With the disengagement of Chinese and Indian troops on the north and south banks of Pangong Lake, the border standoff between the two countries has shown signs of cooling down, and the Indian government’s “backlog” of investment applications from Chinese companies will gradually be put on the agenda for approval. The Times of India quoted Modi government sources as saying that some “small-scale investment applications” have been approved in the past few weeks. In addition, the Indian government will also set up a coordination committee consisting of the Ministry of Home Affairs, Ministry of Foreign Affairs, Ministry of Commerce and Industry and National Transformation Council to focus on large capital investment applications from China. “This is a positive sign,” said Liu Xiaoxue, a Chinese scholar, in an interview with the Huan Qiu Shi Bao on the 22nd, saying that India needs investment from China to achieve long-term stable growth in the wake of the epidemic and a sharp decline in Indian consumption.
Manufacturing industry first to be “released”
The Times of India said on the 22nd, that it was understood that the above mentioned coordination committee would be different from the Indian Foreign Investment Promotion Board, which is responsible for all approvals of direct investment proposals from foreign countries as the former is mainly focused on the study of investment applications from countries sharing India’s land border. Reuters exclusively broke the news on the 22nd that Indian government and industry sources revealed that India will approve 45 investment proposals from China, which may include those of Great Wall Motor and SAIC.
The Hindu’s report of the 21st also mentioned that after India and China completed disengagement and launched the tenth round of army commanders-level talks on the north and south banks of Pangong Lake, China’s Great Wall Motor Company’s acquisition of the U.S. General Motors plant in India may usher in a turnaround, but the road ahead is not straightforward as tensions between the two countries have not been eliminated. India’s Home Ministry received 150 investment applications related to Chinese companies last year, of which at least 30 have been largely investigated, according to sources, suggesting the government may consider lifting restrictions on direct investment from countries that share a land border with India. A Great Wall Motor Company spokesman said, “We will continue to seek approval for our relevant investment proposals and are committed to contributing to India’s economic growth”. Earlier, a Reuters report said that Great Wall was the most likely company to be the first to receive investment approval after the India-China border standoff crisis is resolved. Saran, India’s former National Security Adviser, said that if the investment application for the Great Wall Motors project is approved, it would imply that the two sides may have covered the resolution of commercial and economic issues in the negotiations.
Liu Xiaoxue, an associate researcher at the Institute of Asia-Pacific and Global Strategy of the Chinese Academy of Social Sciences, said in an interview with the Huan Qiu Shi Bao on the 22nd that foreign investment in India has long been concentrated in the service sector, and the little that is in manufacturing is mainly from China. From the perspective of the complementarity of the industrial structure of China and India and the docking of the industries of two countries, there is a lot of room for India to cooperate with China in the manufacturing sector. If, as the media reported, China has more than 150 investments held on hold by the Indian side, and 45 of them are to be released (approved), they will be basically from the manufacturing sector, i.e. India will first release investment in manufacturing, as it has great hopes of receiving Chinese investment to turbo-drive its manufacturing industry. Chinese investment can also play a very positive role in the development of related industries in India.
Chinese businessmen in India “talk about India”
In April last year, India’s Department of Industrial and Domestic Trade Promotion amended foreign investment approval rules to prevent “malicious opportunistic takeovers” of Indian companies by neighboring countries during the epidemic, requiring mandatory government approval for direct investments from all land neighbours, including China. India’s tough economic policy toward China has spread to other areas since the border standoff between India and China erupted. In late June last year, the Indian government suddenly decided to block 59 mobile apps developed by Chinese companies, including TikTok, WeChat and UC Browser. In August, the Indian government revised its National Education Policy to remove the Chinese language from the list of foreign elective languages, and in mid-August, Indian police and tax investigation authorities raided Chinese corporate entities and their affiliates in India for alleged money laundering and “espionage. Several Chinese businessmen were arrested on suspicion of money laundering and “espionage”. India has also banned Chinese companies from participating in government bidding projects and tightened entry standards for business visas.
India’s tough economic policy toward China has not only caused Chinese direct investment in India to come to a near standstill, but has also caused many Chinese businessmen in India to “talk about India”. According to the Huan Qiu Shi Bao, many Chinese companies have suspended or are considering suspending their business in India. India’s Economic Times recently quoted sources familiar with the matter as saying that TikTok had actually withdrawn from India and offered its employees three months’ salary and corresponding severance pay. Club Factory, another cross-border e-commerce platform previously blocked by the Indian government, has also suspended its operations in the Indian market. 2019 saw Club Factory India surpass 100 million users and help create hundreds of thousands of jobs in India.
Anonymous Chinese industry sources who have ended their operations in India told reporters that “the actual losses resulting from this (India’s tightened business policy toward China) are difficult to estimate.” In a sense, we are the builders of India’s overall business environment, not the drivers of India-China relations, but in the end we are the innocent victims of India’s tough policy toward China,” he said.”
Indian startups suffer badly
Indian startups have also been negatively affected by India’s tough policy towards China. According to the BBC, tensions along the India-China border standoff have led to damage to bilateral trade and economic relations, and Indian startup unicorns (companies valued at $1 billion or more) are at risk of falling on hard times due to difficulties in accessing financial investment from China. Currently, there are at least 18 Indian startups that have received investment from China, including Paytm, India’s largest digital payment platform, and Zomato, a restaurant information integration and takeaway service platform.
A decade ago, the scale of Chinese investment in India seemed insignificant, but now 35 Chinese companies and 85 Chinese venture capital and private equity firms have invested a cumulative total of more than $4 billion in India, according to the BBC report. Chinese investment in India has increased from 5 percent to 11 percent of all foreign direct investment in India. The report highlights that Indian startups are not only eager for Chinese investment, but also value the local development experience and lessons learned from Chinese companies.
Anonymous sources told reporters that India’s tough policy toward China in the economic sphere is aimed at giving it a head start in negotiations on the border standoff. As the situation along the border between the two countries eases, some of these tough policies, especially those that also constitute a collateral blow to Indian businesses, are expected to be relaxed or lifted. But given the Modi government’s “self-reliant India” policy, the ban on related areas may not be lifted immediately. He said the improvement of relations between the two countries in the economic and trade field depends on the degree and speed of restoration of bilateral trust after the end of the standoff.