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Last Updated: Monday, 20 November 2006, 02:26 GMT
Chinese firms find all is not rosy in India
Karishma Vaswani
By Karishma Vaswani
Business correspondent, BBC News, Mumbai

Chinese President Hu Jintao
President Hu's visit is eagerly anticipated.

While having two of the world's fastest growing economies - China and India have also shared many years of mutual mistrust.

Trade between the two nations is expected to touch $20bn this year and Chinese investors are now rushing into India - lured by the country's growing wealth.

But it is a relationship that is fraught with tension.

Until recently most of the trade between India and China takes place across the sea - with few land routes between the two nations.

The countries have been nurturing economic ties and the Himalayan border crossing was opened last year after 44 years of closure.

Furthering their economic relationship will be high on the agenda when Chinese president Hu Jintao arrives in India on Monday - the first time in the last decade that a Chinese leader has visited the South Asian nation.

But while the sentiment for closer relations may be there, some Chinese firms already based in India say that things are not going as smoothly as they could be.

'Not easy'

Chinese technology firm Huawei sells communications equipment around the world and is on a big expansion drive in India.

More than 1,000 people work at its research and development facility in Bangalore.

And while it has also invested in the staff it has brought from China - providing a Chinese chef, television channels from China and even table tennis facilities - about 95% of its staff are Indian.

But Huawei says that expansion has not been easy - obtaining visas for its Chinese engineers to work on long-term projects in India being a particular challenge.

A computer market in New Delhi
Foreign firms are eyeing up India's increasingly wealthy consumers

"We only manage to get visas for a few months, and then we have to send our workers back to China again," a company spokesman said.

"It's very difficult to get teams from China the right to stay here for a longer period of time. It disrupts our working patterns, as many engineering projects need to be seen through until the end."

Reliance Industries, India's largest company outside of government control, reports similar problems.

It has been negotiating with Indian officials to obtain visas for 1,800 Chinese workers for a gas pipeline project.

According to Indian media reports, when Reliance approached the Indian home ministry to sanction the visas, they were met with objections from officials, citing security concerns.

Rumours

Management at Huawei also feels that issues over security are hampering its progress - largely stemming from allegations, in 2001, that it was accused of working for Pakistan and the then Taleban government in Afghanistan.

Huawei denies this, and has been cleared of these charges by the state government of Karnataka, where its main headquarters are based.

But five years on, it is hard to shake off the rumours.

Trying to get a manufacturing licence in India is also proving tough. Huawei has applied twice in the last two years but is yet to hear back from India's Foreign Investment Promotion Board.

Indian Commerce Minister Kamal Nath
China is not receiving any unfair treatment. We treat their firms the way we treat everyone else
Kamal Nath
Indian trade minister

"We cannot wait forever," the spokesman said.

"We've invested over a 100 million dollars in India, and we'd like to invest more but we have encountered extensive delays in processing of approval for our manufacturing facility early this year.

Also unsettling the firm are rumours that the Indian government may draft a law, which would open investments from countries deemed as a security threat, to increased scrutiny.

China, as well as Taiwan, Pakistan, North Korean and Middle Eastern nations would be likely to be on the list.

But India's Commerce and Trade Minister Kamal Nath insisted that India's security considerations in terms of investment are no different from those of other big nations.

"We aren't doing anything different to America," he said, adding that security considerations were sector - and not country-specific.

We found out that Indian families don't like to eat leftovers, so are unlikely to freeze food for the next day
Pranab Dabhai, Haier Technologies

"Ports and telecommunications - those are areas that are nationally sensitive to any nation," Mr Nath said.

"China is not receiving any unfair treatment. We treat their firms the way we treat everyone else."

Challenge

One of China's most well-known consumer electronics brand, Haier Technologies, said it had experienced no major difficulties in doing business in India.

It is there to sell its refrigerators, television sets and washing machines to India's fast growing middle class and said its main battle was fighting the perception that Chinese goods were cheap, but of low quality.

Another challenge was localising its products to the Indian market - which has thrown up some interesting changes in the designs of some products

"For example, our refrigerators that you buy here will have the freezer section on the bottom instead of the top," chief operating Officer Pranab Dabhai said.

"We found out that Indian families don't like to eat leftovers, so are unlikely to freeze food for the next day."

He added: "We've now built up trust and a brand equity with our Indian customers.

"I'd go so far as to say they don't think of us as a Chinese brand anymore - but as a global brand."


SEE ALSO
Country profile: China
24 Aug 06 |  Country profiles
Country profile: India
01 Nov 06 |  Country profiles

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