The Coronavirus pandemic has sounded the death knell of Chinese investments in Indian companies and the Union Government is preparing itself for bringing the sledgehammer that could potentially remove even the smallest trace of Chinese Yuan from the Indian companies.
According to a report in TOI, Foreign direct investment (FDI) proposals with even minuscule Chinese holding will need government approval. An inter-ministerial group met this week and started working on preparing the guidelines that would be followed by ministries ranging from commerce and industry to power and telecom.
The motions leading up to this potential shake off had started in early April when it was found that People’s Bank of China- the Central Bank of the People’s Republic of China, had acquired 1.01 per cent stake in India’s top lender, Housing Development Finance Corporation (HDFC). This was really an alarming financial investment by the Communist regime of China, and according to the data submitted by HDFC at the Bombay Stock Exchange (BSE), the People’s Bank of China reportedly acquired as many as 1.75 crore shares in the quarter ended March.
As soon as the report hit the newsstands, the government instantly went into a course-correction mode. Reported by TFI, within a week, the Modi government altered its FDI policy to avoid predatory financial investments specifically from Beijing targeting debilitated corporates.
The pre-revised position only restricted Bangladeshi and Pakistani entities/ citizens into investing only under the Government route. But according to the revised guidelines, “an entity of a country, which shares land border with India or where the beneficial owner of an investment into India is situated in or is a citizen of any such country, could invest only under the Government route.”
In April, the government had discussed the option to set the threshold at either 10%, the provision in the Companies Act, or 25%, the prescription in the Prevention of Money Laundering Act.
However, it looks like the government is not willing to cede an inch to the Chinese and, therefore, it is all but ascertained that there will be no minimum or maximum limit.
“The (Cabinet) decision did not mention a minimum or maximum limit. So, even it is a small fraction, it will be covered,” a government official was quoted as saying to TOI.
Moreover, to leave no room for a workaround for Xi Jinping and his Chinese investments, the finalized guidelines are expected to include FDI flows from Hong Kong.
While PM Modi or his cabinet might not have responded to the Taiwanese PM Tsai Ing-wen’s birthday wishes, the government through its work is looking to recognize Taiwan as a separate entity from China. According to the report, Taiwanese investments are expected to be exempted from the requirement of mandatory clearance. This could potentially be a huge move as it will indicate that India has shifted from its traditional “One China Policy”. Beijing to-date maintains that Taiwan is a part of mainland China.
Chinese tech giants like Tencent and Alibaba through investments in Indian companies have managed to create their own small yet dangerous ecosystem. In the aftermath of the COVID-19 pandemic and the Galwan valley incident, the central government is taking one radical step after another to weed out the influence of Chinese encroachment in the country.
First came the FDI alteration, then came the ban on Chinese espionage apps and the subsequent capturing of strategic positions in Pangong-Tso and now leaving no leeway for Chinese investments that could evade the government eye. Add to it the diplomatic message New Delhi is sending to Beijing by keeping Taiwan out of the guidelines and one can eventually figure out that the Modi government is pressing all the right buttons when it comes to hurt Chinese interests.