India should be cautious of rising Chinese investments
May 7, 2015

China-to-India-5502Chinese companies are keen now more than ever to invest in India, with a long term vision on rich dividends in the years to come. With a stable economy, government and smart apex bank governor, India is China’s golden ticket. Besides Jack Ma who showed interest in investing in Indian technology firms earlier this year, the Wanda group, the world’s largest property developer with interest in culture and tourism, ecommerce and department stores is also keen on investing in India.

The property major is in talks with the government of Haryana to develop 100 square kms into an industrial and township zone. While final approvals are yet to be sought for Wanda, Guangdong’s Wangtat Construction and Investment Holdings Group recently met with Vapi-based Payal Properties Pvt Ltd to develop an industrial park in Bharuch district. The park is expected to cover 300 acres and is likely to witness an investment of Rs 1,000 crore. It is expected to house industrial units from automotive, pharmaceuticals, textiles, electricity generation equipment as well as electric transmission and distribution sectors.

Besides industrial parks, Chinese financial groups are also keen on India. Recently, Shanghai-based Haitong Securities, valued at US$21 billion, set foot into India by acquiring Espírito Santo’s domestic business. Haitong currently has operations only in the investment banking space but soon plans to expand into the institutional trading business. Another major Chinese investment bank operating in India is Citic Securities. Both land deals are being promoted by the Chinese Embassy in New Delhi and are part of a larger plan to develop multiple industrial parks across India. Inchin Closer had written about Beijing’s plan to develop these parks last June.

While the Indian government was earlier reluctant to give China pieces of Indian territory to build on, the Make in India plan seems to have given the deal an impetus. The slowing Chinese economy, through these industrial parks is expected to boost Chinese manufacturing in India. However, little attention is being paid to the environment. China due to western pressure has had to amp up her environment regulations, however India which still lags behind on protecting her flora and fauna is permitting manufacturing sans strict environment guidelines. Analysts therefore fear that many of China’s low end manufacturing will move to India.

The problem will only be excaberated by these industrial parks which will offer massive incentives to Chinese firms to manufacture in India with abysmal environment laws. As Chinese companies move up with value chain, inflation increases and the rmb tumbles, a greater number of low end Chinese firms will establish themselves in lower end economies such as India.

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