HomeNewsDiplomatic NewsIndia to ease Chinese investment curbs if border stays calm

India to ease Chinese investment curbs if border stays calm


Davos, 18 January 2024 (TDI): If the India-China border remains peaceful, India may ease its heightened scrutiny of Chinese investment. A senior Indian official hinted at the possibility, marking the first signal in four years that the authorities could lift the curbs.

At Davos, Rajesh Kumar Singh, a top industrial policy bureaucrat, revealed on Wednesday that the longstanding border tensions, the primary irritant between nuclear-armed Asian giants, have eased. This positive development may pave the way for enhanced investment ties. Singh shared this insight during the annual World Economic Forum meeting in Davos, Switzerland.

In 2020, India enhanced scrutiny of investments from neighboring countries. The process now includes thorough vetting and security clearances, reinforcing national security measures.

Clash between Chinese-Indian troops

A clash erupted between Chinese and Indian troops on their disputed 3,800-km (2,400-mile) Himalayan frontier. The confrontation resulted in the loss of at least 20 Indian and four Chinese soldiers, marking their most severe military conflict in decades. In response, this move is widely perceived as a form of retaliation.

The imposed restrictions have disrupted billions in investments between the world’s two most populous nations, halting planned projects. This includes ventures by Chinese automakers such as BYD (002594.SZ) and Great Wall Motor (601633.SS). The impact extends across various sectors, impacting the flow of funds and stalling crucial initiatives.

The investment rules “could change once our relationship there stabilises because I think the border issues that we’ve had – the border has stabilised”, Singh, secretary at the Department for Promotion of Industry and Internal Trade, said in an interview.

“On the investment side also, if things go well, I’m sure we can resume normal business.”
He did not give a timeframe for a possible easing.
Asked if India’s message was that Chinese investment depend on a peaceful border, Singh said, “You can’t have somebody nibbling at your border while at the same time having red-carpet treatment for investments from there.”
While discussing investment curbs, he mentioned a minor ‘step back’ in India’s overall openness to foreign investment. In recent years, India has notably eased barriers for inbound investment, reducing or eliminating foreign ownership limits in various sectors and providing automatic approvals.

Trade between China-India

Despite ongoing border issues, China remains India’s primary import partner. Bilateral trade has surged by 32% amid tensions, reaching nearly $114 billion in the fiscal year ending in March.
In 2022, Indian and Chinese troops clashed twice, despite ongoing peace talks. New Delhi and Beijing, which engaged in a brief border war in 1962, initiated a series of diplomatic and military discussions to resolve the conflict.
The two neighbors must find a way to step back from potential confrontation in the western Himalayas, Indian Foreign Minister Subrahmanyam Jaishankar said in June.
But Singh said, “In the last year or so, there haven’t been any incidents. So I’m expressing the general hope from the business community that things will, you know, stabilize and improve.”
A mechanism to review foreign investments from all countries, resembling those in the United States and Australia, is an option India could eventually consider, Singh said, adding no decision has been taken as India would want to maintain a “welcoming environment” for investments.
Syed Mohammad Sibtain
Syed Mohammad Sibtain
I am currently pursuing a BS in International Relations at NUML, Pakistan. My academic journey is fueled by a passion for exploring historical developments, delving into the intricacies of economic ties, and gaining insights into defense and strategic studies. With a keen interest in the dynamics of international relations, I am committed to acquiring a nuanced understanding of global affairs and contributing meaningfully to the field.

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