How China’s expansion gaining momentum through its shrewd investments in India?
A myopic strategy behind China’s exponential investment affair: Today many sectors of the Indian market are seen aggressively growing, where many news startups and ventures taking place with promising future orientations. And one the prime aspect for these businesses are aligning themselves with promising shareholders. Recently, it has been observed that Indian startups have attracted the majority of investors from Chinese big business houses. In terms of FDI flow, China ranked 17th largest investor in India in 2016, while in the year 2014 it was on 24th position. Verily China has emerged as the most trusted investor in India as the marketers said they certainly stay for long without a possible early exit as done by western venture capital fundraisers.
India is the 5th largest and the fastest growing economy in the world. And extracting this advantage Chinese investors are making clear that like-minded business approach and working model are bringing them closer to the digital ecosystem and hyperlocal startups in India. The increased investments from China is also in the lieu of Silicon valley’s cold shoulder to the Chinese investments.
By investing in existing digital startups, Chinese companies minimize the risk and operational costs of establishing an independent, competing for presence. Furthermore, it is in China’s interests to see Indian digital startups flourish.
The rise of American e-giants like Amazon and Uber reduce the space for Chinese firms to achieve international growth, sometimes even threatening their stronghold at home. For instance, during the market access war between ride-sharing company Didi and Uber in China. Didi invested an unpublicized amount (estimated at US$10 million) into Ola – an Indian ride-sharing startup currently engaged in its own battle for the Indian market with Uber.
The heavy influx coming from neighbouring country China boosts the morale of Indian companies as well. It has also helped the Chinese slowing economy to mark a positive shift through investment in a growing economy like India. Because of the paucity of opportunities in their homeland in China, the investors made inroads in the vast startup platform on India.
This is considered as a smart move as gradually as these Chinese firms raise their stake and begin influencing the political environment in India.
Until 2015, Chinese investors were absent in large investment deals (more than $100 million) in India. That’s when a couple of such deals were closed by China’s Alibaba ($500 million in Snapdeal and $700 million in PayTm). This was the time when a number of smartphone users as a percentage of mobile phone users in India crossed 25% – a milestone that had triggered growth in China’s own e-commerce market several years ago.
This trend continued in 2016 when China’s Tencent invested $150 million in Hike, an Indian messaging app. In the same year, a consortium of Chinese investors paid $900 for media.net, making it the single largest investment from China in India ever. Thus within two years, the digital industry emerged as the largest recipient of Chinese investments in India.
Seven smartphone companies from China have launched, or plan to launch, factories in India, according to a February 2017 Chinese media report, Rise and Coexist.
Until now, China’s ballooning economy provided much of the capital and opportunities for the investors. But after a global slowdown in the demand for Chinese goods, investors had to find gruelling interests across its border.
The cultural and geographical proximities between the two Asian giants resulted in an outburst of investments in India.
“The huge change now is that a lot of Indian entrepreneurs talk of Chinese examples. They are no longer saying I am building the Amazon of India. They say they are building the Alibaba of India. Often, people point out, ‘O, this happened in China.’ That is an interesting shift,”
said Tej Kapoor, executive director at Fosun India Management, which is reportedly armed with a $200-million fund to invest in 10-12 startups over the next two years.
The two developing economies are working together to improve the business environment where language barriers do not become an investment barrier.
Some industry players complain Chinese investors tend to speak among themselves in Mandarin, instead of engaging in an open discussion in English, while others blame Chinese investors who are unaware of India’s complex legal system.
Ixigo founder Alok Bajpai initially found it difficult to communicate with Fosun Kinzon Capital as the language barrier pitched in. But later on, he was convinced that Chinese investors will not shun them and will remain as a long-term investing agency.
Despite several political disagreements like stand-off at Doklam, china blocking India’s entry in Nuclear Suppliers Group, the veto by China, Chinese investments have increased in India. This upsurge in throwing millions of dollars in India is also to become influential in the political scenario. The Indian companies in which Chinese investments have multiplied may change Indian perspective towards Chinese goods as Chinese goods are being criticized much here in lieu to make indigenous products apprehensive and increase domestic production.
Dragon flying high in the world…
Not only in India, China is also accelerating their investments throughout the world. A major factor for this heightened Chinese around the globe is that China believes in the expansion. China has lately shown that its investment in any country has resulted in much political influence within that nation. This comes along with a global decline in demand for Chinese goods and declining economy.
Thus, China has made it very clear that in its engagement with several nations will enhance trade benefits and political inclination in its favour as well as it might appear to the USA that recent trade embargos may not affect the Chinese expansionist policy.
India is one of the crucial investment centres for the Chinese firm, but their strengthening investment roots are more likely to harm Indian economy. Indian government needs to look at the investments as a caution so that the business deals do not force political scenario or favour the actions in context with China.