India has warned China not to exploit the current economic vulnerability caused by COVID-19 situation.
This comes just two days after the Department for Promotion of Industry and Internal Trade (DPIIT) revised its foreign investment policy.
The changes in the FDI rules prevent investment without the government’s permission, by any entities or people, belonging to countries that share India’s borders, in shares or stock market through indirect or discreet purchase methods.
Explaining the intention behind the FDI rule change, sources in the government said, “India can’t allow the current vulnerability due to COVID-19 pandemic to be exploited by any country, including China. A preemptive action was needed to protect Indian assets from hostile acquisitions and takeover, particularly start-ups that have little money power.”
More importantly the move follows concerns shared by other friendly countries as well that China is trying to buy up shares from India and other markets for acquisitions.
“The necessity was not just felt by India but many other countries, including powerful G20 nations, who have reasons to be suspicious of the designs and actions of Chinese investors actively backed by its government. It is felt that it was not business as usual and hence a need was felt to protect our domestic interests. There is no bar on Chinese entry or investment, but proposals have to go through the government. Again this is not targeted just at China but all the countries that share border with India. It is surprising therefore to see as to why China is so perturbed, if it believed in ethical business,” said the government sources.
On Monday the Chinese Embassy in Delhi sent out a press release to journalists stating that “additional barriers set by the 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.”
There have been apprehensions founded on sound facts that some Chinese companies are aggressively buying shares in Indian companies.
The Chinese press release even recounted how some Chinese enterprises actively made donations to help India fight the COVID-19 epidemic. India didn’t expect a press release flaunting some test kits and PPEs by private entities as a big donation by China.