India wants to be China's gateway to the West
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
By Shritama Bose
MUMBAI, July 26 (Reuters Breakingviews) -India is warming up to its northern neighbour. The South Asian country’s annual economic report recommends courting investment from China rather than integrating into the country’s supply chains. That lays out a way for companies from Shein to BYD 002594.SZ, 1211.HK to keep selling in Western markets despite rising suspicion towards the People's Republic. Much depends on how the Sino-American trade war plays out.
In the survey for the year ended March released on Monday, India’s Chief Economic Adviser V. Anantha Nageswaran laid out the two options for the country to benefit from companies shifting supply chains out of China. He argues that it is more effective to encourage manufacturers from the People's Republic to set up factories in India and export to Western markets than to import China-made parts for assembly and re-export.
Betting on investments rather than low-value imports would help cut New Delhi’s $85 billion annual trade deficit with its neighbour. It would also shield India against any future moves by Beijing to restrict exports of critical material.
Ideas floated in the survey do not necessarily translate into policy action. But the push for Chinese direct investment found an advocate in Finance Minister Nirmala Sitharaman on Tuesday,the first member of Prime Minister Narendra Modi’s cabinet to back the idea.
That statement is significant, coming four years after India stepped up scrutiny of investment from its neighbours following a skirmish with Chinese troops. Signs of a thaw are visible elsewhere, too. Fast-fashion giant Shein, which is gearing up for an initial public offering in London, is partnering with $242 billion Reliance Industries RELI.NS to source merchandise from the world’s fifth-largest economy. China's SAIC Motor 600104.SS formed a joint venture with JSW Group in March to build and sell electric cars in India.
Those are still exceptions, though. As of March 2023, 54 foreign direct investment proposals from entities based in China and Hong Kong were awaiting official approval. It’s a reminder that parts of the Indian establishment are uncomfortable with opening the floodgates to Chinese capital. Beijing’s level of comfort with companies investing in India, especially in strategic industries with potential for technology transfer, is unclear too.
More importantly, the U.S-China trade war is still in flux, and the upcoming presidential election in November adds to the uncertainty. At the very least, India’s economic ambitions might offer a handy blueprint for the road ahead.
Follow @ShritamaBose on X
CONTEXT NEWS
India is likely to ease restrictions on Chinese investment in sectors like solar panels and battery manufacturing where New Delhi lacks manufacturing expertise, Reuters reported on July 24, citing two unnamed government sources.
The country’s Ministry of Finance in its annual economic survey released on July 22 recommended a focus on attracting foreign direct investment from China to benefit from the trend of manufacturers diversifying away from the People’s Republic. Raising FDI will be a more promising strategy for boosting Indian exports to the U.S.than integrating into China’s supply chain, said the survey prepared by Chief Economic Adviser V. Anantha Nageswaran.
Finance Minister Nirmala Sitharaman backed the survey’s suggestion to allow more Chinese investment in the country at a press conference on July 23. She said that the adviser's office works at an "arm's distance" but "that doesn't mean I am disowning the suggestion."
In April 2020, New Delhi introduced a policy of additional scrutiny of investments from countries with which it shares a land border, after a clash between Indian and Chinese troops deployed along their border.
Graphic: India's trade gap with China has been increasing https://reut.rs/3LCPvzT
Editing by Robyn Mak and Ujjaini Dutta
Últimas noticias
Descargo de responsabilidades: Cada una de las entidades de XM Group proporciona un servicio de solo ejecución y acceso a nuestra plataforma de trading online, permitiendo a una persona ver o usar el contenido disponible en o a través del sitio web, sin intención de cambiarlo ni ampliarlo. Dicho acceso y uso están sujetos en todo momento a: (i) Términos y Condiciones; (ii) Advertencias de riesgo; y (iii) Descargo completo de responsabilidades. Por lo tanto, dicho contenido se proporciona exclusivamente como información general. En particular, por favor tenga en cuenta que, los contenidos de nuestra plataforma de trading online no son ni solicitud ni una oferta para entrar a realizar transacciones en los mercados financieros. Operar en cualquier mercado financiero implica un nivel de riesgo significativo para su capital.
Todo el material publicado en nuestra plataforma de trading online tiene únicamente fines educativos/informativos y no contiene –y no debe considerarse que contenga– asesoramiento ni recomendaciones financieras, tributarias o de inversión, ni un registro de nuestros precios de trading, ni una oferta ni solicitud de transacción con instrumentos financieros ni promociones financieras no solicitadas.
Cualquier contenido de terceros, así como el contenido preparado por XM, como por ejemplo opiniones, noticias, investigaciones, análisis, precios, otras informaciones o enlaces a sitios de terceros que figuran en este sitio web se proporcionan “tal cual”, como comentarios generales del mercado y no constituyen un asesoramiento en materia de inversión. En la medida en que cualquier contenido se interprete como investigación de inversión, usted debe tener en cuenta y aceptar que dicho contenido no fue concebido ni elaborado de acuerdo con los requisitos legales diseñados para promover la independencia en materia de investigación de inversiones y, por tanto, se considera como una comunicación comercial en virtud de las leyes y regulaciones pertinentes. Por favor, asegúrese de haber leído y comprendido nuestro Aviso sobre investigación de inversión no independiente y advertencia de riesgo en relación con la información anterior, al que se puede acceder aquí.
