ISSN 2330-717X

Chinese Investment To Rejuvenate Make In India, Which Lost Steam – Analysis


Unlike Sino-Japan hostility, which is unabated, Sino-India hostility is receding in economic cooperation. For Indian Prime Minister Narendra Modi, China is not a foe, but a friend. Leaving aside the political row, India and China are moving towards a new era of economic friendship. Though China became the biggest trade partner of India for over half a decade, Chinese gushing exports widened India’s trade deficit. This caused a major concern for India.

Situation witnessed a volte-face after China made an aggressive attempt in investment in India. This led to a cascading impact on China’s exports. Chinese exports declined and eventually narrowed down  the trade deficit . This evoked a new synergy between India and China trade relation.     

During past  two years Chinese investment spurred in India . It increased by 136.8 percent in 2018 – from US$ 165.2 million in 2017 to US $ 391.2 million in 2018. Five years ago, it was merely US$ 72 .3 million in 2013. Correspondingly, its export to India declined, bringing a positive impact of narrowing trade deficit . Trade deficit with China – which heightened to US $ 63 billion in 2017-18 – declined to US $ 53 billion in 2018-19. 

Seen from the perspectives of investment in India, where domestic investment is sluggish, Chinese investment is viewed a bliss. Coupled with slump in  consumption, the situation became a drag on  GDP growth.  Notwithstanding, foreign investors were unperturbed and  poured in cash , reposing confidence in strong parameters of the Indian economy. Amidst this paradoxical situation, China emerged a new brand of potential investor, leaving aside the  political row. 

Chinese media was upbeat on growing Chinese investment in Indian market. According to Global Times – a Chinese media – “More Chinese phone makers are considering relocating their production bases to Indian market”. Addressing this movement, it said further “Chinese companies are bringing their assembly lines to India are exactly what the  country needs to recover economic momentum and revive Make in India”.

Caught in the uncertainty over domestic investment, foreign investment is seen a strong insulation to drive the Make in India movement. Chinese investment, though small as compared to investment by  leading investors like Singapore, Japan, Netherland, UK and USA, is considered more pertinent to Make in India initiative.

Make in India  depends on four main pillars. First, to boost  manufacturing and gain more share in GDP. Second, to make India a global hub for manufacturing. Third, manufacturing should widely be spread length and breath in the country. Lastly, manufacturing should be the main aim for employment  generation. To this end, Chinese investment are considered pertinent  to Make in India principle objectives.

Today, India is the second largest producer of mobile phones in the world , according to Chairman of India Cellular and Electronics association ( ICEA). From a mere two companies manufacturing mobile phones in 2014, today the country has 265 manufacturing companies of mobile phones and accessories, with substantial investment from China.

India is the second biggest market for mobile phones in the world – ahead of USA and behind of China. In smartphones, China established a strong foothold in Indian market, outsmarting Koreans.  Over 67 percent market share of smartphones is held by Chinese companies in the country. Of the top six smartphone makers, four are Chinese. They are Xiaomi, Vivo, Realme and OPPO.

Market leader Xiaomi, which had one manufacturing unit in 2015, now has seven facilities in the country 

Nearly 95 percent of mobile demand in the country is met  by domestic production. This exemplifies the success of Make in India, driven by Chinese investment.

Chinese companies made an active role to boost start-ups in the country. Start-up is a new movement for technology  manufacturing. It also enhanced  employment opportunities. During past two years,  China made a big entry in financing e start-ups and made  a strong pitch for  the growth of this sector in the country. According to an estimation, Chinese VCs ( Venture Capital) invested US $ 5 billion in 2018, compared to US $ 3 billion in 2017 and US $ 668 million in 2016.  

 Among the top Chinese investors were Alibaba, Shunwai Capital, Fosun,  Tencent and Xiaomi. Sectors , which attracted Chinese VC funds , are consumers, food-tech, logistics, retail,  AI ( Artificial Intelligence) and  IOT ( Internet of Things).  

In the first wave, Chinese VC majors entered in technology start-up. E-Commerce giant Alibaba is a case in point. It invested large sum in Snapdeal, Paytm and  Big Basket. Tencent invested in food delivery , such as Swiggy, gaming   Dream11 and online insurance, like Policy Bazar.

In the second wave, investment came from financial investors, such as Shuewei Capital. It invested in food delivery start-up, such as Zomato. 

Thus, Chinese investment unleashed a big solace to Make in India. It drove Indian manufacturing sector in new technology sector, such as mobile phone. It created new job opportunities by boosting star-ups and making India a strong hub  for global  mobile phone manufacturing. And, lastly it  shadowed India’s concern over trade deficit.

Given the Chinese investment binge and it being an important member of BRICS,. Chinese investment harps on uptick in India’s growth trajectory through a new face of Make in India. Underpinning the Chinese significance in increasing the investment, which is the need of the day  for revival of the economy, NITI Aayug evinced interest in Chinese investment.

Both NITI Aayug and National and Reform Commission of China entered several agreements for economic cooperation in 2016. Niti Aayug Vice Chairman Rajiv Kumar urged Chinese investors to invest export oriented industries and export to the world, after losing opportunities in USA due to trade war.   

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Subrata Majumder

Subrata Majumder is a former adviser to Japan External Trade Organization (JETRO), New Delhi, and the author of “Exporting to Japan,” as well as various articles in Indian media, including Business Line, Echo of India, Indian Press Agency, and foreign media, such as Asia Times online and Eurasia Review .

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