In Depth

Can India really disconnect from China?

Chan is still waiting.

The last meet is at a banquet in June, the participants were veterans having years of experience in India. During the dinner, he said he had just invested in an offline project in India.

Previously, on April 22, the Indian government amended the Foreign Exchange Management Act to require non-citizen entities from countries bordering India to obtain prior approval under the government’s route when investing in India.

The invested party told Chan that the project would take about three months to go through all the approval processes. In mid-September, when asked about the progress, he said there was still no result.

This fund, when he was raising money, he wanted to invest overseas. Now, he couldn’t get the money out, even himself couldn’t go out, and he couldn’t see the project, couldn’t do due diligence, so he had to start investing in China domestic projects.

Another friend of mine, an investor, has been relatively active in India in the last two years. And he is in the same predicament. His fund is still optimistic about emerging markets, but India is investable, and he’s considering projects in southeast Asia.

Chinese investors poured $641 million into Indian startups last year. In 2020, with the exception of Tencent’s three projects, Chinese investors will receive nothing.

In April, when India’s new outbound investment policy was first announced, several lawyers in Delhi told me that India might adopt different policies for Chinese companies, such as greenfield investment, and that regulators would give preference to approval. But what we expected didn’t happen.

anti china
Picture Source: Forbes

Blocking Chinese investment and making troubles for Chinese companies

Zhang Bin cannot say “danshari” to India, which he has always considered as his second home. He has been working in India since 2003. But his “faith” in India has been sapped by India’s constant punitive measures.

At the end of September, when he was quarantined in Guangdong, bad luck had been following his Indian company.

An hour’s drive from Indian capital New Delhi, Noida is geographically part of Uttar Pradesh and is known as the “factory of the future”, where Chinese mobile phone makers such as OPPO and vivo, as well as the manufacturers of Xiaomi and Transsion, are clustered.

Uttar Pradesh has “informally” suspended special awards to four Chinese companies – Haier, vivo, Heli Thai and Sunwoda – because of border tensions and anti-China sentiment.

According to Uttar Pradesh’s 2017 Electronics Manufacturing Policy, projects that invest more than 1 billion yuan in it are eligible for special incentives ranging from 150 million to 250 million yuan. “The integrity is too poor,” said the head of one of the developers. “How can they attract foreign investors?”

Huawei is also inevitably involved. On September 17, Sanjay Dhotre, India’s minister of Electronics and Information Technology, said the government had no intention of excluding the two Chinese companies from 5G network infrastructure contracts.

However, according to a Huawei employee in India, “there is no explicit intention to restrict the participation of Chinese manufacturers in 5G construction. But there are hidden obstacles.”

In early 2020, Indian media reported that Huawei was planning to conduct 5G tests in partnership with Airtel and Vodafone. Until now, however, the Indian government has not approved spectrum tests for operators working with Huawei. The only approved company is Jio, owned by India’s richest man, Ambani.

Huawei and ZTE are not part of Jio’s plans.

In late September, Japanese telecom operator Rakuten Mobile said it was likely to work with Reliance Jio on technology to develop 5G network technology.

India is also blocking Chinese investment as it never mind taking all the trouble to make trouble constantly for Chinese companies.

According to several people familiar with the matter, the Home Ministry has received 100 applications, mainly from Chinese investors, to pour money into India’s start-up ecosystem but has been bogged down in regulation.

The Home Ministry is also reviewing investment applications, lawyers who are familiar with the developments said. “Unless [an MHA permit] is issued, it may not be granted,” says one lawyer. “He estimates that permission could take four to five months. “But the most important thing is the security clearance. The Home Ministry has not issued any security clearance yet.” “The person said.

What is India thinking?

“For a whole decade, we gave India our best years, but now it is equivalent to that we have been kicked out of the door.”

At an internal seminar in Guangzhou’s Tianhe district in early September, Hu Bin told me that he had moved to India around 2010 before joining Alibaba’s UC and that he had been commuting between Guangzhou and Delhi every month for several years.

In August, Alibaba announced the closure of UC India. Hu was of foresight. He left UC India two years ago to focus on the Indonesian market and his products have DAU over 10 million.

When grain dust of geopolitics falls on everyone’s head, it will be a mountain. Take India’s 5G technology as an example, which reflects the role of the Indian government in geopolitics.

In August, Ambani officially announced the company’s ambitions. Jio has created a complete 5G solution from scratch, which will enable us to launch a world-class 5G service in India, using 100 percent indigenous technology and solutions.”

But even in India, no one believes the rich man’s boast.

After elbowing out Huawei and ZTE, Jio is integrating different components of its telecom network, building some of its own, sourcing the rest and white-labeling it.

In the two years before the epidemic, China spent more than $6 billion on Indian start-ups, and India is highly dependent on Chinese supply chains for industries such as electronics and auto parts. In India, Chinese firms are creating objective jobs. Vivo, for example, employs more than 10,000 people in India.

Why is the Indian government in such a hurry to “disconnect” from China, ignoring market forces?

In the opinion of Lin Minwang of the Institute of International Studies of Fudan University, after the COVID-19 outbreak, the US actively promoted the “de-China-ization” of the global industrial chain, while India pushed forward the efforts, in order to seize the opportunity of the US to push the manufacturing industry to be independent of China.

Betting on The United States, and make emotional links between border issues and trade by force, has also become a mainstream sentiment in Delhi’s policy circles. At an internal meeting with several policy advisers in Delhi in early September, I asked whether there was room for Chinese companies, especially apps banned in India, to lobby at the current juncture.

“If you hear it’s a Chinese company, now everyone just wants to avoid it. For Chinese companies, the only option is to do nothing and wait quietly for the border situation to stabilize.” A professor at India’s Jindal Global University suggested.

When Delhi strategically chose to disconnect from China, it also catered to some vested interests in India in terms of specific policies.

On April 18, the Indian Council for the Promotion of Industry and Internal Trade press the authorities to revise its foreign investment policy to require all of India’s land neighboring countries to obtain Indian government approval for direct investment.

The target is Chinese investment. While in Mumbai, an unconfirmed story is spreading widely. At the end of last year, a Chinese state-owned company going to do due diligence on Airtel, an Indian telecoms company, visited Mumbai. Airtel has already been decimated in competition with Jio. Jio faces a further threat if Airtel gains access to the Chinese capital.

In addition, in Indian Foreign Minister Sushil Jaishankar’s new book the Indian Road, he explains that political and military disputes throughout history have led to mistrust of China. In the new era, this still affects Indian people.

As Chinese capital invests more boldly in India, the suspicion is growing in Delhi. In fact, even before the epidemic, India’s relevant think tanks had already started to check Chinese capital. While the Internet gambling and other Chinese “grey products” have been repeatedly exposed by Indian media, which has increasingly aroused alarm in Delhi.

But treating Chinese companies as “second-class citizens” without distinction, and betting on American, Japanese and other companies when “linking” with China, does not seem to have had the expected effect.

In mid-September Toyota, India announced that it would not invest any more in India because of the country’s high taxes.

The source of article is, original language is Chinese, translated by FirmKnow.

Jack Chan

Pre Editor in chief of FirmKnow News.

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