Chinese Economic News & Discussions

[Brotherhood]

High-speed trains reshape nation's transport landscape - People's Daily Online January 12, 2011

The rapidly expanding high-speed rail network will increase the pressure on the country's roads in the coming holiday travel peak period and has already forced airlines to quit some short-distance routes, officials said on Tuesday.

Some 5,149 km of high-speed track were put into service last year, making the network stretch to 8,358 km, the world's longest, the Ministry of Railways said.

But the opening of more fast train services has led to fewer regular trains being available for budget-conscious passengers in the upcoming Spring Festival holiday period, Ministry of Transport spokesman He Jianzhong said on Tuesday.

The railway ministry has added luxury services to bullet trains on several routes, hoping to provide more diversified service.

For example, a luxury sleeper service was added between Shanghai and Chengdu, capital of Sichuan province, with tickets costing up to 2,330 yuan ($352).

But many travelers cannot afford the tickets, causing a waste of transport capacity.

According to a report in the Shanghai-based Oriental Morning Post on Tuesday, hundreds of soft berths on bullet trains between Chengdu and Shanghai will be vacant, although cheaper tickets have sold out.

He Jianzhong said this year the situation had pushed many passengers, who used to ride home by slow trains because of the cheap tickets, onto long-distance buses.

This extra traffic will add pressure to the road transport system during the travel peak season, He said.

The Ministry of Transport estimated that a record high of 2.6 billion bus passenger trips will be made during the peak time between Jan 19 and Feb 27, an increase of 11.6 percent on the same period last year.

The transport sector plans to increase capacity to handle the extra traffic. A total of 840,000 buses, including 70,000 added this year, will hit the road during the travel peak, making 2.4 million road trips a day, he said.

While giving away some passengers to road transport, the high-speed railways, at the same time, have attracted more affluent travelers from the airlines.

Wang Changshun, deputy head of the Civil Aviation Administration of China, told a conference on Tuesday that the fast trains have forced some airlines to cancel short-distance flights along high-speed rail lines.

For example, the Wuhan-Guangzhou high-speed railway, where every few minutes trains zip between the two cities via Changsha, capital of Central China's Hunan province, has carried 20.6 million passengers in the year since its opening in December 2009.

During that period the number of flights between Changsha and Guangzhou has been cut from an average of 11.5 flights a day to three flights a day, he said.

Hainan and Shenzhen airlines decided to withdraw from the market, leaving only China Southern Airlines carrying the three daily flights, Wang said.

The ticket price for those flights also dropped by 15 percent to attract travelers, but still the number of passengers flying between Changsha and Guangzhou dropped by 48 percent to 390,000 during 2010, he said.

"The opening of the Beijing-Shanghai high-speed line next year will be another blow to the air transport industry," Wang said, without forecasting how serious the impact will be.

Airlines have been urged to cut costs, reduce delays and seek cooperation opportunities with high-speed railways.

Tan Zongyang contributed to this story.

By Xin Dingding, China Daily

 

[Brotherhood]

China's foreign exchange reserves top 2.8 trillion USD in 2010 - People's Daily Online January 12, 2011

The People's Bank of China, China's central bank, reported on Tuesday that China held 2.85 trillion U.S. dollars worth of foreign exchange reserves at the end of 2010, a year-on-year increase of 18.7 percent.

With 199 billion U.S. dollars of new foreign exchange reserves, the fourth quarter of 2010 witnessed the highest rise of the year. The quarterly increases were 47.9 billion U.S. dollars, 7.2 billion U.S. dollars and 194 billion U.S. dollars for the first, second and third quarters, respectively.

At the end of 2010, the Chinese currency was valued at 6.6227 yuan against the U.S. dollar, an appreciation of 3 percent.

New yuan-denominated bank loans were 7.95 trillion yuan in 2010, which exceeded the ceiling of 7.5 trillion yuan set by the central bank. Banks are expected to be more cautious on new credit grants in 2011 in the context of the country's tightening monetary policy.

The new yuan-denominated deposits are registered at 12 trillion yuan in 2010, which is 2 trillion yuan less than the total of new deposits in 2009.

By Li Jia, People’s Daily Online

 

[Martian2]

Here is an news article of WSJ. What do you make of it? for me two things stand out:

- The USA wont be restricted by the OECD rules when dealing with trade with china, challenging china´s trade pratices;

- US Congress´s foreign affairs committe is considering holding hearings about china´s "hot topics" DURING hu´s visit. If that happens, it will be a major embarrassment to hu. IMO, its like saying: we open the doors to you, but your not welcome.

U.S. Ex-Im Bank Tests New Financing Model in Challenge to China - WSJ.com

Lets see how all of this turns out.

1. The prospect of the U.S. Congress talking tough about China is nothing new. It has been happening for as long as I can remember. I think the Chinese government is used to it. Look on the bright side, things have improved considerably. Unlike the Korean War in the early 1950s, the U.S. is no longer talking about nuking China.

2. Pakistan is hardly a good test of whether the U.S. can match China's prowess in foreign markets. Pakistan receives billions of dollars in U.S. foreign military and economic aid.

3. The fundamental problem is that the United States cannot match the China Price for expensive and sophisticated industrial goods. If you were the leader of a country, would you pay premium prices for American railcars, construction equipment, highways, dams, etc.? Or would you rather obtain the same products from China at prices that are "30% to 50% cheaper than the GE products?"

Here is the conundrum: How do you compete against a country that possesses first-world technology (e.g. Chinese spacewalk, world's-fastest 380 kph trains, world's-fastest supercomputer, world's-largest Three Gorges Dam, etc.) and can manufacture them at developing-world prices? Quite frankly, I have no idea on how to solve this challenge.

----------

From the Wall Street Journal link that you provided:

"Pakistan had indicated its interest in buying locomotives made by GE if the U.S. matched China's financing terms, which were sweeter than those allowed by the OECD agreement. The Chinese railcars were 30% to 50% cheaper than the GE products, but U.S. officials said Pakistan wanted the American equipment.

"The underlying premise has been that we ought to let products compete on their own merits, their own quality, their own value, and not let financing be a distorting factor," Mr. Hochberg said. China, not an OECD member, has long operated outside the group's agreed-upon terms. "Tolerance of that began to wear thin over the last 18 months," Mr. Hochberg said."

 

[Brotherhood]

Hong Kong ranked as world's freest economy (3) - People's Daily Online January 12, 2011

Hong Kong has been ranked the world's freest economy for the 17th consecutive year in the 2011 Index of Economic Freedom rankings released by the Heritage Foundation and Wall Street Journal Wednesday. (Xinhua/Huang Xiaoyong)

Photo taken on Jan. 12, 2011 shows the Monument of Hong Kong's Return to China next to the Hong Kong Exhibition Center.

Photo taken on Jan. 12, 2011 shows the Golden Bauhinia Square in south China's Hong Kong.

 

[Brotherhood]

China open to joining UK in high-speed rail cooperation - People's Daily Online January 13, 2011

China holds a "positive attitude" toward cooperation with Britain on British high-speed rail projects, said Gao Hucheng, China’s vice Minister of Commerce, who is in London as a member of Chinese vice premier Li Keqiang's delegation to Britain.

Gao said British Prime Minister David Cameron invited China to join British infrastructure projects, including high-speed rail.

In response, China has also expressed willingness to promote cooperation on high-speed rail on the basis of reciprocity.

Gao said China has 8,358 kilometers of high-speed rail in operation and more than 10,000 kilometers under construction. The link between Beijing and Shanghai, which will feature trains running at speeds of 380 kilometers per hour, will start operation in June this year.

He also stressed that China has developed the world's leading high-speed rail technology and a huge domestic market demand.

By Li Jia, People’s Daily Online

 

[Brotherhood]

China high-speed rail zooms past old record at 487 km per hour - People's Daily Online January 13, 2011

The newly developed CRH380BL high-speed train hit a record high speed at 487 kilometers per hour during the test run at the Shanghai-Beijing high-speed railway pilot section on Jan. 9.

According to news from the China Northern Locomotive and Rolling Stock Industry Group (CNR), the CRH380BL high-speed train ran smoothly at a speed of 487 kilometers per hour. All parts operated normally and it made little noise.

The train narrowly edged out the previous record of 486.1 kilometers per hour, which was made by the CRH380A, a high-speed train also developed by CNR.

Sun Bangcheng, an engineer from CNR, said that the CRH380BL, the new generation of high-speed train in China, was completely researched and developed by the group. The train adopted 10 technical innovations, including a streamline locomotive with low air-resistance, excellent body vibration mode and high air-seal intensity carriages.

Its operating speed, safety and reliability, comfort, energy saving capacity and life cycle costs all reached a leading level in the world, the engineer said.

It was reported that to meet the transportation demand, the CRH380BL high-speed train was formed by 16 long carriages with a combined loading capacity of 1,004 persons. It is expected to be mass produced and become the main train model running on China's high-speed rail networks in the future.

By Li Mu, People's Daily Online

 

[Brotherhood]

Chinese yuan among world's safest currencies - People's Daily Online January 14, 2011

The Chinese yuan is "one of the safest currencies in the world," global investment expert Jim Rogers said Wednesday.

Speaking on an occasion at the well-known Union League Club of Chicago, the chairman of Rogers Holdings recommended that global investors hold the Chinese yuan, or renminbi.

Citing China's extraordinary economic growth in the past 30 years, he said that China is "changing the world already" and "will continue to change the world."

Turning to the US dollar, he said that the American currency has now been reduced to "a terribly flawed alternative," with the United States being "the largest debt nation in history."

The legendary investor also lashed out at the United States' second round of quantitative easing, saying that it was "totally wrong" for the Federal Reserve to print a large amount of money.

Source: Xinhua

 

[Brotherhood]

Taizhou Yangtze River Bridge under construction - People's Daily Online January 14, 2011

On Jan. 13, the two main cables of the Yangtze River Bridge in Taizhou of eastern China's Jiangsu Province were completed after three months of construction. The Taizhou Yangtze River Bridge has two 1,080-meter-long main spans and a 3,117-meter long main cable, the longest of its kind in all of China. It was also the first suspension bridge to have three towers and two spans in the world. (Photo by Gujun/Chinanews.com)

 

[Martian2]

Chinese yuan among world's safest currencies - People's Daily Online January 14, 2011

The Chinese yuan is "one of the safest currencies in the world," global investment expert Jim Rogers said Wednesday.

Speaking on an occasion at the well-known Union League Club of Chicago, the chairman of Rogers Holdings recommended that global investors hold the Chinese yuan, or renminbi.

Citing China's extraordinary economic growth in the past 30 years, he said that China is "changing the world already" and "will continue to change the world."

Turning to the US dollar, he said that the American currency has now been reduced to "a terribly flawed alternative," with the United States being "the largest debt nation in history."

The legendary investor also lashed out at the United States' second round of quantitative easing, saying that it was "totally wrong" for the Federal Reserve to print a large amount of money.

Source: Xinhua

The graph contains an error that may cause confusion. It should say the "Long-term exchange rate had been Yuan 8.26" in the upper-left corner of the illustration.

 

[pulsar220]

China has $1.5 trillion in hidden debt

Billions of dollars of debt racked up by local Chinese governments during their investment sprees are likely to sour as the projects they finance near completion, Yin Zhongqing, a prominent Chinese lawmaker, said this week.



In an interview with Reuters Insider, Yin said local governments had incurred at least 10 trillion yuan ($1.5 trillion) of "hidden" debt, which they have concealed by creating thousands of investment vehicles that serve as borrowers.

Yin said it is not yet clear which loans will sour because they do not have to be repaid until the projects are completed.

"The large amount of debt that local governments took on since the end of 2008 to battle the impact of the global financial crisis will become a heavy burden for our development going forward," said Yin, who is a member of the finance and economic affairs committee in China's parliament.

He highlighted the high risk of default in the low-level county governments, which Yin said have little financial resources.

"Seventy percent of the loans from these investment and financing platforms in 2009 and 2010 were generated at the county level, where governments don't have much assets, and some cannot even afford to pay their staff," he said.

"Debts accumulated from these platforms, even with government financial guarantees, simply cannot be paid back. In other words, when they borrowed the money, local governments did not plan to pay it back."


More from CNBC.com
China Raises Banks' Required Reserves AgainChina Guides Yuan to New High Ahead of US SummitChina Leaders Emphasize Fighting Inflation in 2011
Local Chinese governments are barred by law from borrowing directly. To pay for their ambitious growth plans for cities, they set up investment vehicles that take out bank loans backed by assets - typically land - or implicit government guarantees. They do not show up in official central government debt accounts.

But Yin said these debts will ultimately have to be written off by Chinese banks and Beijing. "In 2009 and 2010, we encouraged them (local governments) to increase debt and run deficits to stimulate investment. Local governments' debt problems will come to light in 2011," Yin said.

He said local Chinese governments were still pursuing breakneck growth rates despite pleas from Beijing to slow down to let the economy tread a more steady and sustainable path.

"We need to use macro controls to pull it back and lower it to a reasonable level," Yin said.

While the problem of "hidden" debt among local governments is not new to China, its massive three-year stimulus programme in the wake of the 2008 financial crisis exacerbated the issue.

China's bank regulator estimated last year that local governments have racked up 7.66 trillion yuan in debt as of June 2010, of which 26 percent is unlikely to be repaid.

But the regulator put a brave face on the problem by saying the risks are under control since most loans can eventually be repaid using income earned from their investment. It also said banks are well protected against defaults because they have already set aside adequate provisions.

Yin warned against complacency, however, and said China's debt ratio was much higher than what official data suggests.

Beijing has said its fiscal deficit will fall below 2.2 percent of gross domestic product (GDP) in 2010, while its total debt will be less than 20 percent of GDP.

"China's rapid development has covered up many problems. But once economic growth slows down, these problems will emerge as stones rise when water levels fall," Yin said.

News Headlines

 

[Brotherhood]

China gets first overseas order for LNG ships - People's Daily Online January 16, 2011

China State Shipbuilding Corporation (CSSC) signed a contract with Exxon Mobil and Mitsui & Co., Ltd on Saturday to build four LNG ships (liquefied natural gas), the nation's first overseas order for such an advanced carrier.

Hudong-Zhonghua Shipbuilding (Group) Co., Ltd, a subsidiary of CSSC, will build the ships for Mitsui, a Japanese shipping giant.

The ships are scheduled for delivery between 2015 and 2016. The fleet will be used for shipping China's imports of liquefied natural gas from Australia and Papua New Guinea.

In 2009, Exxon Mobil contracted with China's major oil and gas producer PetroChina and refiner Sinopec to transport exports about 425 tonnes of liquefied natural gas per year.

A liquefied natural gas carrier is a tanker ship designed for transporting liquefied gas at a temperature of minus 163 degrees Celsius, and marks an important part in the LNG supply chain.

Only a handful of nations, such as the United States, Japan and the Republic of Korea, have the ability to build such ships.

Hudong-Zhonghua Shipbuilding (Group) Co., Ltd. is China's only LNG ship builder. Its first ship was delivered in April 2008. It has completed 5 vessels, with one still under-construction.

The company did not disclose the price of the vessels.

Tan Yajun, general manager of CSSC, said the company would strive to deliver the ship with high quality craftsmanship and on schedule.

Source: Xinhua

 

[xixi]

China has $1.5 trillion in hidden debt

Billions of dollars of debt racked up by local Chinese governments during their investment sprees are likely to sour as the projects they finance near completion, Yin Zhongqing, a prominent Chinese lawmaker, said this week.



In an interview with Reuters Insider, Yin said local governments had incurred at least 10 trillion yuan ($1.5 trillion) of "hidden" debt, which they have concealed by creating thousands of investment vehicles that serve as borrowers.

Yin said it is not yet clear which loans will sour because they do not have to be repaid until the projects are completed.

"The large amount of debt that local governments took on since the end of 2008 to battle the impact of the global financial crisis will become a heavy burden for our development going forward," said Yin, who is a member of the finance and economic affairs committee in China's parliament.

He highlighted the high risk of default in the low-level county governments, which Yin said have little financial resources.

"Seventy percent of the loans from these investment and financing platforms in 2009 and 2010 were generated at the county level, where governments don't have much assets, and some cannot even afford to pay their staff," he said.

"Debts accumulated from these platforms, even with government financial guarantees, simply cannot be paid back. In other words, when they borrowed the money, local governments did not plan to pay it back."


More from CNBC.com
China Raises Banks' Required Reserves AgainChina Guides Yuan to New High Ahead of US SummitChina Leaders Emphasize Fighting Inflation in 2011
Local Chinese governments are barred by law from borrowing directly. To pay for their ambitious growth plans for cities, they set up investment vehicles that take out bank loans backed by assets - typically land - or implicit government guarantees. They do not show up in official central government debt accounts.

But Yin said these debts will ultimately have to be written off by Chinese banks and Beijing. "In 2009 and 2010, we encouraged them (local governments) to increase debt and run deficits to stimulate investment. Local governments' debt problems will come to light in 2011," Yin said.

He said local Chinese governments were still pursuing breakneck growth rates despite pleas from Beijing to slow down to let the economy tread a more steady and sustainable path.

"We need to use macro controls to pull it back and lower it to a reasonable level," Yin said.

While the problem of "hidden" debt among local governments is not new to China, its massive three-year stimulus programme in the wake of the 2008 financial crisis exacerbated the issue.

China's bank regulator estimated last year that local governments have racked up 7.66 trillion yuan in debt as of June 2010, of which 26 percent is unlikely to be repaid.

But the regulator put a brave face on the problem by saying the risks are under control since most loans can eventually be repaid using income earned from their investment. It also said banks are well protected against defaults because they have already set aside adequate provisions.

Yin warned against complacency, however, and said China's debt ratio was much higher than what official data suggests.

Beijing has said its fiscal deficit will fall below 2.2 percent of gross domestic product (GDP) in 2010, while its total debt will be less than 20 percent of GDP.

"China's rapid development has covered up many problems. But once economic growth slows down, these problems will emerge as stones rise when water levels fall," Yin said.

News Headlines

Some people here fear to show the dark side.

 

[Brotherhood]

China should be cautious of inflation, excess liquidity: economist - People's Daily Online January 16, 2011

China's inflation chart.

China should be cautious of inflation and prevent the effects of excess liquidity, Fan Gang, a former advisor to the country's central bank, said Saturday.

The loose credit policy of the United States is pumping money into the market and increasing expectations for the depreciation of the U.S. dollar and the appreciation of other currencies, including the Chinese yuan, Fan told the annual meeting of China's economy (2010-2011) in Beijing.

The policy is reasonable for its own economy but will cause serious problems for the world, he said.

It pushes up commodity prices and spurs hot money flows that cause inflation in emerging economies, he said.

The People's Bank of China (PBOC), China's central bank, announced Friday it will raise banks' reserve requirement ratio by 50 basis points, to mop up excess liquidity amid mounting inflationary pressures.

The PBOC last year raised banks' reserve ratio six times and interest rates twice, to rein in inflation.

China's consumer price index (CPI), the main gauge of inflation, hit 5.1 percent in the year to Nov. 2010, its highest in 28 months.

Fan also came out in favor of a gradual appreciation of the yuan. He said a stronger yuan helps ease inflation pressures and facilitates economic restructuring.

The annual forum is sponsored by the China Center for International Economic Exchanges (CCIEE), a non-governmental think tank chaired by former vice premier Zeng Peiyan.

Source: Xinhua

 

[Brotherhood]

China makes its mark in Indian market - People's Daily Online January 17, 2011

The Lenovo logo on the wall at the Chinese company’s Indian branch in Bangalore. The company, which took over IBM’s personal computer arm in 2005, now has a bold plan to surpass all its competitors to become the largest player in India by 2014. (WANG XING / CHINA DAILY)

When Amar Babu first joined the Chinese computer maker Lenovo Group in India in November 2007, what he faced was the aftermath of a typical business failure: Lenovo's local market share had dropped by nearly a half, management had quit the company and local sales partners were demanding payment.

But that did not prevent the veteran executive from turning India into one of Lenovo's most successful overseas markets.

During the past two years, business for China's biggest PC maker has not only survived the financial crisis but also won market share from rivals. Its market share in India has risen from about 5 percent in 2008 to more than 9 percent in the last quarter, ranking it fourth after HP, Dell and Acer. The Chinese company, which took over IBM's personal computer (PC) arm in 2005, now has a bold plan to surpass all its competitors to become the largest player in India by 2014.

"If we can be a strong No 1 in China and, giving the similarity between the two countries (China and India), why can't we be the No 1 in India?" said Babu, managing director of Lenovo India.

He said because India is "a little behind China" in terms of economic development, market penetration and maturity, many of Lenovo's successful experiences can be applied to India.

As part of its global strategy to steer away from relying on advanced markets such as the US to fuel overseas growth, Lenovo started to focus its expansion on emerging markets such as India and Russia after its business in the mature markets was hit hard by the global financial crisis in 2008.

During the following years, Lenovo has successfully employed tactics that have made it China's PC market leader, including offering colorful models and products that are cost effective and using retail franchises with insight into their individual markets.

Although India is the world's ninth biggest PC market, Babu said the country has a huge potential for growth due to its vast population, growing numbers of young people and relatively low PC penetration.

"If you take what China was seven years ago, maybe that's what India is today," said Babu. He said the subject he often raised with his Chinese colleagues was: "Tell me what you did seven years ago."

Discover India

India and China are the world's most populous countries and together account for more than a third of the world's population. The two countries also have a history of conducting trade and cultural exchanges over thousands of years.

However, most Chinese enterprises did not realize the scale of India's importance until the latter part of the 20th century. And most of the Chinese new multinationals did not find success until after the year 2000.

Chinese telecom equipment maker ZTE Corp, for example, entered India in 1999, but the company did not win any orders until 2002.

Then, from 2004 to 2009, ZTE's turnover in India grew from $100 million to nearly $1 billion, making India ZTE's largest overseas market and its biggest market after China, said D.K. Ghosh, chairman of ZTE Telecom India.

"By being manufactured in China, our product can be 25 percent cheaper than our rivals," said Ghosh. "We expected our business to grow at the rate of 30 percent annually and become one of the top two players in India in the next three years."

According to research firm Analysys Mason, ZTE is the fourth biggest player in the India telecom equipment market, following Ericsson, Huawei and Nokia Siemens Networks. The Chinese second-largest telecom equipment maker now has about 3,000 employees, of which 1,000 were employed in 2009.

Last month, the Chinese government approved ZTE's plan to increase investment in India. Ghosh said he expects ZTE's business will be $1.7 billion last year, an increase of about 70 percent compared with 2008. He said the new investment will mainly be used to build factories and other facilities in India.

Complementary

Adopting different economic development patterns, China and India have built up their own positions of strength in the world economy since instituting economic reforms. Over the past 30 years, China established itself as a powerhouse in manufacturing and the construction of infrastructure, while India became a specialist in software and IT services.

"The economic structures of China and India are in fact more complementary than competitive," said Peng Gang, commercial counselor of the Chinese embassy in India. "If we could combine China's advantages in hardware and India's in software, for example, we could make a real difference in the world."

According to official figures, China is India's largest trading partner. Last year, bilateral trade was expected to reach $60 billion, up from $42 billion the previous year and a 30-fold increase since 2000.

On the back of that trend, especially after the financial crisis during which the United States and European countries struggled with the economic downturn, more and more Chinese have chosen to turn their eyes to their emerging neighbor.

Despite the increasing economic ties between China and India, the political relationship between two of Asia's biggest countries was still "very fragile, very easy to be damaged and very difficult to repair", said Chinese ambassador to India Zhang Yan. Issues such as territorial disputes and employment visas often disrupt normal communication between the two countries.

For businessmen such as Ghosh from ZTE, the best solution to solve that problem may be commercial cooperation.

"India and China are not enemies. Our relationship should not be India versus China but India and China," said Ghosh. "If India and China work as one, we can create an economic tsunami in the world."

 

[Brotherhood]

Indian IT companies size up China - People's Daily Online January 17, 2011

India's information technology (IT) companies started their businesses in China by serving large multinational clients in the country but now they are ramping up efforts to win more domestic companies in order to consolidate their foothold.

Tata Consultancy Services Ltd (TCS), India's largest IT services company by sales, is leading the effort to expand the presence of the Indian IT industry in China - although cracking the Chinese market may not be an easy job.

"Chinese companies are still used to the traditional global brands. They have not yet seen us. So it is also a question of brand-building for us," Girija P. Pande, head of the Asia-Pacific region of TCS, told China Daily.

Unlike their Western counterparts, large Chinese companies usually have their own IT department and domestic outsourcing in China has yet to take shape.

"But when they start doing it and focus on their core business, then the Indian companies can bring value to China's domestic outsourcing market," Pande said.

India exported $50 billion in IT services to China in 2009 and industry analysts expect the number to exceed $100 billion annually in the next five years. Chinese Premier Wen Jiabao also vowed to further remove the trade barrier to Indian goods and services during his visit to India in December.

In recent years, TCS has emerged as the largest Indian software business company servicing large Chinese State-run companies. It has established a noticeable presence in China's banking industry. Four major Chinese banks including Bank of China and Hua Xia Bank have been clients of TCS' core banking system.

Pande said TCS needs to further increase its presence in China and added the company is very keen on expanding into the sectors of government, insurance, healthcare and manufacturing.

"I think we have to get more Chinese large companies to see our capability," he said. TCS currently hires more than 170,000 people in 40 countries around the world, but it only has 1,200 people in China. Pande said the company plans to increase its workforce in China to 5,000 people in the next three years.

Pande also pointed out that Indian companies which are used to working in the English market need to shed the mindset that language is a barrier to business in order to have a fully-fledged operation in China.

Since the eruption of the global financial crisis in 2008, India's IT companies have begun to look for business opportunities in emerging markets in order to reduce their dependence on the US and European clients.

Pande said emerging markets now account for 20 percent of TCS' business and the company has been growing by 40 percent for the last seven years in Asia. TCS earned revenues of $6.34 billion in the 2009 fiscal year, about 6 percent of which came from the Asia-Pacific region, where Japan, Australia, and China are key markets.

Wipro Technologies Ltd, a leading Indian software company, is also following TCS' step in expanding into the growing markets.

"China has become our preferred delivery center for our Japanese customers," said Gangadharaiah C.P., vice-president and global head of Wipro Technologies' testing services. "We want to build our biggest research and development center in Asia in the city of Chengdu."

Rajan Kohli, Wipro's chief marketing officer, said that the company plans to reduce reliance on the mature markets in the US and Europe as demand in emerging markets such as China is booming.

"China has yet to be the major market for us, but it will be one of the fastest growing markets for us in the next five years," Kohli said.

In the meantime, China is promoting its own IT outsourcing sector to challenge India's dominant position in the business globally. Chinese companies are now increasingly picking up orders in the US and Europe, both traditional strongholds for Indian companies.

According to a survey by accountancy firm KPMG, China's total outsourcing market will grow to $43.9 billion by 2014, more than double its $20 billion in 2009.

"China will grow and there is no doubt about that," Pande from TCS said. "It isn't an easy task to keep leading the IT industry, but competition keeps us all slim and healthy."

Source: China Daily