Shanghai: President Pranab Mukherjee asked Chinese investors to be a “partner in India’s growth story” and assured a conducive business environment during his recent visit to Guangzhou, but a senior leader of China’s top advisory body feels there are still “some issues” in opening shop in India.

In an interview to IANS, Zhao Qizheng, Vice-Chairman of Foreign Affairs of Chinese People’s Political Consultative Conference (CPPCC), said Chinese businessmen were “not clear” about rules and business environment in India.

Zhao maintained that “public diplomacy” could help both sides understand the issues related to doing business in each other’s countries.

“Over the past few years, China’s outbound FDI [foreign direct investment] is rocketing. In particular, some foreign investors in China and even some local companies in China have made a lot of outbound investment and India is one of their good choices,” Zhao told IANS.

“But we have some issues when it comes to investment in India. I think that the two countries need to enhance their mutual understanding before making mutual investment.”

“For example, many Chinese businessmen are not very clear about the laws, regulations as well as investment environment in India, and Indian people may not be fully aware of how Chinese enterprises treat their employees,” said Zhao, who played a key role in attracting foreign investment in Shanghai.

“My point is that we might have different ways in treating employees than our counterparts in India,” he added.

Cheap workforce

Rising labour cost in China is pinching foreign as well as domestic firms with India emerging as the obvious choice because of its cheap workforce and surge in demand for consumer goods.

Though the response to Make in India initiative — strongly promoted by Prime Minister Narendra Modi — has been tepid, it seems to have resonated well with Chinese companies.

World’s third-largest smartphone maker, Huawei, is mulling opening its manufacturing unit in India while China’s top car maker, SAIC Motor, is planning to take over the US carmaker General Motors’ facility in the western state of Gujarat.

Investment from Chinese firms in India in 2015 stood at $870 million (Dh3.2 billion) — a six-fold increase in comparison to the previous year.

“Communication in advance is of vital importance and that is where public diplomacy can play its role. Not government, but the enterprises, business associations as well as NGOs [non-governmental organisations] could sponsor some forums and organise some visits so that the entrepreneurs of both sides can have visits before the substantial investment,” Zhou elaborated.

Zhou shared his past experiences of how he showcased Shanghai to woo foreign investors.

“When I was a government official in Shanghai to attract foreign investment, we organised a lot of Shanghai forums. We clarified our investment environment and also invited some compatriots of that country who have already made successful investment in China, particularly in Shanghai to explain their cases to their countrymen,” he said.

“And that built a lot of trust,” Zhou said.

Zhou also pointed put how good infrastructure is one of the cardinal factors in attracting foreign firms.

“Back then, I encountered a lot of unexpected questions. A German friend asked if I invested in Shanghai and is the best hospital in Shanghai within a 20-minute drive from my residence,” he added.

Mukherjee last month visited the manufacturing hub of Guangzhou where he assured that the Indian government would facilitate the efforts of Chinese businessmen to “make their investment in India profitable”.

He also called for greater market access in China for Indian IT and pharmaceutical companies, and said there was a “great potential” for deepening economic and trade ties.