China Cries Foul, Seeks Review Of India’s New FDI, Acquisition Guidelines

China has reached out to India, seeking a revision of the alleged discriminatory foreign direct investment (FDI) policy.

In its first formal statement, issued on April 19, Chinese embassy spokesperson Ji Rong said, “We hope India would revise relevant discriminatory practices, treat investments from different countries equally, and foster an open, fair and equitable business environment.”

Ji highlighted that the additional barriers, set by India on investment activities from specific countries, are in violation of the World Trade Organisation’s (WTO) principle of non-discriminations. China also highlighted that the guidelines are also against the global trend of liberalisation and facilitation of trade and investment.

Besides this, Beijing also added that the changes in the FDI rules “do not conform to the consensus of G-20 leaders and trade ministers to realise a free, fair, non-discriminatory, transparent, predictable and stable trade and investment environment and to keep our markets open.”

The recent update has enabled a screening process for all investment activities led by India’s neighbouring countries — China, Pakistan, Nepal, Bangladesh, Bhutan, Afghanistan and Myanmar.

With this, the Department for Promotion of Industry and Internal Trade (DPIIT) aims to prevent “opportunistic acquisitions or takeovers” by investors. The policy is largely targeted towards Chinese investments.

Two of the prominent Chinese investors in India are — Alibaba and Tencent, which have stakes in Indian unicorns such as Paytm, Zomato, BigBasket, Hike, Flipkart, MX Player, BYJU’s among others.

With these new regulations, any foreign investors or companies will have to take permission from the concerned ministries or departments before striking a deal. The new rules will also be applicable to “the transfer of ownership of any existing or future FDI in an entity in India, directly or indirectly,’ the DPIIT said, in the circular.

The Indian government had been working on the guidelines since the second half of the 2019 due to the security concerns raised by the home ministry. However, the Indian government believed it was the right time to roll out the guidelines as the economy was slowing down, affecting the cash flow for businesses.

With the Covid-19 blockade and lockdown, the Indian government expected to see high investment activities from China in the healthcare, pharmaceuticals and real estate sector, along with the supply chain management.