NEW DELHI: Days after India tweaked its Foreign Direct Investment (FDI) policy, China on Monday hit out at New Delhi claiming that the move was against liberalisation and guidelines of the World Trade Organization.
“The additional barriers set by the Indian side for investors from specific countries violate WTO’s principle of non-discrimination and go against the general trend of liberalization and facilitation of trade and investment. More importantly, they do not conform to the consensus of G20 leaders and trade ministers to realize a free, fair, non-discriminatory, transparent, predictable and stable trade and investment environment, and to keep our markets open,” the Chinese embassy said in a statement.
India on Saturday had changed its FDI policy and mandated all countries that share a border with it to approach the government for investing in India.
Earlier, only Pakistan and Bangladesh were mandated to take the government route but now it mandates China, Nepal, Bhutan and Myanmar to do the same.
There has been growing concern across the world that Chinese firms are buying assets which have been affected by the COVID-19 pandemic.
Countries such as Australia and Germany have also made their FDI policy more stringent in a bid to protect domestic companies.
The move to tweak the FDI guidelines is being seen as India’s efforts to keep a check on Chinese takeovers of its companies Recently, China through its central bank — People’s Bank of China — had increased its share in HDFC from 0.8 per cent to 1.01 per cent.
The tweak of rules has been welcomed by most but small companies, who get their foreign investments through the Foreign Portfolio Investment (FPI) route which consists of securities and other financial assets held by investors in another country.
It does not provide the investor with direct ownership of a company’s assets.
While the FDI is regulated by the finance ministry, the FPI is regulated by the Security Exchange Board of India (SEBI).
Experts feel that the lack of foreign investments for small companies could lead to their demise.
“For example, Alibaba founder Jack Ma has a stake in PayTM and Chinese investments in India through FPI are around $1.1 billion. If they are stopped from further investments, it could lead to many small companies shutting shop,” an economics faculty from Delhi University said.
The embassy, meanwhile said, that Chinese investment has driven Indian industries like mobile phones, electrical appliances etc and has proven to be mutually beneficial for both countries.
“We hope India would revise relevant discriminatory practices...” the statement said. The MEA did not respond to queries.