reactors and parts (US$ 14.9 billion), organic
chemicals (US$ 8.19 billion), plastic and articles (US$ 3.8 billion), and fertilizers
(US$ 1.9 billion) etc. in April- November 2023.

 Imports from China to India stood at US$ 68.01 billion during April-November 2023.

RECENT TRENDS AND DEVELOPMENTS

 On April 1, 2020, India and China marked 70 years of their diplomatic relations.
 In May 2014 India was invited by China to join the Asian Infrastructure Investment
Bank (AIIB) after committing to the ‘Key Elements of AIIB’, to join in the
multilateral negotiations on the MoU for the establishment of AIIB. As of September
15, 2022, 33 projects (25 Sovereign, 11 Non-Sovereign) have been approved for
financing of US$ 8.75 billion.
 New Development Bank (NDB) which has established its office in Shanghai, opened
its India Regional Office in Gujarat International Finance Tec-City in June 2022. India
is the biggest borrower in NDB with 19 projects approved with a commitment of US$
6.92 billion as on August 31, 2022.
 A bilateral meeting between India and China was held at the third G20 Finance
Ministers and Central Bank Governors (FMCBG) meeting at Gandhinagar on July 18,
2023. During the meeting, Union Finance Minister Ms. Nirmala Sitharaman met Mr.
Liu Kun, Minister of Finance, People’s Republic of China. The Ministers discussed
the G20 Finance agenda and the state of their economies, inflation, and trade and
recognized the importance of a good business environment for economic growth and
development.

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INVESTMENTS AND ECONOMIC RELATIONS
The bilateral trade between India and China has grown four-fold in the past decade. The
India-China trade crossed US$ 100 billion for the third consecutive year as it amounted to
US$ 113.83 billion in FY23.

With increasing bilateral trade in the last few years, many Indian companies have started
setting up Chinese operations to service both their Indian and MNC clientele in China. Apart
from this, more than 100 Chinese companies have established offices/operations in India.
Many big Chinese names in the field of machinery and infrastructure construction have won
projects in India and have opened project offices in India.

Top Import Products from India to China

PRODUCTS VALUE
Refined Petroleum $1.95 billion
Iron Ore $1.04 billion
Crustaceans (e.g., shrimp, prawns) $895 million
Organic Chemicals $1.9 billion
Machinery and Nuclear Reactors $1.18 billion
Plastics $347.54 million
Fertilizers $1.33 million
Iron and Steel $532.47 million
Optical, Photo, Technical, and Medical $208.69 million
Apparatus

Top Export Products from China to India

PRODUCTS VALUE
Electrical and Electronic Equipment $30.63 billion
Machinery, Nuclear Reactors, and Boilers $21.72 billion
Organic Chemicals $13.55 billion
Plastics $5.44 billion
Fertilizers $2.34 billion
Optical, Photo, Technical, and Medical $2.21 billion
Apparatus
Iron and Steel $1.98 billion
Vehicles other than Railway or Tramway $1.80 billion

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 Porter’s 5 force Model for Manufacturing Sector in China Country

The Porter's Five Forces model is a useful framework for analysing the competitiveness and
profitability of a market or industry. Here is an overview of the model applied to the
manufacturing sector in China:

1. Threat of New Entrants: The manufacturing sector in China is highly competitive, but it
can still attract new entrants due to its vast market size, low labour costs, and government
incentives. However, new entrants need to overcome significant barriers to entry such as
acquiring licenses, securing financing, building a customer base, and complying with
complex regulations.

2. Bargaining Power of Suppliers: The bargaining power of suppliers in the Chinese

manufacturing sector is generally low due to the large number of suppliers competing for
business. In addition, the government can influence the prices of raw materials through
subsidies, tariffs, and regulations.

3. Bargaining Power of Buyers: The bargaining power of buyers in the Chinese

manufacturing sector is significant due to the availability of many suppliers and intense
competition. Buyers have a wide range of options, and they can demand lower prices, better
quality, and customized products.

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4. Threat of Substitutes: The Chinese manufacturing sector faces a constant threat of
substitutes, such as other countries (e.g., Vietnam, India) and alternative production methods
(e.g., automation, 3D printing). However, China's strong manufacturing infrastructure,
economies of scale, and high-quality standards give it a significant advantage.

5. Rivalry Among Existing Competitors: The Chinese manufacturing sector is highly

competitive, with many local and foreign players competing for market share. Competitors
compete on factors such as price, quality, delivery time, and innovation. Major players tend to
have the advantage due to economies of scale and well-established supply chains.

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 Bilateral Trade Opportunities between India & China Country for
Manufacturing Industry
There are existing trade agreements and initiatives between India and China aimed at
promoting bilateral trade in the manufacturing industry.

1. India-China Free Trade Agreement (FTA): The two countries have signed an FTA
known as the India-China Regional Trade Agreement (RTA). This agreement seeks to
promote trade and investment in various sectors, including manufacturing. It aims to reduce
tariffs and non-tariff barriers, enhance market access, and provide a framework for economic
cooperation.

2. India-China Strategic Economic Dialogue (SED): The SED is a high-level platform that
facilitates discussions between the governments of India and China on economic and trade-
related issues. It includes discussions on enhancing collaboration in areas such as
manufacturing, infrastructure development, and investment promotion.

3. Make in India and Made in China 2025: India's "Make in India" initiative and China's
"Made in China 2025" strategy are both aimed at promoting domestic manufacturing and
enhancing industrial capabilities. While these initiatives are primarily targeted towards
boosting respective countries' manufacturing sectors, they also provide opportunities for
collaboration and partnership between Indian and Chinese companies in the manufacturing
industry.

4. Working Groups and Business Councils: India and China have established various
working groups and business councils to promote trade and investment in specific sectors,
including manufacturing. These groups facilitate regular exchanges and discussions among
business communities, industry associations, and government representatives, creating a
platform for exploring new business opportunities and resolving trade-related issues.

5. Joint Economic Group (JEG): The JEG, established by India and China, focuses on
promoting economic cooperation and addressing challenges in bilateral trade. The group
discusses various sectors, including manufacturing, and explores ways to enhance trade and
investment flows between the two countries.

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 Benefits of Good Trade Relations Between India & China Country
Trade relations between India and China can bring several benefits for both countries. Some
of the key benefits include:
1. Economic Growth and Development: Enhanced trade relations can contribute to the
economic growth and development of both India and China. Increased bilateral trade leads to
higher export revenues, job creation, and investment opportunities, boosting overall
economic output and prosperity.
2. Access to Large Markets: India and China are home to the world's largest populations,
offering a massive consumer base for goods and services. Improved trade relations facilitate
market access, allowing businesses from both countries to tap into these large markets and
expand their customer reach.
3. Diversification of Trade: Strengthening trade ties encourages diversification of trade
portfolios for both India and China. This diversification reduces dependence on a limited
number of trading partners and promotes a more balanced and sustainable trade ecosystem.
4. Technology and Knowledge Transfer: Closer trade relations foster technology and
knowledge transfer between India and China. Collaboration in research and innovation
enables the exchange of ideas, expertise, and advanced technologies, nurturing industrial
development and competitiveness in both countries.
5. Lower Costs and Increased Efficiency: Trade relations promote competition and
efficiency, driving down the cost of goods and services. Access to competitively priced
inputs, raw materials, and intermediate goods from each other's markets can reduce
production costs for industries in both countries.
6. Sectoral Synergies and Cooperation: India and China possess complementary strengths
in various sectors. Collaborative partnerships and trade relations facilitate sharing of
expertise, resources, and experiences, enabling synergies and cooperation in areas such as
manufacturing, technology, agriculture, renewable energy, and infrastructure development.
7. Socio-Cultural Exchanges: Enhanced trade relations not only promote economic
cooperation but also foster socio-cultural exchanges between India and China. Increased
business interactions, people-to-people contacts, and cultural exchanges deepen mutual
understanding, appreciation, and friendship between the two nations.
8. Regional and Global Stability: Strong trade relations between India and China contribute
to regional and global stability. Cooperation and economic interdependence create incentives
for peaceful engagement, conflict resolution, and mutual benefits, promoting peace and
stability in the region.

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 CONCLUSION

1. China's Manufacturing Dominance:

- China has emerged as the world's manufacturing superpower, with its share of global
manufacturing exports rising from just 3% in 1995 to 20% by 2020.
- China has become the central node and core hub of the global value chain (GVC), with its
manufacturing industry playing a crucial role.

2. Participation in Global Value Chains:

- China's manufacturing industry mainly participates in the GVC through backward
linkages, relying on imported intermediate inputs and engaging in processing and assembly
activities.
- However, China is also increasingly participating in the GVC through forward linkages,
exporting more intermediate products and moving up the value chain.

3. Productivity Gains and Reforms:

- The sharp increase in productivity, driven by the market-oriented reforms initiated in
1978, has been the primary driver of China's unprecedented economic growth and
manufacturing success.
- The reforms introduced profit incentives, encouraged the growth of rural enterprises and
small private businesses, and helped unleash a productivity boom.

4. Risks and Challenges:

- Manufacturing in China poses various risks, including intellectual property theft, quality
control issues, supply chain complexities, and regulatory uncertainty.
- These challenges require careful risk assessment and proactive mitigation strategies for
companies considering manufacturing in China.

In conclusion, China's manufacturing sector has experienced remarkable growth and

dominance, driven by productivity gains and market-oriented reforms. However, the sector
also faces significant risks and challenges that companies must navigate carefully when
engaging in manufacturing activities in China.

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 REFERENCES

https://www.ibef.org/industry/manufacturing-sector-india
https://www.india-briefing.com/doing-business-guide/india/why-india/india-s-international-
free-trade-and-tax-agreements
https://journals.openedition.org/chinaperspectives/2853
https://porters-5-forces.blogspot.com/2011/11/porters-five-forces-analysis-china.html?m=1

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