Alibaba Spearheads Chinese Investment into India’s e-Commerce Market
DELHI – Jack Ma, founder and chairman of the Alibaba Group and the richest person in China, has indicated that Alibaba is looking to invest more in India as it continues to expand its services. The company’s recent IPO in September raised a massive US $25 billion; funds which could be used for it to expand its operations further outside of China.
Ma this week concluded a visit to India as part of a Chinese business delegation and said he was looking to, “work with Indian entrepreneurs and technologists to improve the relationship of the two nations”. China recently became India’s largest trading partner, and Xi Jinping said on an earlier visit to Delhi that China would invest $20 billion in India over the next five years.
With over 1.3 million suppliers listed on Alibaba’s Indian website, India is the largest sourcing destination for the company outside of mainland China; second only to China’s 8.2 million. Approximately 400,000 consumers in China buy products from Indian businesses, including chocolate, spices and teas.
Geographical proximity to China and a disorganized distribution network make India a compelling market for Alibaba. Although India does not allow foreign investment in online retail, the impact of this law on Alibaba will be minimal. This is because the e-commerce giant only provides a marketplace without owning any inventory itself.
Alibaba could enter India as a joint venture partner with one of India’s smaller e-commerce sites. The most likely partner is Snapdeal, which has the most users of any Indian e-commerce site. Kunal Bahl, a co-founder of Snapdeal, has already met with Jack Ma and Bahl has openly stated that its business model closely resembles Alibaba’s.
In addition, the Japanese corporation Softbank is a common investor in both Alibaba and Snapdeal. Softbank recently invested $627 million in the Indian company and, with a 32 percent stake, is also the largest shareholder of Alibaba. Bahl said: “That’s why Softbank invested. They understand the Alibaba model really well. And they saw that in the Indian context we are closer to that model than anyone else”.
However, Amazon may also be trying to create a joint partnership with an Indian e-commerce site called Jabong. If these deals go through it could put Amazon in competition with Alibaba in India. It is also an interesting parallel for Chinese companies competing with Western companies in emerging economies.
Trade between India and China has been increasing quickly. The value of bilateral trade has surged from under US $3 billion in 2000 to nearly US $52 billion in 2008. China-India trade is growing nearly three times as fast as US-China trade.
However, levels of investment between China and India are still relatively low as companies from each are still learning to operate in the other’s economies. Alibaba’s interest in India shows that this may be changing for the better.
Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email firstname.lastname@example.org or visit www.dezshira.com.
Stay up to date with the latest business and investment trends in Asia by subscribing to our complimentary update service featuring news, commentary and regulatory insight.
Establishing Your Sourcing Platform in India
In this issue of India Briefing, we highlight the advantages India possesses as a sourcing option and explore the choices available to foreign companies seeking to create a sourcing presence here. In addition, we examine the relevant procurement, procedural and tax duty concerns involved in sourcing from India, and conclude by investigating the importance of supplier due diligence – a process that, if not conducted correctly, can often prove the undoing of a sourcing venture.
Taking Advantage of India’s FDI Reforms
In this edition of India Briefing Magazine, we explore important amendments to India’s foreign investment policy and outline various options for business establishment, including the creation of wholly owned subsidiaries in sectors that permit 100 percent foreign direct investment. We additionally explore several taxes that apply to wholly owned subsidiary companies, and provide an outlook for what investors can expect to see in India this year.
Passage to India: Selling to India’s Consumer Market
In this issue of India Briefing Magazine, we outline the fundamentals of India’s import policies and procedures, as well as provide an introduction to the essentials of engaging in direct and indirect export, acquiring an Indian company, selling to the government and establishing a local presence in the form of a liaison office, branch office, or wholly owned subsidiary. We conclude by taking a closer look at the strategic potential of joint ventures and the advantages they can provide companies at all stages of market entry and expansion.