Growing Footprints

of Indian Companies
in China

Survey-based Report
February, 2018
Introduction

“Growing Footprints of Indian Companies in China”, is a survey-based report of 54

Indian companies focused on their investments and operations in China. The report
has been developed and published in collaboration with Confederation of Indian
Industry (CII).
The survey was designed and administered by CII. Evalueserve has collated and
analyzed the responses received. The results provide insights into the locations,
business activities, investments-made, performance of the 54 Indian companies in
China etc.
The research covers the 54 Indian companies operating in China, which have
presence across multiple industries such as manufacturing, healthcare and
financial services. It is a diversified set with their unique perspectives.
The first section of this report covers present status of operations,, expectations of
business performance and investment plans in 2018 for these participating
companies; more importantly it looks at what it takes to run businesses successfully
in China.
The second section covers insights and analyses of the business operations. It tries
to look at different factors which impact businesses in China and its interplay with
other parameters.
Three points of note:
1. This report is solely based on the responses received from Indian companies. It
does not necessarily represent the views of CII or Evalueserve.
2. This report presents a snapshot of the opinions at a certain point of time. In
order to glean more in-depth insights, there is a requirement to collect this data
over time.
3. The respondents have been kept anonymous.
We would like to thank all the companies that have participated in the study. We are
also thankful for the contribution they have made to Chinese and Indian economy.
Section - 1
Respondent Profile
Respondent profile – Operational Presence in China (1/7)
54 respondent companies collectively cover whole mainland China with
their operation centers

Number of companies with their operations in

respective provinces

Less than 5

5-10

Over 10

Most of these companies surveyed are present in eastern China.

Shanghai is the most popular investment destination among the 54

companies surveyed, with about 76% investing here. Other cities/provinces
where operations are clustered include Beijing, Jiangsu, Guangdong, and
Zhejiang
Respondent profile – Headquarters (2/7)
~30% of the survey-participants have headquarters in Mumbai; ~37% are
involved in manufacturing followed by 17% in healthcare

Number of companies with their headquarters (holding company)

18 16
16
14
12
10
8
6
5 5
4
3 2 2 2
2
1 1 1 1 1 1 1 1 1 1 1
0

Most of the companies have headquarters across cities in India, mainly

in Mumbai, Bangalore, and Hyderabad. Some of them have headquarters
in other countries, such as the US, Singapore and even China.

Indian origin companies: sector diversification*

25
20
20
15
10 9
10 6 5 4
5 3 2 2 1 1 1 1 1 1 1 1 1 1
0

Indian origin companies in China have presence across multiple

industries, among the respondents, with majority in manufacturing (37%),
followed by healthcare (19%), financial services (17%), IT&BPO (11%),
telecommunications (9%), logistics (7%), and business consulting (6%).
*includes companies with multiple sector-presence as well.
Respondent profile – Type of entity and number of employees (3/7)
As their operations expanded, majority of respondent companies increased
their employee count in China and changed their entity type with time

Changes in Type of entity

Present Status
At start-up
(2017) • More than half of the
Joint Joint respondent companies
Ventur
e
Ventur chose to establish a
e
5% Branc4% representative office when
Other h
WOFE 4% Office Other they first started operations
5% 7%
39% in China.
WOFE
54%
• Once they gained a foothold
in China, some of the
Repre
Repre
sentati companies changed their
sentati
ve
ve entity status to wholly
office
Office
52%
30% owned foreign enterprise
(WOFE) or branch office.

Changes in employee numbers

Present Status
At start-up
(2017)
• Around 90% of the survey
participants had less than 300-
1999 2000- 1000-
50 employees in China 2% 9999 5000
2%
when they first entered the 4% >5000
2% less
country. 50-299 300-
than
7% 999
13% 49
• As of 2017, around 56% of 44%
these companies had more 50-299
less
than 50 employees, than 37%
including three companies 49
89%
with more than 1,000
employees.
Respondent profile – Self-assessment on business performance
(4/7)
About 54% of the survey participants registered y-o-y growth in 2017 and
all of them expect their revenue-growth to be the same or better in 2018

Revenue comparison between 2017 and 2016*

• Compared with that in 2016, the

Substanti performance of 91% of the companies
ally Almost
Higher the same
was either stable or positive.
(>15%) (-2% to
26% 2%) • ~ 57% of the manufacturing companies
37% rated their revenue ‘substantially higher’,
Lower (-
3% to
while 80% of the companies related to
15%) healthcare, pharmaceuticals, and life
9%
sciences rated their revenue ‘almost the
Higher same’ or ‘higher’ compared with that in
(3% to
15%) 2016.
28%

Profitability assessment for 2017

• For 2017, only 13% of the survey participants

reported losses from their business in China.
More than half of the companies considered
their business profitable or very profitable. loss
13%
Very
• Out of the 30 companies that considered their Profitable
Break-
even
business profitable or very profitable, 12 of 2% 33%
them earned revenue exceeding RMB 100
million in 2017.
profitable
• Very few of the responding manufacturing 52%
sector companies recorded losses in 2017.
Out of the 20 companies, 17 registered profit
or reached break-even in 2017.

*Answer to the question asked as - How does your company's expected revenue in China in 2017 compare to that in 2016?
** Answer to the question asked as - How profitable do you consider your China Operation in 2017?
Respondent profile – Investment plans for 2018 (5/7)
About 44% of the surveyed companies plan to increase their investments
in their operations in China for 2018

Initial investment at start-up stage

RMB 25-<50
Million
13% RMB 0 -<1
Million
30%
RMB 10-<25
Million
13%

RMB 1-<2.5
RMB 5-<10 Million
Million RMB 2.5-<5 14%
20% Million
10%

Investment plan for 2018*

Decrease or Increase by 1%
close operations to 10%
3% 17%

Increase by
11% to 20%
Stay the same 14%
50%
Increase by
21% to 30%
5%

Increase by Increase by 31
50% and above to 50%
8% 3%

Out of the 36 survey participants (67%) that expect their business to be

better than in the previous year, 50% plan not to invest more in 2018,
while 17% plan to invest 10% more than they did the previous year.

*Answer to the question asked as - What investments do you plan for 2018 in China?
Respondent profile – Factors for success in China (6/7)
More than 60% of the survey participants have claimed three key factors
of success in China: quality, relationship with Chinese authorities and
local workforce

Factors for success in China*

25%
20%
15%
10%
5%
0%

• Among the respondents, 35 (65%) regarded the quality of products and services
and a strong management team as the most important factors for success in
China.
• The companies claimed that Guanxi or networking is also important.

Resources allocated for Chinese authorities

Less
• Among the 54 companies, over 9%
70% claimed they would be More
allocating the same or even The same
19%
more resources to build or 46%

keep good relationship with

Chinese authorities. Much less
20%
Much more
6%

Percentage (%) of Local Workforce (Chinese Employees)

0%
13%
• As of December 31, 2017, out of 54
0-50% respondent companies, 41 (76%) had
11% over 50% of their employees hired
locally.

> 50%
76%

*Answer to the question asked as - What are the top 5 most important factors for your company’s success in China?
Respondent profile – Future Outlook for Business in China (7/7)
~77% Indian companies which participated in the survey are positive
about their business growth in China

Business performance confidence for future*

For 2018 For the next 5 years

Not • ~80% of the respondent
confi
Confi
dent
companies are confident about
Neutr dent Neutr
al 63% al 2% their operations to be successful in
24% 18% the next five years.
• Companies involved in
manufacturing are most confident
Confi
about their future performance. ~
Extre Extre dent 80% have a positive attitude
mely mely 67%
confid confi toward the possibility of future
ent dent success in China, both for next
13% 13%
year and the next five years.

Business-growth outlook for 2018**

Worse
than • Most of the respondent companies
2017
Same as 2% (43 of 54) are optimistic about their
2017 business and expect to see growth in
16%
Much
2018.
better
than
• Only 1 company (in the healthcare
2017 sector) is pessimistic about its growth
15% prospects in 2018.
Better
than
2017
67%

*Answer to the two separate questions asked as - How confident are you that your operations in China will be successful in the
next one year? In the next 5 years?
** Answer to the question asked as - How do you expect your company's businesses to perform in 2018, as compared to 2017?
Section - 2
Insight and Analysis
Insight and analysis – years in business, initial investment,
profitability (1/5)
Out of all companies which are older than 10 years, more than 50% of
them are profitable

Years in business and Profitability*

100% 8 15 19 8
(N = 50 companies responded)
# of companies profitable

80%
63% 63%
60% 53%
47%
40%

20%

0%
≤5 ≥6, ≤10 ≥11, ≤15 ≥16
Years in business
Profitable Non-profitable
Most respondents at the initial start-up stage ( ≤ 5 years experience) are
generally profitable. Companies that are 6–10 years old tend to be less
profitable, with more than half of them reporting either loss or break-even
in 2017.

Initial Investment and Profitability*

26 4 6 5
100%
(N = 41 companies responded)
# of companies profitable

80% 67% 100%

60% 50%
42%
40%

20%

0%
≤25 ＞25, ≤50 ＞50, ≤100 ＞100
Initial investment (in RMB Million)
Profitable Non-profitable
Among the survey participants, companies that invest more capital at the
initial stage of establishing their operations in China tend to be more
profitable than those that invest less. All companies that invested more
than RMB 100 million in the initial stage reported profit. On the other
hand, around 58% of the companies that invested less (≤ 25 million)
found to be reporting break-even or loss in 2017.

*Includes answers to the question asked as - How profitable do you consider your China Operation in 2017?
Insight and analysis – Revenue and performance confidence (2/5)
Most respondent companies in telecommunications and IT & BPO sectors
registered revenue growth in 2016–2017; most companies in the
manufacturing sector are confident about their performance in 2018

Revenue comparison between 2016 and 2017

Telecommunication 67%

IT & BPO 67%

Manufacturing 57%

Financial Service 44%

0% 15% 30% 45% 60% 75%

Two-thirds (~67%) of the manufacturing companies that registered growth

in 2017 are expecting a growth rate higher than 15% in 2018. Only half of
the companies that registered growth in telecommunications and IT & BPO
industries are expecting growth at this rate.

Business performance confidence for 2018*

Manufacturing 81%

Telecommunication 67%

IT & BPO 67%

Financial Service 56%

0% 20% 40% 60% 80% 100%

Among the respondents in telecommunications and IT & BPO sectors

that are expecting growth in 2018, 25% are ‘extremely confident’ about
their performance in 2018. However, none of the companies in the
financial services sector is ‘extremely confident’.

*Answer to the question asked as - How confident are you that your operations in China will be successful in the next one year?
Insight and analysis – Profitability and investment plan (3/5)
The profitability of respondent companies varied slightly with different
sectors; the financial services sector has the least number of companies
planning to make additional investment in 2018

Profitability in 2017
100%
# of companies profitable

80%

60%

40%

20% 50% 50% 48% 44%

0%
IT & BPO Telecommunications Manufacturing Financial Service
Established Years
Profitable Non-profitable
The percentage of profitable companies within different industries was
almost similar in 2017.

Investment plan for 2018

100%
# of companies profitable

80%

60%

40%

20%
52% 50% 50%

0% 11%
Manufacturing IT & BPO Telecommunications Financial Service
Established Years
Investment Plan for 2018

Around 50% of the companies surveyed in manufacturing, IT&BPO, and

telecommunications industries plan to make additional investment in their
operations in China in 2018. However, only 11% of financial service
companies plan to invest more.
Insight and analysis – Internal and external challenges (4/5)
Indian companies in China have cited facing multiple challenges; more
than 70% of respondents rated ‘finding and retaining talent’ as their top-
most management challenge

Major External Challenges in China*

40 36 33 31
30 26
23 21
20 16 15
10 6
0

Among the 54 companies, about two-thirds of the them reported

increasing labor cost as the primary external challenge. While 60%
considered competition as one of the major external challenges, only
around 16% considered it as a primary challenge.

Major Management Challenges in China**

40
38
30 25
20 14 13 11 10 7 7 7
10 6
0

Other primary challenges reported include obtaining required licenses,

service and material quality, corporate governance, and distribution
problems. Around 46% found ‘understanding regulation’ an important
management challenge, though none of them has rated this point as a
topmost challenge

*Answer to the question asked as - What are the greatest external challenges faced by your company in China? (Choose max 5)
**Answer to the question asked as - What are the greatest management challenges faced by your company in China? (Choose
max 5)
Insight and analysis – Working with local partners (5/5)
About two-thirds of the respondents perceived collaborating with local
partners as important for business success in China

Importance of working with local partners

Not important 5

Less important 12

Important 21

Extremely important 16

0 5 10 15 20 25

Ease of working with local partners

Very easy 4

Easy 21

Difficult 28

Very difficult
1

0 5 10 15 20 25 30

Among the companies surveyed, about two-thirds cited that cooperating

with local partners is important for doing business in China. However,
more than half recognized that such collaborations as a difficult task. The
major challenges stated were related to communication and language
gap, government regulations, uneven understanding/expectation, trust
issues, cultural differences, etc.
About CII

The Confederation of Indian Industry (CII) works to create and sustain an environment conducive to the
development of India, partnering industry, Government, and civil society, through advisory and consultative
processes.

CII is a non-government, not-for-profit, industry-led and industry-managed organization, playing a proactive role in
India's development process. Founded in 1895, India's premier business association has over 8,500 members, from
the private as well as public sectors, including SMEs and MNCs, and an indirect membership of over 200,000
enterprises from around 265 national and regional sectoral industry bodies.

CII charts change by working closely with Government on policy issues, interfacing with thought leaders, and
enhancing efficiency, competitiveness and business opportunities for industry through a range of specialized
services and strategic global linkages. It also provides a platform for consensus-building and networking on key
issues.

Extending its agenda beyond business, CII assists industry to identify and execute corporate citizenship
programmes. Partnerships with civil society organizations carry forward corporate initiatives for integrated and
inclusive development across diverse domains including affirmative action, healthcare, education, livelihood,
diversity management, skill development, empowerment of women, and water, to name a few.

As a developmental institution working towards India's overall growth with a special focus on India@75 in 2022, the
CII theme for 2017-18, India@75: Inclusive. Ahead. Responsible emphasizes Industry's role in partnering
Government to accelerate India's growth and development. The focus will be on key enablers such as job creation;
skill development and training; affirmative action; women parity; new models of development; sustainability;
corporate social responsibility, governance and transparency.

With 67 offices, including 9 Centres of Excellence, in India, and 11 overseas offices in Australia, Bahrain, China,
Egypt, France, Germany, Iran, Singapore, South Africa, UK, and USA, as well as institutional partnerships with 355
counterpart organizations in 126 countries, CII serves as a reference point for Indian industry and the international
business community.

The Confederation of Indian Industry

The Mantosh Sondhi Centre
23, Institutional Area, Lodi Road, New Delhi 110003, India
Tel: +91-11-24629994-7, Fax: +91-11-24626149;
Email: info@cii.in, Web: www.cii.in
 About Evalueserve

Our history

Quick facts Employee base

• Staff of more than 3,500 professionals worldwide
• Our global clients include Since our inception in 2000, we have steadily grown
– More than 100 of the global Fortune 500 our operations to more than 3,500 employees across
the globe.
– 8 of the top 10 global investment banks
– 3 of the 6 oil and gas supermajors
15 years of success

– 12 of the 15 largest pharma companies in the world

– 3 of the top 5 strategy consultancies
• We also serve many large- and mid-sized firms across 40 240 1,400 3,500+
verticals such as energy, chemicals, ICT, transportation,
and consumer goods.

2001 2003 2006 2017

Our locations

sumeet.chander@evalueserve.com
Office: +86 21 2602 7000 (Extn. 7111)
Mobile: +86 18101795752
 CII & Evalueserve Disclaimer

Without limiting the rights under the copyright reserved, this publication or any part of it may not be translated,
reproduced, stored, transmitted in any form (electronic, mechanical, photocopying, audio recording or otherwise) or
circulated in any binding or cover other than the cover in which it is currently published, without the prior written
permission of CII and Evalueserve.

All information, ideas, views, opinions, estimates, advice, suggestions, recommendations (hereinafter ‘content’) in this
publication should not be understood as professional advice in any manner or interpreted as policies, objectives,
opinions or suggestions of CII and Evalueserve. Readers are advised to use their discretion and seek professional
advice before taking any action or decision, based on the contents of this publication. The content in this publication
has been obtained or derived from sources believed by CII and Evalueserve to be reliable but CII and Evalueserve do
not represent this information to be accurate or complete. CII and Evalueserve do not assume any responsibility and
disclaim any liability for any loss, damages, caused due to any reason whatsoever, towards any person (natural or
legal) who uses this publication.

This publication cannot be sold for consideration, within or outside India, without express written permission of CII and
Evalueserve. Violation of this condition of sale will lead to criminal and civil prosecution.

Published by

i) Confederation of Indian Industry (CII) China Office, Room 11A47/49, Shanghai Mart, No. 2299 Yan'an Road
(West) Shanghai 200336, Tel: +86-21-62360969, Fax +86-21-32283510; Email: madhav.sharma@cii.in; Web:
www.cii.in;

ii) Evalueserve, 6th floor,Huatsing Building,No.88,777 West Guangzhong Road, Shanghai 200072, China,Tel:
+86-21-26027000, Fax:+ +86-21-66316188; Email: sumeet.chander@evalueserve.com; Web: www.evalueserve.com

“Copyright © (2018) Confederation of Indian Industry (CII) and Evalueserve. All rights reserved.
THANK YOU!