Chinese FDI in Red List

· No Chinese investment is now allowed through the automatic route available to other countries, and all Chinese applications undergo a screening process with so many rejections.

· Great Wall Motor Company, a conventional auto manufacturer, proposed a billion-dollar investment in India.

· BYD, the biggest electric car company in the world – its sales exceed that of Tesla – proposed another billion-dollar investment. This included a mega-battery plant with cutting-edge ‘blade technology’.

· Luxshare is one of the biggest Chinese companies in the Apple value chain. It makes wearables like Apple watches and Airpods. It had proposed to invest Rs. 750 crore to become a major local supplier to Apple.

· China also has some of the best global technology, being numero uno in e-vehicles, batteries, solar panels and windmills.

[ABS News Service/10.08.2024]

This year’s Economic Survey, overseen by the chief economic advisor, has suggested a major but overdue policy change, aims to attract foreign direct investment from China in the face of Home Ministry resistance.

India’s security establishment has long opposed Chinese FDI, saying this will send the wrong signals to China, with standoffs in Ladakh and Arunachal.

No Chinese investment is now allowed through the automatic route available to other countries, and all Chinese applications undergo a screening process with so many rejections that the message is clear – you are not welcome here. ‘No business as usual’ seems to have become ‘no business at all’.

Some years ago, Great Wall Motor Company, a conventional auto manufacturer, proposed a billion-dollar investment in India. It did not get clearance.

More recently, BYD, the biggest electric car company in the world – its sales exceed that of Tesla – proposed another billion-dollar investment. This included a mega-battery plant with cutting-edge ‘blade technology’. But this too was not cleared.

Luxshare is one of the biggest Chinese companies in the Apple value chain. It makes wearables like Apple watches and Airpods. It had proposed to invest Rs. 750 crore to become a major local supplier to Apple. Despite strong support from the Tamil Nadu govt, clearance has not come. Lux has now move to Vietnam where the reception is good.

China also has some of the best global technology, being numero uno in e-vehicles, batteries, solar panels and windmills. All these are high priority areas in India’s bid to curb climate change. Why keep out the best companies in such vital sectors?

In autos, India allowed investors from every country to enter: All the global companies came in, interacted with our ancillary companies, raised their technical skills, started R&D centres, and ended up making India a world hub for small cars and auto ancillaries. We need a similar approach in key areas like e-vehicles and renewable energy. Get the best companies in the world to invest in India, including the Chinese ones.

The concept of ‘China plus one’ refers to the aim of many global investors to diversify out of China into other developing countries. That’s fine, but China itself wants to diversify to other destinations.

The Economic Survey has an additional justification. “Focusing on FDI from China seems more promising for bosting India’s exports to the US, similar to how East Asian economies did in the past. This is because China is India’s top import partner, and the trade deficit with China has been growing. As the US and Europe shift their immediate sourcing away from China, it is more effective to have Chinese companies invest in India and then export the products to these markets rather than importing from China, adding minimal value, and then re-exporting them.”