Chinese small and medium enterprises are keen to set up manufacturing bases in India and Bangladesh to take advantage of lower labor costs. These are mainly original equipment suppliers, which do not have their own brands.

As part of a pilot research they have visited West Bengal, Assam, Orissa and Telengana to explore opportunities. Businesses they are particularly interested in are textiles and garments, furniture, plastics, machinery, household items, and electronics.

Apart from taking advantage of lower labor costs, they feel they can market their products domestically and export to other markets. Chinese companies are particularly keen to engage with small and medium enterprises as they need linkages unlike big companies which can find their way anywhere.

If the production data of textiles are any indicator, India has a great potential for collaboration with Chinese companies. China accounts for nearly ten times the textile business generated in India.

Chinese investments in India grew six-fold in 2015 from the previous year while more investments are in the pipeline following easing of restrictions on Chinese firms and favorable tax rates.

India has liberalised the investment climate for Chinese investors by removing visa and security restrictions. The bilateral trade deficit is in favor of China.