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    China terms India's new FDI policy as discriminatory, violative of WTO guidelines

    China terms India's new FDI policy as discriminatory, violative of WTO guidelines

    China terms India's new FDI policy as discriminatory, violative of  WTO guidelines
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    By CNBC-TV18  IST (Updated)

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    China has responded to India’s latest amendment in the Foreign Direct Investment (FDI) policy 2017 terming it as discriminatory practices and violative of WTO guidelines.

    China has responded to India’s latest amendment in the Foreign Direct Investment (FDI) policy 2017 terming it as discriminatory practices and violative of WTO guidelines.
    To curb opportunistic takeovers or acquisitions of Indian companies due to the current COVID-19 pandemic, the Department for Promotion of Industry and Internal Trade (DPIIT) revised its foreign investment policy, making it much difficult for companies from countries sharing land border with India, including China, to invest in the country.
    In a statement issued on Monday, spokesperson of the Chinese Embassy in India Counselor Ji Rong said, "The additional barriers set by Indian side for investors from specific countries violate WTO’s principle of non-discrimination, and go against the general trend of liberalization and facilitation of trade and investment. More importantly, they do not conform to the consensus of G20 leaders and trade ministers to realize a free, fair, non-discriminatory, transparent, predictable and stable trade and investment environment, and to keep our markets open."
    "Companies make choices based on market principles. We hope India would revise relevant discriminatory practices, treat investments from different countries equally, and foster an open, fair and equitable business environment," the statement added.
    As of December 2019, China’s cumulative investment in India has exceeded 8 billion US dollars, far more than the total investments of India’s other border-sharing countries.
    "The impact of the policy on Chinese investors is clear. Chinese investment has driven the development of India’s industries, such as mobile phone, household electrical appliances, infrastructure and automobile, creating a large number of jobs in India, and promoting mutual beneficial and win-win cooperation. Chinese enterprises actively made donations to help India fight COVID-19 epidemic," the statement said.
    The government’s move is effectively going to bring the billions of dollars of future Chinese investments into Indian startups and the tech ecosystem under government scrutiny, which is likely to affect deals.
    According to a February 2020 report by think tank Gateway House, Chinese tech investors have put an estimated $4 billion into Indian start-ups. The report also points out that 18 of India’s 30 unicorns are Chinese-funded. This includes the likes of Flipkart, Ola, Oyo, Byju’s, BigBasket, Zomato and several others.
    Gateway House also identified over 75 companies, with Chinese investors concentrated in e-commerce, fintech, media/social media, aggregation services and logistics.
    For many startups, Chinese investors are the go-to option given the dearth of Indian capital and higher risk-taking among Chinese backers.
    Given that deal flows will be hit due to the slowdown from the Covid-19 crisis, capital-strapped startups looking for Chinese funding may see discussions being impacted or slowed down.
    "Several startups nearing funding closures could be affected due to this restriction (only with govt approval) from FDI from China. Even if approval finally comes in, it usually takes quite a bit of time and the investee company may not be in a position to wait for the funds. This will sound a death knell to future Chinese investments." Says Amit Maheshwari, Tax Partner at AKM Global a consulting firm.
    Apart from Chinese capital, Chinese companies themselves have significant market share in India. The Gateway House report says TikTok has 200 million subscribers and has overtaken YouTube in India. Chinese smartphones like Oppo and Xiaomi lead the Indian market with an estimated 72 percent share, leaving Samsung and Apple behind.
    The report also highlights that Chinese funds and companies often route their investments in India through offices located in Singapore, Hong Kong, Mauritius etc. For example, Alibaba’s investment in Paytm was by Alibaba Singapore Holdings Pvt. Ltd. These, the report said, don’t get recorded in India’s government data as Chinese investments.
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