India’s relationship with China has often swung back and forth between paranoia and deep suspicion to a calmer assessment of the situation. Last August, when the two countries clashed in their most serious border crisis in the last four decades over Doklam, the Chinese government publicly reminded India about the lessons of the 1962 war. But such is the nature of the India-China relationship—and its unpredictable ups-and-downs—that last week Prime Minister Narendra Modi had an unprecedented “informal” meeting with Chinese President Xi Jinping, without aides or an agenda, in the Chinese city of Wuhan.
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Interestingly, despite bilateral and geopolitical differences, economic ties have continued to grow over the years between the two countries. China is among the fastest-developing foreign direct investment resources in India. “In 2017, China invested about $2 billion, up from $700 million in 2016, tripling the investment in a single year,” says Mohammed Saqib, secretary-general of the India-China Economic and Cultural Council (ICEC). Mauritius was the largest source of foreign investment in India, followed by the United States and the United Kingdom in 2016-2017.
China is also the biggest trading partner of India, and India the largest project-contracting market for Chinese companies in South Asia. “Despite being locked in an antagonistic relationship over Doklam, India-China bilateral trade scaled up to $84.44 billion in 2017, rising 18.63%, which is well above the $71.18 billion registered in 2016. This is a major milestone for both countries,” says Saqib.
Major players teaming up
This year, bilateral trade in Q1 hit $22.1 billion, up 15.4% year on year. In April, the two countries signed over 100 trade agreements, worth $2.38 billion, when the Chinese trade delegation visited India.
“As two major emerging countries and major emerging market economies, China and India have a huge domestic market,” Ministry of Commerce spokesperson Gao Feng told Xinhua last week. “The economies of the two countries are very complementary, creating enormous cooperation. “
Seemingly, there’s a shared belief in both countries that a position of hostility undermines their interests, and stabilizing relations at a time of global uncertainty will yield economic dividends. India’s competitive edge in information technology, software and medicines, and China’s strengths in manufacturing and infrastructure development make the two sides natural partners.
“China and India are now trying to restore their bilateral relations in a mutually favorable manner, and their industrial ties deserve this goal,” Saqib said. “In the Asian neighborhood, India is the only country with the market and strength to absorb China’s excess capacity and investment. India’s GDP of approximately $2. 5 trillion is equivalent to that of all ASEAN countries combined and is developing rapidly. “
What’s in it for China?
China’s economy is five times larger than India’s. In recent years, as domestic expansion slowed, China produced more steel, cement and machinery than the country needed. And while it is up to emerging Asia to keep its economic engine running, Chinese corporations have been courted across India to fill its infrastructure gap. Last year, Chinese company Sany Heavy Industry planned a $9. 8 billion investment in India, while Pacific Construction, China Fortune Land Development and Dalian Wanda planned investments of more than $5 billion each.
In 2014, President Xi Jinping, who is exporting China’s model of state-led development in a quest to create deep economic connections, promised to spend $20 billion in Indian industrial and infrastructure projects in five years. Earlier this year, the Asian Infrastructure Investment Bank, a multilateral investment bank led by China, has approved funding for roughly $1 billion worth of projects in India.
“However, while many MoUs (memorandums of understanding) have been signed by Indian government agencies and Chinese investors, they haven’t yielded any mainstream, huge infrastructure investment yet,” says Saqib, noting that Chinese companies are well positioned to invest in the field as they have both the capital and technical expertise.
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Indian startups make a profit
Meanwhile, Chinese investors have poured money into sectors that fall outside the purview of government agencies. “In the last three years, according to data, Chinese and ethnic Chinese investors have invested around $3. 7 billion in Indian startups,” says Saqib. “For India’s startup sector facing an investment crisis, such investments are an incentive for new entrepreneurs. “
In 2015, Alibaba invested $500 million in Snapdeal and $700 million in Paytm. The following year, Tencent invested $150 million in Hike, a messaging app, and a consortium of Chinese investors paid $900 per media. net. In 2017, Alibaba and Tencent announced or closed deals worth about $2 billion: Alibaba’s second tranche of $177 million in Paytm, $150 million in Zomato, $100 million in FirstCry and $200 million in Big Basket. Tencent’s investments included $400 million in Ola, $700 million in Flipkart and a second round of investment in Practo. Last year, even Chinese pharmaceutical giant Fosun Pharma spent $1. 09 billion to take a 74% stake in Indian company Gland Pharma.
“Apart from the virtual area and startups, China’s investments have historically been concentrated in the automotive industry and have been concentrated in the state of Gujarat, home state of Prime Minister Modi, among others,” Saqib said, adding that there has been “exuberance” in India this period. Chinese micro-capital and increased investments in sectors such as prescription drugs and solar energy. “Given the good fortune of recent investments, China could very soon become one of the top 10 most sensible foreign investors in India,” he says.
The Chinese generation discovers a foreign market
Chinese smartphone makers Xiaomi, Huawei and Oppo, which run manufacturing plants in India, have also noted wonderful good fortune in the Indian market. Xiaomi’s sales in India increased by 259% in 2017. Relatively low labor prices make India hot for Chinese investors, offering an ideal hunting ground for the manufacturing sector. According to a report by China Briefing, an average Indian employee can be hired for just one-fifth of what it costs to employ a Chinese workforce.
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Tellingly, Chinese corporations appear to have greater confidence in the Indian economy, which of late is developing faster than China and narrowing the competitiveness gap between the two Asian giants. India was ranked 40th while China is ranked 27th in the World Economic Forum’s Global Competitiveness Report 2017-2018. .
Santosh Pai, spouse of Link Legal, a legal corporation that is helping Chinese investors gain a foothold in the Indian market, told CNBC: “Chinese investment has doubled in recent years. I have no explanation to doubt that this They will not continue because they have already tasted blood. If you are a Chinese company with unlimited capital and you look at the global world and ask yourself: “Where is the big bet you can make?”
Not only the search for capital, but also the exchange of knowledge. Chinese investments are proving to be a game-changer for Indian entrepreneurs. “Even if they gain financial advantages from Chinese investments, the long-term gain comes from reading the successes of Chinese corporations in navigating the domestic market,” says Saqib.
Since India and China have notable similarities in terms of customer habits and revenue stream levels, there is a “huge learning curve,” he adds. “Chinese investors are helping Indian startups to strategically leverage various pockets of market dynamics. When it comes to market management, Indian marketers may depend on the Chinese model, not the American model.