Chinese investment has started to flow in big time
While China has been India’s largest trading partner since FY09, Chinese companies have till recently shied away from investing in the country. From 2000 to September 2015, China invested a mere $1.24 billion in India, accounting for just 0.47% of the total FDI in the country. That number is marginally better than the $1.23 billion from the Cayman Islands and less than what Luxembourg ($1.38 billion) and Cyprus ($8.3 billion) have invested. But that could change quickly in 2016. Leading the investors is China’s richest man, Wang Jalian—of the Wanda group, the world’s largest property company—who has recently committed to invest $10 billion over the next few years in building a 13 square kilometre industrial estate at Sonepat, near Delhi, initially. It will house software, automotive manufacturing and other industries. Also on the investment horizon is construction equipments giant Sany group, looking to invest $3 billion in renewable energy projects. That apart, there are a dozen-odd Chinese electronics companies that could together invest $2-3 billion to set up facilities to make, among other things, mobile handsets in India. In 2015, e-commerce giant Alibaba invested in India’s Snapdeal and PayTM. Handsets of many Chinese brands—Oppo, Gionee, Xiaomi—will be manufactured in India by Taiwan-based Foxconn.
One area where China pitched hard but lost out to Japan was in the $12 billion, 505-kilometre Mumbai-Ahmedabad bullet train project, based on a $8.1 billion soft loan offered by Japan repayable over 50 years. However, it is still in contention for the feasibility report of the 2,200-kilometre Delhi-Chennai high speed rail project. China has, in the recent years, built the largest high-speed railway network globally. As China is slowing down, and India emerging as the fastest-growing large economy, there is a surge in interest among Chinese companies to invest in India. It is also because both countries have now realised that the simultaneous growth of both economies offers an opportunity for the realisation of the Asian Century. Though it is still early days for Chinese investment in India, it could over time look to match the investments made by the United States ($14 billion) and Japan ($19 billion). That will take some time to happen, but the doors have opened. The moot question: Will greater investment lead to finally sorting out the contentious border issue between the two? If that happens, that will be collateral benefit.