India, China may build new framework for investments

New Delhi: India and China are exploring a new framework to facilitate business-to-business exchanges and Chinese investments, with a focus on accelerated capital flow, as the neighbours cautiously move to rekindle commercial ties amid a broader thawing of diplomatic relations, said people familiar with the developments.

For one, Beijing may unveil an investment package for India, including a special economic zone with easier access to the sea route, during Chinese President Xi Jinping's visit for the BRICS summit on September 12-13, they said. Xi will be meeting PM Narendra Modi in New Delhi, groundwork for which was laid during NSA Ajit Doval's just-concluded visit to Beijing, one of the persons said.

Of particular note is a likely push by Beijing for its electric vehicles, including leading EV maker BYD, into the Indian market.


Also read: Before Xi Jinping's likely India visit, Chinese money is pouring in

Smoothening the Route

This, while China continues to weaponise supply chains.

Another proposal on the table is third country exports from a proposed export processing zone in India built with Chinese funding, the person said.

The overall investment package may not be huge since the two sides are currently focused on steadily improving overall ties and managing differences after a six-year freeze. The Chinese side, however, wants to capitalise on Xi's first visit to India since 2019, and is keen to make announcements for possible investments including in the export processing zone, the person said.

Further easing the approval process for Chinese investments in non-strategic sectors is also being examined, a second person said. "Substantial easing has already been done but there can be scope for some more steps," this person said.

A third person, however, highlighted certain areas barred to Chinese investments, including projects along the Line of Actual Control, besides defence and other sensitive sectors.

New Delhi is intent on getting Beijing's assurance on smoother access to technology and critical raw material supplies, the person said. There are efforts for further easing, strengthening and bringing predictability to this route for the benefit of Indian industry, the person said.

Also read: China's Xi likely to visit India with big delegation for first time in seven years

Noted China expert and Jawaharlal Nehru University's Professor Srikanth Kondapalli cautioned that merely making announcements doesn't signify automatic implementation. This is evident from the abysmal track record of China's 2014 announcement of $20-billion investment in India during Xi's first visit to India, with total investments of only $2 billion in the last 12 years, Kondapalli told ET.

Prior to Covid-19 and the Galwan Valley clashes, there were around 1,000 Chinese companies operating in India, which has since declined. That may make a slow revival post Xi's New Delhi visit.

The Indian side is insisting on enhanced Chinese investments, and for Beijing to increase imports from India, including industrial goods to narrow the large trade deficit.