Due to cheap labour and
its extensive network, China has been the manufacturing hub of the world. But
now, especially after the pandemic, nobody knows if China can retain the title.
Before the pandemic, major countries relied on China for production of goods.
But now several countries are trying to secure their home companies’ production
units. For instance, Japan has offered $2.2 Billion to Japanese firms for
shifting their production out of China. President Trump, too, ordered US firms
to move production out of China. But many had already taken steps to get out of
China and others are convinced that it is the right thing to do. Especially,
when there has been a US-China trade war in the past and is most certainly
nowhere close to an end. The European Union’s
competition chief, Margrethe Vestager, advised EU countries to consider buying
stakes in their businesses to reduce the threat of Chinese takeovers.
This could help the
Indian economy as India is also a leading producer. India is planning to offer
land to the companies moving out of China. This is especially beneficial to
India when the country has already tightened its FDI rules for those countries
sharing borders with India. But for Pakistan and Bangladesh, the rules were made
strict in the past itself. So, it is very clear that the new rules are
implemented to prevent any hostile takeovers by China, although China being the
biggest investor in India. According to the new rules, any country sharing a
border with India needs prior approval from the government of India. But, the
Chinese funds and companies often route their investments in India through
offices located in Singapore, Hong Kong, Mauritius etc. For example, Alibaba’s
investment in Paytm was by Alibaba Singapore Holdings Pvt. Ltd. These, don’t
get recorded in India’s government data as Chinese investments.
China objected to the
new FDI rules of India, saying those are against the WTO’s free trade
principles. India amended its rule on 18th April 2020, after the People’s
Bank of China took over 1.01% stake of India’s leading mortgage bank, HDFC
bank.
Now there are 2 major
problems. Firstly, India is in an on-going border dispute with China which has
led to several clashes amongst the armed forces of the 2 nations. After India
rejecting the India-China-Pakistan trade route; border clash is another reason
why the Indian government is very cautious with Chinese investments in the
country and has also stalled many projects having investment from the
neighbouring country.
Maharashtra government
has also put a hold on 3 Chinese investments in the state worth more than ₹5000
Crores. One of these is the setting up of Great Wall Motors’ automobile plant
near Pune. The agreement was made to produce Electric Vehicles and SUVs in the
plant to be set up in Pune, for ₹3770 Crores. Additionally, MMRDA has also
cancelled the bidding process for designing, manufacturing, suppling, testing
and commissioning of 10 monorail rakes as both the bids received were from 2
Chinese manufactures. Instead, a dialogue has been initiated with Indian
manufacturers like BHEL. A joint venture between PMI Electro
Mobility Solutions and China-based Foton has also been stalled.
Also, BSNL i.e Bhartiya
Sanchar Nigam ltd was to receive 5G telecom equipment from Chinese gear makers,
but following the border clash, the department of telecommunication has barred
BSNL from using any Chinese equipment. Recently, Reliance Jio, too rejected
Huawei’s equipments that would have been used for 5G gears.
Not only this but also
the Indian loved sport-cricket may take a hit. The Indian Premier League has a Chinese
mobile Company, Vivo as the title sponsor since 2018. Vivo pays ₹440 Crores
annually to the BCCI. Besides Vivo, a bunch of Chinese brands invest in IPL.
There are about 30
Indian unicorn companies. Unicorn companies are start-ups who have their valuation
crossing $1 billion. These companies are very valuable not only to the
investors but also to the economy. But Chinese investors have their stake in the majority of these companies, too. China has invested in about 18 of the 30
Indian unicorn companies. Alibaba, Tencent and Ant. Financials are the biggest
investors in the Indian unicorns.
Source of information:
Gateway House
Secondly, Indians might
ban products that are either made in China or the products of Chinese brands. The Indian government, on 29th June 2020 banned 59 Chinese applications
like TikTok, UC Browser, ShareIt, etc. But what about Indians companies which
have Chinese investment? Some say we should avoid using these products or
services, too. But these companies, are too valuable to the economy. So,
avoiding their use is not possible and is neither a good idea.
Investors and startup
founders sharply criticised the government's move. It is relatively easy to get
investment from Chinese investors. Many investors are of the view that this
move might hurt their own business and the economy as a whole, too.
Rejecting
Chinese investment does impose a cost, though. But for now, many analysts are
of the view that it would be best to attract investment from anywhere but China.
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