Government of India issued order a few days back, stipulating that any foreign direct investment in Indian companies from the countries which share border with India, require permission from Government of India. In other words, it means that there cannot be automatic investment in Indian companies from the countries sharing border with India.
Obviously, this rule has been imposed to prevent Chinese companies, that have deep pocket, from taking over Indian companies, utilizing the steadily decreasing equity share value due to COVID 19 crisis in India.
Like devil quoting scripture, China has said that this Indian regulation is against WTO norm.
Misinterpretation of WTO rules
Obviously, China is deliberately misinterpreting the WTO regulations.
Not only India, but a few other countries like Germany, Spain , Taiwan have also imposed severe restrictions on Chinese companies buying equity in the companies based in those countries.
WTO stipulations predominantly is related to trade restrictions and customs duties chargeable across countries. Buying the equity share of company in one country by the company in another country strictly does not fall under the scope of World Trade Organisation norm and therefore, China’s contention that India has violated the WTO regulations is disputable. Several countries across the world scrutinize and restrict take overs / mergers by companies, keeping the overall short term and longterm interests of the country in view.
For example, there is competition law in use within the European Union. The purpose of the competition law is to ensure the maintenance of healthy competition within the European Single Market by regulating anti-competitive conduct by companies, so that they do not create cartels and monopolies that would damage the interests of society. This law is to prevent take over of one company by another or mergers between companies that may result in monopoly in the production of products and services and lead to exploitation.
WTO regulations clearly recognize the right of any country to protect it’s trade interest by imposing safeguard duty or anti dumping duty on any product imported from another country, after conducting detailed enquiry and providing justifications. China itself has imposed anti dumping duty on several products exported to China from countries like USA, India, Japan and others. While WTO is concerned about trade dealings of products between countries, it is not with regard to “equity trading”.
Worldwide fear of China’s dominance
Now, there is worldwide fear of domination by China in the coming years and China has not concealed its intention to dominate the world, by adopting variety of means including claiming the territory of other countries, taking over several international companies etc.
The OBOR scheme launched by China, is another move of Chinese government to extend it’s influence over other countries by building infrastructure facilities in other countries using Chinese equipment and products and extending huge loan to other countries to increase their dependence on China.
Countries like Sri Lanka, Pakistan, Bangladesh, Nepal and a few countries in Africa now owe huge debt to China, which they will not be able to repay in the foreseeable future. The result of this situation is that several assets of the debt ridden countries would go into the hands of Chinese companies and Chinese government.
The recent example is the Hambantota port in Sri Lanka, which has been virtually handed over to Chinese company by Sri Lankan government to reduce its debt burden to China. In the case of Hambantota port, Sri Lankan government has given 99-year lease to China in place of debt payment.
China’s domination over Pakistan is now almost complete with several mines, infrastructure projects, and portal ready under Chinese management, Gwadar port in Pakistan is now under China’s control for all practical purposes, with Pakistan government handing over the management of this strategic port to China. So many other examples can be pointed out.
India’s act in self interest
Government of India has adopted the right strategy by restricting the investment by Chinese companies in Indian companies to prevent India going under control of China to unacceptable level. What India has done is in its self interest and this step is not really much different in essence from the provisions of antidumping duty and safeguard duty permitted under WTO regulations. China is crying foul about India’s move to restrict the investments by Chinese companies, as it clearly implies that India is resisting China’s game plans.
China has to pay the price for its game plan
The world is increasingly becoming aware about China’s long term intentions of dominating the world and before long, several other countries would initiate measures to safeguard their interests and protect themselves from China’s domination by restricting investments by Chinese companies.
China certainly would not be pleased about such happenings, but it has to pay the price for its aggressive attempts to dominate the rest of the world.