India suddenly not interested in the Chinese Investors!
New Delhi, 27th April: India has changed its Foreign Direct Investment (FDI) rules on 18 April and has decided to block Chinese Investments that has led to a mini earthquake in the Sino-Indian investment corridor.
“If India doesn’t want Chinese money,’’ said the executive of a venture capital fund in Beijing, “then more money will go to another country.” The Chinese businessman has already had other options in mind for business ventures.
India has blocked the automatic route for investments from nations that share a land border to prevent “opportunistic takeovers/acquisitions” of vulnerable Indian companies as stock markets plunge during the coronavirus pandemic.
The policy barrier against the dragon was raised soon after China’s central bank, the People’s Bank of China (PBC), raised its stake in housing finance major Housing Development Finance Corporation (HDFC) from 0.8% to 1.01%.
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Several European countries, including France, Australia, and Germany have taken recent measures to protect undervalued companies from China, the one and only target.
As per unconfirmed sources, Indonesia, Thailand, Vietnam, and the Philippines and parts of Africa could benefit from the diversion of Chinese tech funds from India.
China has been India’s fastest-growing source of FDI in the past five years. The Middle Kingdom has poured money into e-commerce, tech, retail, automotive, and manufacturing sectors. No wonder the revised policy went viral on social media between the small network of Sino-Indian dealmakers— executives, lawyers, consultants, and techies—who board flights nearly every month to the metropolises on both sides of the world’s two largest online marketplaces.
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In 2011, Chinese investment in India was just $102 million and it was difficult to entice Chinese CEOs to attend promotional events for Indian businesses in Beijing. Current estimates of total Chinese FDI in India vary between $5 billion and $8 billion.
According to the report from Gateway House, Chinese tech investors have pumped $4 billion into Indian startups and funded 18 of 30 Indian unicorns (startups with billion-dollar valuations) led by Baidu, Alibaba, and Tencent.
The think-tank’s report noted that with its 200 million subscribers, the popularity of Chinese video app TikTok surpassed that of YouTube in India; Alibaba, Tencent, and ByteDance compete with Facebook, Amazon, and Google; smartphone makers such as Xiaomi and Oppo, and not Samsung or Apple, dominate the nearly half-billion-sized and fast-growing market of Indian smartphone users.
Indian startups want Chinese funding because it comes with real-time expertise on how to modify their business. Chinese firms have nation-wide interest in the Indian economy. Chinese investors have a long term plan to create industries in India. They have studied the economic landscape and invested with an aim to build scale.
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Previously, central government approval was mandatory only for investments from Bangladesh and Pakistan. The Beijing executive quoted earlier said that India’s redirection of overall Chinese investment from the automatic to government route had instantly spread “concerns” and “uncertainty” in Chinese corporate circles. A sudden dip in confidence in India’s ease of doing business could potentially bring ongoing investment proposals to a temporary halt as the venture capitalists have to go into wait and watch mode.
China’s media has been quick to call India’s FDI restrictions as a “bitter pill to swallow” for a nation aiming to become a hi-tech manufacturing powerhouse. The Communist Party of China has complained of discrimination in its first reaction to the revised FDI rules. However, Sino-Indian diplomacy had ensured that the investment ties will expand despite the bilateral political tensions.
It is reported that days before the announcement, India had imported millions of masks and protective gear from China to battle the pandemic. New Delhi also stayed aloof during the US-led blame game on ‘China Virus’.
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