India adjusts investment restrictions on China, Chinese Chamber of Commerce: only 'partial optimization', actual situation to be further observed
The Indian Cabinet announced on the 10th that it has approved amendments to the rules regarding investments from countries bordering India on land. According to Indian media reports, this is the first time since the implementation of the third press release in April 2020 that India has relaxed restrictions on Chinese investment. The past restrictions have cut off the inflow of Chinese capital, causing many investment plans in India to come to a standstill. This relaxation will provide convenience for industries that rely on Chinese capital, such as manufacturing, technology, and startups. The industry also welcomes the new rules. The Indian Chinese Chamber of Commerce told the Global Times on the 11th that the adjustment of India's investment policy towards China this time is a "partial optimization" rather than a "comprehensive opening up", so further observation is needed on the actual implementation and execution of the policy adjustment.
On April 17, 2020, India issued Press Release No. 3, announcing that any entity from a country bordering India on land, or whose beneficiary of an investment is located in such a country or a citizen of such a country, must obtain prior approval from the Indian government for its investment in Indian entities. In addition, if there is a direct or indirect transfer of ownership of foreign investment in entities within India, and the beneficiaries come from countries bordering India on land, the change of ownership must also be approved in advance by the Indian government. Although the notice did not specify targeting Chinese investment, Indian public opinion generally believes that this is to restrict Chinese investment.
According to the announcement of the Indian Cabinet on the 10th, India has made two important adjustments: firstly, if the equity of the investment beneficiary in the investment entity does not exceed 10% and does not control the investment entity, the investment entity's investment in India will be subject to automatic approval mode; The second is investment in fields such as electronic components, electronic capital goods, polycrystalline silicon, silicon wafers, etc., with an approval deadline controlled within 60 days, but the prerequisite is that the invested object is controlled by Indians or entities controlled by Indians.
The Indian Cabinet stated that the new rules will help improve the business environment in India, attract more foreign direct investment, enable Indian companies to acquire new technologies, facilitate their expansion and integration into the global supply chain, and enhance India's competitiveness as an investment and manufacturing destination. More foreign investment will help supplement domestic capital, support the achievement of the goal of a "self reliant India", and promote economic growth.
The Sunday Guardian reported that India's electronic product manufacturing, start-up venture financing, renewable energy, and automotive components sectors rely on Chinese capital and supply chains. The Indian industry has long believed that the rules introduced in 2020 have slowed down capital inflows in the aforementioned fields, and the approval mechanism has resulted in multiple investment applications being in a state of long-term waiting for approval, bringing great uncertainty to both investors and Indian companies. The Sunday Guardian reported that the new rules send a positive signal, indicating that after years of tension caused by the 2020 border crisis, India China relations are gradually stabilizing. Despite geopolitical competition and unresolved border issues, there is significant complementarity in the economy, and strengthening contacts is beneficial for both sides. Moneycotrol, an Indian media outlet, said that the industry welcomes the new rules, stating that this move will introduce new investments into the Indian electronics and semiconductor industry and promote the establishment of related joint ventures.
Lin Minwang, Vice Dean of the Institute of International Studies at Fudan University, told Global Times reporters on the 11th that there have been different voices within the government since India introduced policies restricting Chinese investment in India in 2020. Therefore, starting around 2022, Indian media will almost every year release similar news calling on the government to relax restrictions on Chinese investment. If this policy can be implemented, it will mean a significant adjustment to India's policy of decoupling from the Chinese economy since 2020.
A representative of a Chinese company in India, who declined to be named, told Global Times reporters on the 11th that India's selective opening up now reflects a pragmatism - it opens up what it needs and continues to block what it doesn't. This reflects a deeper issue, that is, India is still afraid of Chinese capital and is concerned that Chinese capital has too much influence in India, so it is still restricting Chinese capital; On the other hand, the areas that India most wants to develop urgently need Chinese technology, so there is a situation of partial liberalization.
On the 11th, the Indian Chinese Chamber of Commerce also specifically pointed out to the Global Times reporter that the adjustments made by India this time "do not have universal applicability", and it has not adjusted for large-scale and actual controlling investments of Chinese capital, and more areas of Chinese investment still face strict scrutiny. The Indian Chinese Chamber of Commerce stated that the foundation of China India economic and trade cooperation lies in mutual benefit and win-win outcomes. Only transparent, stable, and predictable policies can truly stimulate the cooperation vitality of bilateral enterprises.