And here’s the Great Wall of India

And here’s the Great Wall of India

Chinese firms need to wake up and smell the coffee. The world wants to know the colour of money now. Where does it come from? What is the intent of this money?

China and India, in that order, have been in the news for the right economic reasons for a long time now. The two nations comprise 37% of the total population of the world. The biggies are possibly the largest consumption hubs for everything a human can eat, drink or partake as commodities and brands.

The two nations have recorded the fastest pace of growth in GDP terms, one behind the other. And each seems to want to make a point of its own. China says communism does it for them. And India says democracy is the ultimate elixir of it all. And both vie with one another to pit the two political and economic models one against the other. And the two have been at war forever as well, it seems. Hotheaded and cold war alike.

The amendment of the Foreign Direct Investment policy to put a ban on investments through the automatic route by entities from countries that share a border with India is long-pending and an interesting decision. This DPIIT (Department for Promotion of Industry and Internal Trade) announcement of April 18 seems to want to stop both direct investments and indirectly routed ones via Singapore or Hong Kong.

To that extent, this looks like a blanket ban policy that means what it says for now. For now.
An economic pandemic: The fact remains that we are in the midst of a health pandemic, and equally importantly, are going through an economic pandemic that has had Indian companies in a tizzy. The markets, its movers and its men are scurrying. The stock market has taken a bad beating. The markets have been waiting for investments from overseas to stoke the sentiment of domestic players to participate and play as well. And here comes the walling of China. A bit of a beating really.

The stock market play is a forever hope-oriented play on FDI for now. And the biggest destination from which all this is expected is from the US and China. The biggest selfish point of hope has been the stated and unstated desire that the position of China as a manufacturing hub of the world is going to be shaken, stirred and re-positioned.

The continent of hope: The ardent hope in India, and possibly many other emerging markets of the world such as Vietnam, Mexico and Ethiopia, would be that many of the manufacturing bases that plan to shift out of China will come to them.

Thus far, the high ground of India has been the fact that it is the image leader in terms of IT and the ITES industry and that of China is its manufacturing muscle. The hope that India seems to thrive on at this moment is that IT and ITES will hold their image positions, being solution providers to the world, and that China will lose its manufacturing label of repute to India.

The only problem for this seamless shift, if at all, is the big fact that we are infrastructure challenged. China has a ready-made infrastructure built, tested and operationally fit across the facilities at its many ports, air hubs, shipping centres, logistics and land-transfer fleets, and its famed manufacturing clusters. As hopes of every kind float around, China has been really active on the count of being the much-needed funder of world growth. Chinese companies have been active even through the pandemic, with clear examples being the recent hiking of investments in HDFC Bank by the PBOC (People’s Bank Of China).

Money is what money buys: If you look deeper and beyond, and if you believe in conspiracy theories of every kind, China has taken sure-footed steps to be in India with as much depth and vigour as it is allowed to demonstrate.

The category of e-commerce, pharmaceuticals, specialty chemicals, fintech and edtech, among many other sunrise sectors of the Indian market, have deep investments from Chinese firms. If the investors are a Tencent, Alibaba and ByteDance, the beneficiaries are a Flipkart, MakeMyTrip, Big Basket, Paytm, Byjus and Ola!

The truth is that there is a little bit of China in every sunrise industry in India. Do we want more of China or less of it is the point to debate. While the Chinese perspective is one that says money must find its way to fund the best enterprises globally, with the mindset that geography is history, the world may not look at it in the same easy manner.

China and companies of Chinese origin and investment intent need to sit up and smell the coffee. The world is becoming more and more difficult. The world wants to know the colour of money now. Where does it come from? What is the intent of this money? Where and how was it generated? And many uneasy questions of those kinds for sure.

China will now equally want to hedge its bets on manufacturing. If companies decide to move manufacturing out of China into India, Vietnam, Canada, Mexico or any other competing country, China might still want to be the funder of that shift. Ownership today is not necessarily only geographic. Ownership is what money buys. And the yuan is looking for that ownership. And money does speak.
And where will this money speak more? In Sri Lanka? In Vietnam? In Mexico? We need to wait and watch. The world economy is in a shambles. Every country will want to uplift itself from the morass left behind by Covid-19. While India has built a wall against predatory investments for now, it needs to be seen as to how this policy will change with time.For the moment, India has just about introduced China to “The Great Wall Of India”. Touché!

Harish Bijoor is Brand Guru & Founder,Harish Bijoor Consults

(Email address: harishbijoor @hotmail.com)

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