China may outshine India in R&D offshoring

China may outshine India in R&D offshoring

By SiliconIndia   |   Friday, 30 January 2009, 11:43 Hrs   |    8 Comments
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Bangalore: China is likely to be well ahead of India in terms of R&D offshoring as the Chinese government increasingly extends its support to this segment and the country possesses a large domestic market and huge availability of local workforce, finds a study by Zinnov Management Consulting. As per the study, China is planning to invest 2.5 percent of its GDP in R&D by 2020.

The report on 'R&D Globalisation: A China Perspective said that China has declared financial and policy initiatives and tax incentives to encourage R&D offshoring in the country. "Top Indian offshore business destinations today are facing tough competition from cities like Shanghai and Beijing as favoured offshoring destinations," opined Pari Natarajan, CEO, Zinnov.

The Chinese government has exempted income tax for the first two years for new foreign enterprises. "The companies would have to pay only half of the normally levied tax for the next three years. Local State taxes have also been exempted for these companies," the report pointed out. Moreover, the government provides free rentals, subsidized utilities and lease deposit waiver in acquiring property for three years.

"The availability of a huge domestic market in China is also attracting more and more companies to invest in China. IT spends for 2008 alone were about $54 billion, which is more than twice that of India. The centers in China play an important part in product localization for the China market," mentioned Natarajan.
At present the total R&D offshoring market in China is about $7.7 billion. There are 920 multinational companies that have operations in China, compared with 671 in India. The number of captive centers in China is 1,100, compared with 780 in India.

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Reader's comments(8)
1: Padmanabhan, have you been to china?
Posted by:vijay - 31 Jan, 2009
2: chinese meaures for population control and implementation of strict laws hs seen its benefit
bt it will do better if they turn towards capitalism...
Posted by:rahulnair - 31 Jan, 2009
3: Infrastructure is an easily quoted factor and valid too. The real reason, outsiders are reluctant to invest in India is the 'corruption' in politics, bureaucracy and most noticeably in police.

It will be much easier paving more roads and buildings, it will be much harder to make people embrace honesty, good work-ethics, and civic sense............... Jasbeer
Posted by:Jasbeer Singh - 30 Jan, 2009
4: I worked for a chemical company. They were planning to open another plant in China, so being a Canadian of Indian origin,I asked my plant manager that why China and why not India, He said, we need infra-structure, cheap labor cost and government support, which only China can provide.

I remember my small town in India never had any concrete roads and there was only certain time for water and electricity, but we were used to that, and I still love my small town.But perhaps people coming from outside never appreciated that, no wonder we hardly had any visitors.

Similarly until Indians cater the needs of these multi national corporations, they will not fall in love with us just because we are good people.
Posted by:Indo-Canadian - 30 Jan, 2009
5: Nuturally when everything in most of consumer stores of Canada and USA is marked as made in China
Posted by:Ashok Kumar Aggarwal - 30 Jan, 2009
6: Dear Sir

it is really appalling that this so called civilized world is making a comparison with India and China. If you really want to compare, there should also be a freedom of expression quotient estbalished and compared between the two.

The pseudo civilized world is the real villain. Have you ever been to a China factory and seen how the labourers are living and working in those companies? Most of the people are really used like machine with out any freedom and they are mostly paid on piecemeal basis only. More over, most of the chinese exports are products duplicated copying other developed countries products. You will find that in India, people have a lot more freedom, They are all paid based on an organised bargaining system managed by trade unions.
In reality, China is taking away jobs from most of the rest of the world using a method of unfair competition. For some reason the so called civilized world closed its eyes and ears and let this happen. That has really catapulted China far ahead of the rest of the world. Anyway this goes along with the ethical standard of the current world. No matter how somebody makes their money, once they are rich, the society around start to respect them. China is also the same way now. So the real villain is the so called civilized rest of the world. Let us all now sing the Jai China song anyway. Even our Indian politicians who spend their energy, brain power and other influence to steal our resources and invest that in other countrie. I will not be surprised if a number of them alreay have huge investments in China also..
Posted by:Padmanabhan - 30 Jan, 2009
7: China is 10 years behind India in terms of R&D work capabilities and scope. Yes, they are catching up - fast, that is why there is a need for Indian MNCs and Government to take steps that will ensure that our leadership is maintained.
Posted by:Sanyog Chaudhry - 29 Jan, 2009
8: The china - India comparison is never ending why is it that China is always ahead.. ?
Posted by:raghav - 29 Jan, 2009