What ‘Made In China’ Means - Price Less, Quality Low, Impact Marginal

Anindita Chattopadhyay - New Delhi

With the entry of China in WTO the demand of Chinese goods has increased globally due to their cheaper price. These cheap Chinese goods are posing a stiff challenge for Indian exports in the international markets. In the Indian hospitality equipment sector however, despite Chinese and Taiwanese companies making a foray, they have had marginal impact. "Chinese products are not really giving competition to Indian manufactured products, only to American and European products because the pricing is 30-40 per cent lower than western goods. Some three-star, two-star and small standalone properties are going in for Chinese products," informed Rajendra Mittal of Mittal International, a company which imports Chinese products into India.

Currently, the share of imported products in the hospitality segment is in the range of 35-40 per cent. American and European products dominate the segment. According to Mittal, the Chinese products have made some inroads in kitchen equipment and refrigeration categories in the lower end of the hospitality segment because price conscious hotels and restaurants do not want to pay for high quality.

Yes, quality is the area where the goods from China are taking a beating. "The Chinese products are scoring because their pricing is 30-40 per cent lower, but quality-wise they are much inferior. Even some Indian products are superior in quality," said Sagar Sachdeva of the Butler Hotel Supermarket.

Conceded Nirmal Khandelwal of FCML, "Despite cheap price, Chinese products are not a rage because their quality is not really good except for products of European and American companies who have set up their manufacturing unit in China."

It is significant to note that well-known brands like Kohler (sanitaryware) and Cisa (security locks) have set up their manufacturing units in China to produce cheaper goods.

Mittal explains the situation better, "The general impression about the quality of Chinese goods in the market is not really good because India mainly imports medium quality products, which are cheap. The reason is five-star hotels in any case go for American and European top brands since under EPCG license they have to pay just five per cent import duty. The high quality Chinese products can compete with western brands, but they are costly. The price-sensitive segment is not ready to pay that price for a made-in-China label."

Hence, Indian manufacturers who also tap the lower end of the hospitality segment are facing some competition. For instance, a hotel or restaurant would not mind paying Rs 250 for a Chinese salver because of the imported product tag, though a ‘Made In India’ label would cost a little less. Products like kettles, salvers, bread slicers, meat mincers, commercial knives, mixers, hair dryers etc are doing moderate business. "Chinese products in future can give competition to Indian manufacturers because of low price, high production volume and availability in the market," opined Sachdeva.

The products manufactured in China are cheap because electricity is cheap. They have highly sophisticated machines of mass production, they have huge domestic volume with no competition from outside and all export is subsidised. Further, raw materials are procured by major import houses and distributed at lesser rates to manufacturers and credits are adjusted against exports. "If Indian manufacturers are to compete, the government should remove duty on raw materials and components and give the EPCG license to manufacturers," according to both Mittal and Khandelwal.