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Chinese FDI plans put in fast-forward mode

New Delhi, June 15: Desperate for a settlement to the intractable border problem, the government is pulling out all stops to boost business links with China.

Ahead of Prime Minister Atal Bihari Vajpayee’s fence-mending visit to China, it plans to let in several Chinese firms despite objections from Indian firms and security agencies.

Sources in the finance ministry said among applications cleared over the weekend was that of Haier, the Chinese consumer products giant ready to hit Indian markets with low cost white and brown goods — refrigerators, television sets and air-conditioners. Other Chinese plans are likely to be cleared this week.

Security agencies have not allowed Chinese investments in the last two years, despite the thaw in relations.

The Hong Kong based Hutchinson had bid for management of certain ports on the west coast in recent years, but the Intelligence Bureau stalled the plan because of the firm’s alleged links with the Chinese People’s Liberation Army.

Sources say aviation, ports, shipping, telecom and oil and gas are considered extremely sensitive and, as such, applications for these sectors from firms with Chinese links will be looked at with a “great deal of suspicion”.

The drought in investments has, however, not stopped bilateral trade is booming. From $ 1 billion in 1998, two-way trade with China has risen to $ 5 billion. Ficci estimates this could go up to $ 10 billion in three to five years.

Indian companies are spooked by the prospect of being swamped by Chinese consumer goods — toys, textiles and batteries — at prices they cannot match. In terms of quality, they are not much of a threat — until big Chinese companies like Haier and TCL come in.

Unlike western firms, the Chinese have not bothered about investing in production facilities in India. Their operations here have been one of simple import and sales.

Even Haier intends to import completely knocked down kits to be assembled at local plants. It will consider a full-fledged plant after two years. Haier’s entry was opposed by Hotline, its Indian partner in the past.

However, the initial outcry against Chinese imports raised by chambers like Ficci has died down. Chambers are happy with huge steel exports to China, which helped push many local firms of them into the black this year.

However, the two countries are expected to become arch rivals in the export markets of the West as textile quotas are phased out and as China’s infotech capabilities expand.

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