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Tuesday, June 02, 2020

‘Chinese investment plans in India surge past $26 bn as govt tightens FDI norms’

On Saturday, the government said its approval is mandatory for FDI by neighbouring countries, in a move that is seen as curbing “opportunistic” takeovers.

By: ENS Economic Bureau | Mumbai | Published: April 20, 2020 12:03:27 am
China investment in India, Indian govt on Chinese investment, Chinese investment in India, Business news, Indian Express The net Chinese investment in India, which was .6 billion in 2014, shot up five-folds to at least billion (Rs 60,800 crore) in the next three years

The total amount of current and planned Chinese investment in India has crossed $26 billion (around Rs 1,98,000 crore), with the private sector in China and provincial governments emerging as important interest groups in shaping China’s diplomacy with India, a study released by Brookings India has said.

The net Chinese investment in India, which was $1.6 billion in 2014, shot up five-folds to at least $8 billion (Rs 60,800 crore) in the next three years — with a noticeable shift from state-driven to market-driven investment from the Chinese private sector, says the report, released in March.

On Saturday, the government said its approval is mandatory for FDI by neighbouring countries, in a move that is seen as curbing “opportunistic” takeovers.

According to the report, official figures underestimate the amount of investment as they neither account for all Chinese companies’ acquisitions of stakes in the technology sector nor investments from China routed through third-party countries, such as Singapore. For instance, a $ 504-million investment from the Singapore arm of the mobile firm Xiaomi would not figure in official statistics because of how investments are measured, the report said.

“Both India’s Department for Industrial Policy and Promotion (DIPP) and China’s MOFCOM (Ministry of Commerce) have different estimates of the amount of investment, the former pegging it at around $2 billion and the latter at $8 billion,” said the report.

The report says Chinese firms have escaped the kind of scrutiny in India that their investments have attracted in the West despite several high-profile investments and acquisitions. “The separation between the Chinese state and private business is blurry. Within China, the Chinese private sector, and particularly tech firms, work closely with the government and the Communist Party in pursuing many of its goals at home,” the report says.

In India, the trend of Chinese investments and acquisitions peaked in 2016 and 2017. Alibaba and Tencent have been the two biggest investors in India, together participating in funding rounds that exceed $3 billion.

“Alibaba led the way with its entry and the $ 680-million investment in 2015 with its affiliate Ant Financial for a 40 per cent stake in One97 Communications, the parent company of Paytm. An additional $177 million by Alibaba in 2017 further raised its stock in the company,” it says.

While Huawei was the earliest entrant, Xiaomi was, in some sense, the trailblazer in the smartphone business, entering India in 2014. In 2019, Xiaomi announced its seventh factory in India. Also, the company announced a $504 million (Rs 3,500 crore) investment in India in January and March 2019, from Xiaomi Singapore, to fund its India plans, which include opening 5,000 retail stores by 2020.

The combined sales of Chinese mobile phone companies in India crossed $7.2 billion (Rs 50,000 crore) in 2017-2018, the report says.

In infrastructure, Chinese companies have recently started making inroads in highway construction and the railways sector. Two of China’s biggest steel companies have also set up plants in India.

The first entrant was the Xinxing Group, which announced a two-phase project in a joint venture with three Indian partners to invest $1.25 billion (Rs 8,735 crore) in Karnataka.

The report says an estimated three in every four power plants in India use Chinese equipment.

The entry of Chinese auto major SAIC motor corporation in 2019 could serve as a test-case to establish whether Chinese firms can make successful inroads into this sector. To begin with, the company has announced a $288 million (Rs 2,000 crore) investment to expand an older General Motors plant at Halol in Gujarat.

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