NEW DELHI: As Chinese President Xi Jinping and Prime Minister Narendra Modi tango at a series of summits over the last few years, Chinese investors led by venture capital (VC) funders by the likes of Alibaba have invested in ever-increasing waves in the Indian market, especially in tried and tested start-ups such as Ola, Paytm, Snapdeal, Bigbasket, Oyo, Zomato and Snapdeal.
According to analysts, Chinese investors have put in over $12 billion in manufacturing over the last five years since Modi and Xi started trying out to normalize relations.
However, the more significant surge has been in VC funding space where Chinese investors have pumped in huge sums with investments going up five-fold to $5.6 billion in 2018 as against a mere $700 million in 2016.
It all started with Alibaba Group’s investment of $685 million in Paytm in two tranches and $500 million in Snapdeal four years back. In the same year China’s Tencent put in an undisclosed amount and Didi Chuxing put in another $500 million in Uber’s Indian rival Ola.
Following years saw even bigger ticket investments being made with Tencent investing $1.1 billion more in Ola and Alibaba Group taking a stake in Zomato and Paytm. In 2019, smaller ticket but strategic deals like Shunwei Capital putting in $62 million in Zomato, Fosun putting in $413 million Delhivery and Alibaba investing $150 million in BigBasket were struck. During the same period, Chinese investment in manufacturing also picked up speed with companies like Huawei, Xiaomi, oppo, CNTC, Haier, Fosun Pharma and SAIC Motors investing in Indian facilities amounts ranging from $110 million to 1.1 billion.
“The Chinese follow the China plus one market’ formula where it targets developing economies so that they can invest to either sell products — say a telecom player like Oppo will invest in basic manufacturing facilities in India — where components produced in mainland China could be sold. This gives them a new market, reduces their dependency on home market and allows capital transfer to markets with high returns,” said Biswajit Dhar, professor, JNU.
However, the investment in Indian Unicorns or start-ups, which have proven their business model by the likes of Alibaba and funds like Ant financial and China Eurasia Economic Cooperation Fund are not only profitable from the investment of China’s huge foreign exchange reserves but also to absorb business know-how in these firms. “They have also stepped into the services sector in India in a big way for two more reasons – firstly it’s a virgin market where they can compete as equals with western giants like Walmart or Uber and secondly they believe they can learn from strong Indian service sector start-ups,” said Dhar.
In a book, "Running with the dragon: how India should do business with China", author and Beijing-based China-watcher Saibal Dasgupta argues that only a portion of the total Chinese investments come from Mainland China. A good part of it is routed via subsidiaries of Chinese firms based in other countries including the US, Hong Kong and South East Asia.