Trump tariff impact: Chinese giants like Haier, Shanghai Highly agree to minority stakes under Indian FDI norms

Shanghai Highly Group and Haier are among Chinese companies that have become more amenable to abiding by Indian conditions for expanding in the country, said people with knowledge of the matter.

This includes retaining only a minority stake in joint ventures, something they weren't keen on, but have been persuaded to do amid the US' escalating tariffs. If Chinese firms get shut out of that market, a presence in India will be important, they said. New Delhi had turned cold to investments from across the Great Wall after border violence erupted in 2020.

Also Read: Unplug China, plug into India: Centre looks to attract US cos planning to exit China


Shanghai Highly, one of the largest compressor manufacturers in China, has revived talks with Tata-owned Voltas for a manufacturing joint venture, and is now agreeable to a minority stake, said the people cited.

PLI Scheme Helps
Another big player, Haier, which is ranked third in the Indian electronics market by sales, has agreed to sell a majority stake in its local operations, they said.

"There is a complete change in attitude of the Chinese companies, who are now extremely comfortable to own minority ownership in an Indian joint venture or form technical alliance," said Rajesh Agarwal, director at Bhagwati Products, a telecom and electronics contract manufacturer. "Chinese companies don't want to lose business since India is a big market and there is scope for exports under the tariff regime. The icing on the cake is the PLI scheme, which will make production cost neutral as compared to China." He was referring to the production-linked incentive scheme for electronic components that the government has just announced.

Also Read: Trump’s executive order on drug pricing could be a booster for Indian pharma industry

Haier was earlier planning to offload a minority stake of up to 26% to a strategic partner since it hasn't been able to pump in money and expand its business in India, with the government not encouraging foreign direct investment (FDI) from China.

But the stake sale process that started last October was delayed. Haier is now in talks with several Indian companies and private equity funds to sell up to 51-55%, industry executives said.

Dragon in Weaker Position
With Trump's tariffs set to make its products much costlier in the US, Chinese companies don't want to be blocked from growing in India and are more willing to accede to terms, industry experts and analysts said.

The government has indicated it will clear joint ventures with Chinese companies, if they have minority ownership, the board is dominantly Indian and the venture offers value addition or brings in a new technology required to grow local production.

Shanghai Highly is even open to a technical alliance, under which it will transfer production lines and technology. A joint venture by Voltas and Shanghai Highly, in which the Chinese company was supposed to own 60%, was scrapped two years ago after their application to the government under Press Note 3 was denied.

According to Press Note 3 norms, any FDI from an entity in a country sharing its land border with India needs government approval. This was aimed at China and came amid rising tensions. Shanghai Highly has also just formed a technical collaboration with listed contract manufacturer PG Electroplast to make AC compressors, under which it will share the technology. The agreement has no equity clause. PG is setting up the plant with a capacity of 5 million units per year near Pune for ₹350 crore.