Relaxing FDI from China: Govt to tread with caution – Industry News

The Economic Survey’s prescription of more foreign direct investment (FDI) from China for manufacturing and export push is being supported with caution by the commerce and industry ministry, which formulates and administers FDI policies.

Officials that there cannot be general opening up for Chinese investments, but in cases where technology and skills cannot be sourced from elsewhere, relaxations may be considered.

“We have to take a nuanced view. There could be some areas like batteries or e-vehicles or any other manufacturing sector where Chinese companies have really good technology which can be encouraged. It (opening up) cannot be general, it is not possible,” a senior official said, requesting anonymity.

In areas like mobile phone manufacturing where India has already built a considerable manufacturing base the ministry is not very keen on Chinese FDI.

For Chinese skills consultations are already on for a liberal visa regime for Chinese experts and technicians. For companies selected under the Production Linked Incentive (PLI) scheme a Special Operating Procedure (SOP) is already in place for visas for Chinese technicians who can install and train workers on the machines which are largely imported from China. The general opening up of visas would be initially confined to the 14 sectors where the PLI scheme is working.

The Economic Survey last week had suggested that welcoming FDI from China will help India better meet its ambition of greater share in the global value chains and higher exports.

“As the US and Europe shift their immediate sourcing away from China, it is more effective to have Chinese companies invest in India and then export the products to these markets rather than importing from China, adding minimal value, and then re-exporting them,” the survey said.

To curb opportunistic takeovers or acquisitions of Indian companies due to the COVID-19 pandemic, the government amended the FDI policy through Press Note 3 (2020) on April 17, 2020. Under this, a company of a country, sharing land border with India can invest only after the government’s approval. The border clash at Galwan in June of that year further impacted the business ties. FDI curbs were followed by a ban on 200 popular Chinese apps like Tiktok, Wechat, and Alibaba’s UC browser.

The first demand for opening up for exports from China came from PLI companies who were finding it difficult to begin production on time as visas for experts were taking a long time. The SOP issued after the review meetings by the government eased the process and laid down a process for processing of the visa requests. Following the footsteps of PLI companies other manufacturers are seeking similar relaxations.

While bilateral trade between India and China is $ 118.4 billion the FDI from the northern neighbour has just been $2.5 billion between April 2000 and March 2024.