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GROWING AMBIVALENCE
- In spite of its trade with China, does India fear Chinese investments'

Are we schizophrenic when it comes to full-fledged economic ties with China' The question must no longer be avoided. On the one hand, bilateral trade is galloping. The volume of two-way trade between India and China (excluding Hong Kong) in 2002 was close to $ 5 billion with Indian exports at around $ 2.3 billion and imports at around $ 2.7 billion. The January-March 2003 figures are even more impressive. Indian exports are valued at around $ 0.95 billion and imports at about $ 0.72 billion. Indian exports in January-March 2003 have zoomed 119 per cent over January-March 2002, while imports have increased by 42.5 per cent. Slightly less than 10 per cent of India’s total international trade is with “Greater China” comprising mainland China, Hong Kong and Taiwan. Thus, this trade is crucial for us, although it forms a miniscule proportion of international trade of that region — it accounts for considerably less than 0.5 per cent of China’s global trade, for example.

While trade has taken off, we seem to be prisoners of the old mindset when it comes to Chinese investments in India. Huawei Technologies, the Chinese telecommunications networking major already employs over 500 Indian software professionals in Bangalore but it has already caused concern in the Indian security establishment. We are approaching its expansion plans very warily. The Chinese consumer goods giant, Haier, whose colourful chief executive officer’s life has recently been captured on celluloid, has been attempting to set up a production base in India but finds itself stymied for one reason or the other.

Hutchison Port Holdings has just been debarred from participating in a major port development project with blue-chip Indian partners apparently on strategic objections by the Indian navy. Hutchison Telecom’s pre-eminent position in the Indian mobile telephony market is causing much discomfort to policymakers. There have been reports that Chinese companies are being discouraged in investing in hydro-electric projects in “border” states like Himachal Pradesh, quite apart from also investing in road projects in states like Tamil Nadu. A Chinese company has evinced interest in the privatization of the aluminum giant NALCO in Orissa causing some concern in official circles but that sale appears to have been aborted for the time being.

Indian ambivalence — more precisely, the ambivalence of the Central government in its myriad forms — on Chinese investments in India — is coming at a time when Indian companies are aggressively scouting for investment opportunities themselves in China. Tata Consultancy Services is a leading candidate for bagging the prestigious contract for the computerization of the Shanghai stock exchange. Ranbaxy was an early investor in China. TCS and NIIT already have a presence and Infosys has talked about an investment, although its plans, unveiled with great fanfare in the presence of Zhu Rongji during his visit to Bangalore in January 2002, seem to have been delayed. Interestingly, Infosys blames the Chinese bureaucracy for the slow take-off but there may well be other contributory factors.

Of late a slew of companies like Apollo Tyres, Sundram Fasteners and SRF have joined the investor community in China. Others, like Dr Reddy’s Laboratories, JK Tyres and Aurobindo Pharma could soon enter. Tata Steel and Bharat Forge have notched major export successes and may well take the next step of a manufacturing presence in the Chinese market. It is true that we have not tested the Chinese and no Indian company has ventured forth to invest in Tibet or Xinjiang, two of the politically most sensitive regions of China. It is also true that we have been slow to develop commercial ties with Taiwan, something that might also test Chinese attitudes and responses. Even so, on the basis of present evidence it certainly appears that China is more relaxed about Indian investment presence in China than we appear to be on Chinese investment in India. Even on trade it must be said that while we are less inhibited, we have acquired the dubious distinction of being the single largest user of anti-dumping duties in the world — a truly remarkable phenomenon in a perverse kind of way given our laughably low share of global trade.

Of course, any bias against Chinese investments will be strenuously denied by officials in the capital. There is, of course, no clear policy directive or direction to this effect. They will point to the remarkable success of South Korean companies like Hyundai and LG in India in the past few years as proof of our open-door policy, especially to investors from east Asia. But there is no political paranoia in India vis-à-vis South Korea as there is in relation to China. Perceptions matter. The reality may well be different but in all such matters optics assumes great importance. Whatever we say, the gnawing feeling in the community that is concerned about such matters is that India is still unable to break out of the shibboleths of the past. When business visas to China after proper documentation take four-five days to get here but when business visas to India there take two-three weeks, then there is bound to be a feeling that we are not on the same wavelength. The fact is that we are not. Just consider the media presence in each other’s countries. There is just one Indian journalist positioned in Beijing affiliated with the PTI, while there are 12 Chinese journalists in New Delhi alone.

Against this background, the move by the Confederation of Indian Industry to open an office in Shanghai is a welcome step forward. China was a partner country in CII’s India International Trade Fair earlier this year. In mid-October 2003, the first-ever Made in India show is being organized in Beijing with the support of the two governments. Hopefully, this show will travel to other provinces and growth centres in China. An India Club is also being launched in Shanghai located in the famous Shanghai Mart. This will undoubtedly be of great value to Indian business looking to export to, source from or invest in China. One of the objectives of the Club must be to address the fundamental asymmetry in the bilateral trade relationship and enhance India’s importance in China’s overall trade portfolio.

Over the past few days, there have been some reports emanating from South Block that India and China are close to a “deal” over Sikkim and some initiative in this regard may be announced during Atal Bihari Vajpayee’s visit to Beijing in late-June. If the Chinese were to recognize that Sikkim is an unalienable part of India, the historic silk road that runs between Sikkim and Tibet through the Nathu La pass could well be reopened by India with implications for tourism as well.

But even without formal recognition, a border trade agreement will be in our long-term interest. While this must be pursued, it is important that Vajpayee’s visit is used to allay Chinese fears that India is not favourably inclined to an increased Chinese investment presence here. If we do not send a positive signal forcefully and categorically, the expansion plans of Indian companies themselves in China will be under threat. You cannot open a green channel for trade and say that we will go slow on investment because we don’t trust you fully. The two are inextricably linked.

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