India’s relations with China have oscillated between paranoia and deep suspicion and a calmer assessment of the situation. Last August, when the two countries faced their worst border crisis in four decades over Doklam, the Chinese government publicly reminded India of the lessons of the 1962 war. But the nature of India-China relations is such – and its unpredictable ups and downs – that last week Prime Minister Narendra Modi held an unprecedented “informal” meeting with Chinese President Xi Jinping, without attendance or agenda, in the Chinese country. Wuhan city.
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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 India’s largest trading partner, and India is the largest allocation market for Chinese corporations in South Asia. is above the $71. 18 billion recorded in 2016. This is a fundamental milestone for both countries,” says Saqib.
Major players teaming up
This year, the bilateral industry in the first quarter reached $22. 1 billion, a year-on-year increase of 15. 4%. In April, the two countries signed more than a hundred industrial agreements worth $2. 38 billion, during the stopover of the Chinese industrial delegation in India.
“As two major emerging countries and giant emerging market economies, China and India have a huge domestic market,” Gao Feng, a spokesman for the Ministry of Commerce, told Xinhua last week. complementary, creating ample spaces for 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 seeking a mutually beneficial reset in their bilateral relations now, and their trade links should strengthen this,” says Saqib. “In the Asian neighborhood, India is the only country that has the market and the strength to absorb China’s excess capacity and investment. India’s GDP of nearly $2.5 trillion is equal to all the ASEAN countries combined, and is rapidly growing.”
What’s in it for China?
China’s economy is five times bigger than India’s. In the past few years, with growth slowing at home, China is producing more steel, cement and machinery than the country needs. And as it looks to developing countries in Asia to keep its economic engine going, Chinese companies have been courted by India to bridge its infrastructure deficit. Last year, China’s Sany Heavy Industry planned an investment of $9.8 billion 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 through Indian government agencies and Chinese investors, they have not yet resulted in massive infrastructure investments,” Saqib says, noting that Chinese corporations are well-positioned to invest in the sector. cash because they have the capital and technical expertise.
Related: How India got involved in China’s Belt and Road initiative, despite its opposition
Indian startups make profits
Meanwhile, Chinese investors have been pouring money into sectors outside the remit of government agencies. “In the past three years, Chinese and Chinese-origin investors have poured in about $3.7 billion into Indian startups, according to various data,” says Saqib. “For the India’s startup sector facing a funding crunch, these investments have come as a shot in the arm 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 for 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.
“Outside the digital and startup space, China’s investments have traditionally been concentrated in the automobile industry and focused in the state of Gujarat–PM Modi’s home state–among other locations,” says Saqib, adding that there has been “exuberance” in India over Chinese micro capital and bigger investments in sectors like pharmaceuticals and solar energy. “ Given the success of recent investments, China could very soon become one of India’s top 10 foreign investors ,” he says.
The Chinese generation discovers a foreign market
Chinese smartphone makers Xiaomi, Huawei and Oppo, all of which have production plants in India, have also enjoyed wonderful good fortune in the Indian market. Xiaomi’s sales in India increased by 259% in 2017. Relatively low prices for hard work make India attractive to 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 almost a fifth of what it costs to employ a Chinese workforce.
Read more on Forbes: Huawei, after all, makes a significant dent in the Indian smartphone market
Tellingly, Chinese corporations appear to have greater confidence in the Indian economy, which of late is developing more rapidly 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 investments have doubled in the last two years. I have no reason to doubt that this will not continue because they have already tasted blood. If you’re a Chinese company with unlimited capital and you look around the world and say, “Where’s the big bet you can make?””, the answer is India.
Not just sourcing capital, knowledge sharing as well Chinese investment is turning out to be a game-changer for Indian entrepreneurs. “Even as they gain financially from Chinese investment, the longterm gain comes from studying Chinese companies’ successes and failures 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.