Due to the continuing face-off on the Sino-Indian border since April 2020, India has consistently taken the position that it is not business as usual for bilateral ties unless Beijing restores peace and tranquility on the border. India has intensified the screening of foreign direct investment proposals from the mainland. The heat is on companies like the electric vehicle giant BYD, which sought to invest $1 billion in the country. Yet the fact remains that there is not much that the Indian public knows about the real state of play regarding Sino-India ties. Is there a continuing Himalayan freeze or has a thaw set in? Last week, India’s national security advisor, Ajit Doval, talked tough with China’s new foreign minister Wang Yi that Beijing’s actions on the border had “eroded strategic trust” and the public and political basis of the relationship. The Chinese readout emphasised the need for both sides to follow “an important consensus” to stabilise ties that was reached by prime minister Narendra Modi and China’s President Xi Jinping at the G-20 Summit in Bali last November. Till now, the public was aware that the two leaders exchanged customary greetings but India’s ministry of foreign affairs has clarified that both leaders also discussed the “need to stabilise bilateral ties”. But so long as the border situation remains tense, this prospect appears unlikely.
There are similar grounds for scepticism regarding the coverage in the Western media like The Economist which recently argued “there has been a quiet yet striking recent improvement in Indo-China ties.” This appears far from obvious regarding the prospects of Chinese foreign direct investment (FDI) flows into the country. The government has received about 54 such proposals that are pending for approval as on March 31, 2023, and has rejected 157 applications. Great Wall Motors shelved its $1-billion plan to invest in the country. BYD’s proposal that was made in April to build electric vehicles in the country with a local joint venture partner was rejected on security grounds.
Interestingly, this company has been operating in the country since 2007 and has already invested $140 million in 2019, according to American Enterprise Institute’s China global investment tracker. Other existing manufacturers like MG Motors India have also faced restrictions, forcing it to scout around for a local partner to secure resources for modernising its plant and introducing newer models.
That said, the online fashion group Shein has found a way around the restrictions by tying up with Reliance Industries to sell its clothing with strict licensing conditions. Last year, Shein made its Singapore arm its de facto holding company, a strategy deployed by Chinese investors looking to take stakes in countries that are sensitive to mainland investments.
The upshot is that a Himalayan freeze persists in bilateral relations post-April 2020. There has so far been no change in the case-by-case screening of investment proposals. The government, for its part, maintains that there is no blanket ban on anything Chinese and that it allows what is in its best national interests. Recently, the minister of state for electronics and information technology, Rajeev Chandrasekhar, told the Financial Times that India is “open” to investments by China as long as they are investing and conducting their business lawfully. Here again, the public has a right to know if a thaw has set in to allow Chinese companies to invest in India.