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.
Also on Forbes: When Modi And Xi Meet In Wuhan, Investment Is Likely To Drive The Agenda
It is attractive to note that despite bilateral and geopolitical differences, economic ties have continued to expand over the years between the two countries. China is one of India’s fastest growing foreign direct investment resources. “In 2017, China invested around $2 billion, up from $700 million in 2016, tripling investment in a single year,” said 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.
The main players sign up to the forces.
This year, the bilateral industry in the first quarter reached 22. 1 billion U. S. dollars, a year-on-year increase of 15. 4%. In April, the two countries signed more than 100 industrial agreements, worth $2. 38 billion, when the Chinese industry delegation visited India.
“As two major emerging countries and giant emerging market economies, China and India have a huge domestic market,” Gao Feng, spokesperson for the Ministry of Commerce, told Xinhua last week. complementary, creating broad spaces for cooperation. »
There is apparently a common confidence in both countries that a hostile stance harms their interests, and stabilizing relations at a time of global uncertainty will pay economic dividends. India’s competitive merit in data technology, software and medicines, as well as China’s strengths in manufacturing and infrastructure development, make both sides herbal 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 larger than India’s. In recent years, with domestic expansion slowing, China has produced more steel, cement, and machinery than the country needed. And while it relies on emerging Asia to keep its economic engine running, Chinese corporations have been courted across India to fill its infrastructure gap. Last year, China’s Sany Heavy Industry planned to invest $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 state-led style of progress with the aim of creating deep economic ties, promised to spend $20 billion on India’s trade and infrastructure projects over five years. Earlier this year, the Asian Infrastructure Investment Bank, a China-led multilateral investment bank, approved financing for projects of around $1 billion in India.
“However, although many MoUs (memorandums of understanding) have been signed through Indian government agencies and Chinese investors, they have not yet resulted in massive investments in infrastructure,” says Saqib, noting that Chinese corporations are well positioned to invest. in the sector. field because they have the capital and the technical experience.
Related: How India got involved in China’s Belt and Road Initiative, despite its opposition
Indian startups make a profit
Meanwhile, Chinese investors have been pouring money into sectors that are outside the purview of government agencies. “In the last three years, as per data, Chinese and Chinese-born investors have invested around $3. 7 billion in Indian startups,” says Saqib. “For the Indian startup sector that is facing an investment crisis, these 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 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 dollars in Flipkart and a second investment circular in Practo. Last year, even Chinese pharmaceutical giant Fosun Pharma spent $1. 09 billion to gain a 74% stake in India’s 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.
Chinese generation discovers a foreign market
Chinese smartphone makers Xiaomi, Huawei and Oppo, all of which have production plants in India, have also seen great fortune in the Indian market. Xiaomi’s sales in India increased by up to 259% in 2017. The relatively low costs of hard work make India attractive to the Chinese. investors, offering an ideal hunting ground for the productive sector. According to a report by China Briefing, an average Indian employee can be hired for about a fifth of what it costs to employ a Chinese workforce.
More on Forbes: Huawei Is Finally Making A Significant Dent In The Indian Smartphone Market
Tellingly, Chinese corporations are appearing greater confidence in the Indian economy, which is lately developing quicker than China and narrowing the competitiveness hole between the two Asian giants. India ranked 40th, whilst China is 27th in the World Economic Forum’s 2017-2018 Global Competitiveness Report.
Santosh Pai, a partner at Link Legal, a law firm that helps Chinese investors to get a foothold in the Indian market, told CNBC: “Chinese investments have doubled in the last two years. I have no reason to doubt that it will not continue as they have already tasted blood. If you are a Chinese company today with a limitless amount of capital and you look at the whole world and ask, ‘Where is the big bet you can play?’ 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 remarkable similarities in terms of customer habits and revenue stream levels, there’s a “huge learning curve,” he adds. “Chinese investors are helping Indian startups strategically tap into various spaces of market dynamics. When it comes to market management, Indian marketers can rely on the Chinese model, not the American model.