I started researching on the topic of China and its investments when I saw the research that 44 of the top 100 apps trending on google play store in India were from chinese companies.
Stories of Chinese companies investing and picking up equities in the biggest of Indian companies and eating up market share in industries with Indian contemporaries was fairly commonplace.
China funding most of the US economy is a known story. But as I dug deeper, I realized that these stories were just the tip of the iceberg.
Chinese Investments across the globe:
Driven in part by Beijing’s “Going Global” strategy that encourages investment in foreign markets, Chinese firms have actively expanded their overseas footprint in recent years and explored investment opportunities in a range of sectors.
From 2005 to 20017, the combined value of China’s investment and construction is approaching $1.8Trillion globally.
Belt and Road Initiative
One of their smarter initiatives has been the Belt and Road initiative, better known as the one Belt, One Road.
It is a development initiative by the chinese Government for increasing infrastructural, economic, and political connectivity between China and the other countries of Asia, Africa, and Europe. It is China’s participation in what has been loosely dubbed the New Silk Road — a multinational endeavor to better integrate the Eurasian landmass in a way that’s inspired by the ancient Silk Road.
This initiative helps develop infrastructure in developing countries and also help China to invest ( and own) infrastructure in the countries. Interestingly, if you look at the tops sectors in which China has invested till date, have been Energy, Transport, Real Estate and Metals — the key ingredients for developing infrastructure.
One of the other reasons for this is that in the past few years, with growth slowing at home, China is producing more steel, cement and machinery than the country needs. And as it looks to developing countries to keep its economic engine going.
It has proved controversial in many Western capitals, particularly Washington, which views it as merely a means to spread Chinese influence abroad and saddle countries with unsustainable debt through nontransparent projects.
The Indian Dilemma
India’s relationship with China has often swung back and forth between paranoia and deep suspicion to a calmer assessment of the situation.
Interestingly, despite bilateral and geopolitical differences, economic ties have been steadily growing over the years between the two countries. China ranks among the fastest-growing sources of foreign direct investment in India. “ In 2017, China invested an estimated $2 billion, compared to $700 million in 2016, tripling the funding in a single year,” says Mohammed Saqib, secretary-general of India-China Economic and Cultural (ICEC) Council.
China is also the biggest trading partner of India, and India the largest project-contracting market for Chinese companies in South Asia. “Despite being locked in an antagonistic relationship over Doklam, India-China bilateral trade scaled up to $84.44 billion in 2017, rising 18.63%, which is well above the $71.18 billion registered in 2016. This is a major milestone for both countries,” says Saqib.
While the focus of India’s current trade strategy with China is to bridge the gap, chiefly by increasing exports of agricultural commodities hit by the China-US trade war, Beijing’s priorities have shifted elsewhere. Since 2015, around $7 billion in Chinese funding has poured into the Indian tech sector. A dizzying range of acquisitions has now left Chinese companies as major shareholders of some of India’s biggest tech companies.
Chinese investments in Indian firms
Just two of China’s three big BAT (Baidu, Alibaba and Tencent) tech firms — Alibaba and Tencent — have invested close to $3 billion in various Indian start-ups. (The third of the group, Baidu, has been slower off the mark.)
Where is the money going? It’s a pretty diverse spread. From 2015 till 2017-end, the biggest sectors have been e-commerce ($3 billion), transportation ($1.7 billion), fin tech ($750 million) and travel ($450 million), according to a KPMG study.
In 2015, Alibaba pumped in close to $700 million in Paytm’s parent company, giving it a 40% stake. Alibaba also has investments in Snapdeal and Zomato, while Tencent has invested in Ola, Flipkart and Practo.
Chinese companies like Bytedance, which is behind Tiktok (and the widely popular Chinese original, Douyin), is among many that see India as the next big frontier. Unlike acquisitions and investments in the west, the objectives here are slightly different — it is not about acquiring new technology (India is widely seen as lagging behind China on this front), but sharing the successes of the Chinese e-commerce experience and helping Indian companies to scale up in a similar way.
India’s trade and investment strategy
A lot of energy has been — and is being — expended in both areas. Both have largely failed to bear fruit for various reasons, one of which is neither suits the objectives or interests of China. Consider IT and pharma. What China is seeking here is to develop and acquire the capacities on its own in both areas, including through acquisitions — hence, for example, Fosun’s $2 billion acquisition of Indian company Gland pharma.
Or, for instance, if we consider the fact that the only Indian IT company to be successful in China is NIIT, which isn’t selling Indian IT services or products, but training tens of thousands of young Chinese in IT skills ever year, so they can bolster Chinese IT companies rather than rely on Indian ones.
In contrast, there’s been little attention at the official level when it comes to investments in tech. That’s because understandably, India’s focus was on greenfield investments. In the past two years, the Indian government has started trying to cash in on this trend and brought Indian start-ups to China on essentially fund-raising missions. But because it been behind the curve, there’s also been very little regulation of what’s been happening in this space.
India’s Issues with BRI
India has always been suspicious of — and at times hostile towards — China’s forays into South Asia. Not only does Beijing’s plan of being at the center of a new pan-Eurasia economic order seem to usurp India’s vision of itself as the big man of South Asia, but also irks Delhi because these forays include an in-depth partnership with Pakistan — India’s arch-rival — and includes development projects in Pakistan controlled territory that India claims as their own.
China is concurrently trying to develop partnerships with both Russia and the EU, Israel and Iran, Azerbaijan and Armenia, and, yes, India and Pakistan. If successful, the one common denominator that political and cultural rivals will have in common will be a close relationship with China.
China is one of the few countries which is trying to create domination not (just) by military power, but using economic brains. While we in India might celebrate being the biggest future market of the world, what we miss out on, is that we are just the product and countries like china would be the ultimate beneficiaries.