CHINA HAS EMERGED AS ONE OF THE FASTEST-GROWING SOURCES OF FDI INTO INDIA :

China has emerged as one of the fastest-growing sources of Foreign Direct Investment (FDI) into India–it was the 17th largest in 2016, up from the 28th rank in 2014 and 35th in 2011, according to India’s official ranking of FDI inflows.   In 2011, total Chinese investment in India was $102 million. Last year, a record $1 billion of Chinese FDI reportedly came to India, but official Indian and Chinese statistics differ on cumulative figures. The Department of Industrial Policy and Promotion (DIPP) last year estimated that total FDI from China between April 2000 and December 2016 was $1.6 billion. Indian industry analysts and media reports have estimated the figure to be over $2 billion.  “Actual Chinese investment in India is at least three times higher than the official Indian figure,” Santosh Pai, partner at Gurgaon-based Link Legal India Law Services, which provides legal services to members of the China Council for the Promotion of International Trade, told IndiaSpend. Indian statistics capture direct investments from mainland China, but a majority of Chinese overseas direct investment, Pai noted, flows through tax havens such as Hong Kong. Last year, Chinese vice-minister for finance Shi Yaobin was quoted saying China has cumulatively invested $4.07 billion in India, and India has invested $650 million in China. “China will be one of India’s top 10 investors shortly,” Pai said. He recalled his experience of building a clientele in Beijing in 2010. The Indian firm he worked for had no clients in China. He would drive up and down Beijing’s best-known road, Changan, noting down companies’ names on buildings along the way. Later, he would track down those companies online and approach them for business. In six years, his firm’s Chinese clientele grew from zero to 120 companies (the firm has since merged with the one he works with now). Six years ago, investors from the world’s second-largest economy were hard to find in India. Today, India’s largest digital payments company Paytm is 40%-owned by Chinese e-commerce firm Alibaba and its affiliates, and Alibaba is reportedly raising its stake to 62%. China’s fourth-largest mobile phone company Xiaomi assembles one phone every second at a new factory in India. Sixty percent of Chinese FDI is concentrated in the automobile industry. Several companies’ regional offices are located in Ahmedabad, although Chinese companies are gradually moving away from an initial preference for Gujarat towards Maharashtra, Andhra Pradesh, Tamil Nadu and Haryana. Seven smartphone companies from China have launched, or plan to launch, factories in India, according to a February 2017 Chinese media report, Rise and Coexist. Source: Department of Industrial Policy and Promotion Nonetheless, Chinese investment flows into India remain relatively low, both in terms of total FDI flows into India and Chinese outward investment globally. China’s share of total FDI in India is only 0.5%, despite its being the second largest economy in the world and India’s largest trading partner, according to DIPP. Source: Department of Industrial Policy and Promotion This is higher than other BRICS countries’ investment in India–Brazil chalks up 0.01% and Russia 0.37% despite historically robust relations. Yet, China’s 0.5% share pales in comparison with fellow Asian powerhouse Japan (7.7%). Meanwhile, the US, which China recently replaced as the world’s largest economy in purchasing power parity terms, has a 6.13% share in total FDI in India. While China’s FDI flow into India last year showed a relatively significant rise, the figure was negligible when viewed against China’s outbound investment of over a trillion yuan or $170 billion across 164 nations last year–including $45.6 billion in the US alone.  SIFY : 11th. Apr,17

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