That in the thick of waging an all-out war against the coronavirus, India should consider it necessary to block Chinese investments unless officially vetted underlines the seriousness of the threat of an adversarial control of critical parts of its economy. India could not be blind to the growing security concerns in western nations from aggressive Chinese investments.
The raging controversy over the 5G technology in the US and Europe has made these nations further wary of giving a leading Chinese company a free pass. It being always hard to sift private from public in case of China, all investments emanating from it whether in commerce or industry or in share markets and unicorns must remain suspect.
However, Saturday’s order does not prohibit FDI from China. It simply makes it subject to prior approval as opposed to the earlier automatic route which obliged the investors merely to inform the authorities after making the investment.
Maybe the trigger was the recent hike in the HDFC Bank equity by a Chinese entity to over one percent, which obliged it to notify the market regulator. Given the sharp fall in the equity markets, several blue chip companies were now sitting ducks for hostile takeovers should a foreign entity seek to exploit the automatic FDI route directly and/or through its hidden proxies.
The timing of the Indian decision is no less significant than the decision itself. In a way, India has only added China to the existing list of countries bordering it from where all investments were already subject to prior approval.
But that is not the way China would look at it, sensing rightly that the Indian move was meant to closely monitor investments by Chinese companies directly or from third country entities controlled by them. Growing fears of an incipient Chinese economic imperialism overwhelming the world have made most western nations sit up and ring-fence their marquee brands.
Germany a few weeks ago passed a law barring the transfer of its world-renowned economic assets to foreign (read Chinese) entities. Other European countries too have woken up to the threat of the Chinese takeover of their iconic commercial and industrial assets.
Australia too has moved to secure its economic assets against a feared Chinese takeover. Thanks to the cupidity of successive American governments which patronized China, first in the hope of building a counter to the Soviet Union and then to implant the seeds of democracy on its soil through export of economic prosperity to the dirt-poor one-party autocracy, the West is now ruing the rise of a Communist China which seeks to carve the world in its own peculiar light.
A militarily and economically powerful China now uses its billions to buy up influence and material assets all across the globe. But it does it so clumsily and arrogantly that a number of aid-dependent nations are offering resistance to the Chinese bullying.
Indeed, the Chinese response to Saturday’s decision to move investments by its companies from the automatic to the approval route reflected its arrogance. In a statement issued by the Chinese embassy in New Delhi on Monday, it spoke of the decision violating WTO principles of non-discrimination and harming free and fair trade.
It sought reversal of the decision and insisted that all Chinese investments be treated on par with those from other western countries. Coming from a country which has always closely controlled all inward foreign investments, barred the world renowned US tech companies to operate from its soil, denied permission to Indian pharmaceutical companies to set up manufacturing units there, China avowing faith in free and fair trade sounded rather hypocritical.
Come to think of it, India had played a significant role in facilitating China’s entry into the WTO. It is different that China itself is guilty of defying the same WTO rules and spirit. As a sovereign nation India, or, for that matter, Germany, or, the US, have every right to secure its economic assets against hostile foreign takeover.
The fact that China evokes such fears across the democratic world ought to make it introspect. Threatening to exploit its superior money-power for a widely feared chokehold on the global economy is bound to be met with fierce resistance from the comity of democratic nations. Meanwhile, we have not heard the last from China on the Indian decision.
