China’s Alibaba Group has put its investment plans in Indian companies on hold due to political tensions and deteriorating business relations between the two countries after the standoff on the Sino-Indian border, according to a Reuters report of the 26th quoted two persons familiar with the matter. It is not expected to expand investment in the Indian market during the next six months or so.
According to reports, the plan is to mainly manage the existing investment portfolio, not that Alibaba will reduce or withdraw its existing equity. Reuters quoted data from private equity analysis agency Pitch Book and pointed out that since 2015, Alibaba Group and its subsidiaries have invested more than US$2 billion in Indian companies and participated in at least US$1.8 billion in financing. India’s largest digital payment platform Paytm, integrated catering takeaway service platform Zomato and e-commerce platform, Big Basket have all received investment from Alibaba Group. The report said that Alibaba’s decision to apply “brakes” may slow down the financing plans of the aforementioned Indian start-ups. Alibaba has not yet commented on the report.
India tightened its review of direct investment from China and other land-based neighbors in April this year to prevent so-called “malicious speculative acquisitions” during the new corona pneumonia epidemic. Since the Sino-Indian border conflict, nationalist sentiment in India has been on the rise, and there has been a wave of “boycott of Chinese” products and companies. At the same time, the Indian government took the opportunity to hype the “China threat” and continued to take small steps in the economic and trade arena to target China: banning more than 100 Chinese mobile phone applications, “hidden box operations” detaining Chinese containers……….. The Indian Government is “eyeing” Chinese investment in India: In April this year, India began to implement stricter regulations on foreign investment; in July, a new policy was drafted to review about 50 investment plans involving Chinese companies. Ant Group, a subsidiary of Alibaba, which is preparing for an initial public offering (IPO), pointed out the difficulties it faces in India in its IPO prospectus issued on July 25th : changes in India’s foreign investment regulations have led to the need to re-evaluate the timing of additional investment in Zomato”.
According to India’s “Economic Times”, all direct investment applications from China are currently awaiting security review by the India’s Home Ministry. An unnamed senior government official said that the goal of the security review is to assess the “potential threat” of Chinese investment, and “at least as many as 175 Chinese investments are awaiting approval.” According to data from the transaction analysis company Venture Intelligence, Chinese investors invested approximately US$166 million in Indian startups from January to July this year, compared with approximately US$197 million in the same period last year. And Indian startups received a total of US$641 million in investment from China through 2019. At the same time, the policy uncertainty at the Indian end has caused some local start-ups to shy away from Chinese investments. Saxena, the founder of India’s short video app Bolo Indya, made it clear that the company will not accept any investment from China until the regulatory policy is clear.
An anonymous Indian government official told the Huan Qiu Shi Bao reporter on the 27th that “until the Sino-Indian border confrontation issue is completely resolved, India’s pressure on Chinese companies will not decrease, but will only increase”. He believes that “even if the confrontation is over, the Indian government will only selectively relax in certain areas out of considerations such as protecting local national enterprises”.
Indian policy analysts believe that, unlike the United States’ long-term strategy, India’s “decoupling” of Chinese technology is the result of a short-term crisis. It remains to be seen whether it will persist. “Free Press Journal” editor-in-chief, Mohammed Qishang, said: “I think India has no intention of playing a long-term game yet. India still prefers to adhere to the principle of non-alignment — it’s is a tradition that is difficult to change”.