Indian think tank points way for winning back Chinese investment

Amid the continued improvement of bilateral relations, the recent proposal by an Indian government’s think tank to ease rules that require extra scrutiny for investments by Chinese companies has sent a positive signal. Nevertheless, the advancement of economic cooperation between China and India necessitates sustained, long-term, and pragmatic efforts.

Indian think tank Niti Aayog proposed a policy change that would allow Chinese entities to acquire up to 24 percent stakes in Indian companies without needing additional security clearances, The Times of India reported on Saturday.

The proposal aims to ease investment processes, potentially boosting India’s supply chain participation and exports, the report said.

The policy proposal, which came around the time after India’s External Affairs Minister Subrahmanyam Jaishankar’s visit to China last week, is undoubtedly a welcome development. Whether it leads to a genuine change will depend on New Delhi’s willingness to confront its own contradictions between its economic needs and its geopolitical anxieties.

What makes the timing of this proposal also noteworthy is India’s own economic situation. Net foreign direct investment (FDI) in India tumbled to a record low of just $353 million in the past financial year, a fraction of the $43.9 billion logged in the year ended March 2021, according to Reuters, which noted that “the rules hampering Chinese investment in India have been seen as a significant factor behind a large drop in the South Asian country’s FDI.”

Such sluggish FDI figures highlight India’s urgent need for foreign investment to drive its economic growth. In today’s increasingly fierce global economic competition, attracting foreign investment is a vital way to promote economic growth, create employment opportunities, and enhance industrial competitiveness. India’s elites can see that if the country maintains strict restrictions on Chinese enterprises’ investment, it will miss a large number of potential investment opportunities and further hinder its own economic development.

As two of Asia’s most influential countries, cooperation between China and India will continue to outweigh their differences in the long run. The two nations boast strong complementarity in terms of resource endowments, industrial structures, and market demand. There has been growing awareness that India’s ambitions of becoming a global manufacturing hub and increasing its products’ share in the global market cannot be realized without pragmatic engagement with Chinese investment and supply chains.

China has strength and rich experience in manufacturing, infrastructure construction, and technological innovation, which are exactly what India’s manufacturing sector urgently needs. According to a report by the Indian Express, the country’s industry needs Chinese professionals since it is heavily dependent on China for crucial parts in most electrical and electronic segments.

Yet, in practice, India’s curbs on Chinese businesses have impeded the progress of such cooperation, which has become a drag on its manufacturing development. The think tank’s proposal this time may just indicate that some in India have begun to face up to these issues.

However, this does not imply that economic cooperation between China and India, particularly in terms of investment, will improve immediately. In recent years, Chinese companies have faced significant challenges when investing in India, including policy uncertainties, cumbersome approval processes, and market access restrictions. These issues have severely undermined the confidence of Chinese enterprises in the Indian market. For Chinese investors, the appeal of overseas markets extends beyond mere market potential; they place great importance on the stability, fairness, and predictability of the investment environment.

Balancing its development needs with so-called geopolitical concerns and building a business environment that reassures investors are severe tests for India’s foreign investment management policies.

This necessitates a forward-looking strategic vision from India, and embracing cooperation with China in an open and inclusive mindset.

Global Times