BackWelcome Chinese FDI
Welcome Chinese FDI
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The political tensions that flare up between India and China ever so often are well known. Less attention is usually paid to commercial frictions between the two Asian rising powers, be it toys or power equipment or telecom investment.
All this heat is against the broader backdrop of Chinese mercantilism that depends on a rigged exchange rate to help maintain export competitiveness, a strategy that directly harms other Asian nations which are trying to export to the rich countries.
However, there are welcome episodes of cooperation as well, most of which are driven by business investment across borders.
Mint reported on Wednesday that Chinese telecom firm Huawei had revenue of $2.3 billion from India in 2009, 10 times more than its local revenue in 2005. The company had also said in January that it plans to invest $500 million in India.
Huawei continues to fight regulatory battles in India. For example, state telecom firm Bharat Sanchar Nigam has cancelled a huge $2 billion equipment order given to the Chinese firm even as the Indian government imposed anti-dumping duties on telecom equipment vendors including Huawei.
Meanwhile, the Financial Times reported on Tuesday that a group of Chinese grey market telecom handset makers plan to invest in India to gain legitimacy in their biggest export market, where the government quite rightly has tried to block them because they violate patents and do not offer identification numbers that are needed on phones for reasons of internal national security.
A senior official of the group told the newspaper that members of the group want to collectively produce around 10 million phones a year in India.
There are good reasons to believe that Chinese firms often dump goods in countries such as India to grab market share. But low-cost Chinese equipment also helps keep down project costs and hence final costs to the consumer, be it in power or telecom.
Business investment by Chinese firms is a good way to get around the overall climate of suspicion, other than sectors where there are national security concerns, such as ports or telecom services.
Should India welcome more Chinese FDI? Tell us at views@livemint.com
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