COLUMN - China Inc finds few easy pickings in India

By Wei Gu

MUMBAI (Reuters) - India shines like a tempting lure for Chinese companies seeking to expand abroad, and on first glance the Indian market looks like a natural fit.

Who better than the Chinese, after all, to provide basic computers and air-conditioners at bargain prices?

But Chinese firms have found profits in India are hard to come by. Tax barriers are everywhere, eroding their cost advantages. Corruption is rampant, adding another layer of difficulty. And Chinese goods have a low-quality image that is very hard to shake.

The challenges are not unique to India. Most are exactly what Western companies encountered when they first arrived in China some 20 years ago. But Chinese companies, whose success so far has been largely built on their home-court advantage and low costs, are much less prepared to tackle those issues.

Chinese companies, for example, lack technological know-how, marketing savvy and managers with international experience. Winning over Indian consumers is much harder than wooing the Americans or Europeans, who treat TVs and DVDs almost as disposable items.

Indians want to make sure that their hard-earned savings go to products that will last. Branding and marketing are the key in India, but that just happens to be Chinese companies' Achilles' heel.

"People here think the Chinese goods are cheap, but of poor quality," said V Balakrishnan, Chief Financial Officer of Infosys, India's No.2 software exporter. "Some even say they send all the good ones to America...Chinese firms need to spend some time to change the perception."

Unlike Western companies with deep pockets who are more willing to invest for the long haul, many Chinese firms are under pressure to turn a profit quickly. Chinese TV maker TCL is not willing to splurge on expensive TV marketing, because it hopes to make a profit in India this year after three loss-making years.