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26 March 2017

Increasing Chinese investment in India can help enhance mutual political trust

By Hu Weijia 

It is likely to be a golden era for Chinese private enterprises investing in India over the next few years, and it is possible that increasing commercial blending could help enhance mutual political trust between Beijing and New Delhi. 

The Indian government is in talks with nearly 300 companies to channel investment into the country, with around half of the capital being pursued from China, the Times of India said recently. In 2016, China's direct investment to India was reportedly six times higher than the year before, despite a call for a boycott of Chinese goods. The rising investment is expected to continue in 2017.

A recent study from the US-based Brookings Institution said that "almost 90 percent of the next billion entrants into the global middle class will come from Asia," with India expected to contribute 380 million people, exceeding the 350 million expected in China. It is understandable that countless Chinese firms have shown an increasing interest in the burgeoning Indian consumer market.

India has reduced investment restrictions and further opened up its market for foreign investors, which is one of the reasons behind soaring investment from China. Some well-known Chinese private enterprises such as telecom giant Huawei have shown great enthusiasm for investing in the country after the Indian government adopted a more open mind in attracting Chinese private investment. The nation could see a faster growth in investment from China over the next few years if the Indian authorities can give more trust and further reduce restrictions on China's State-owned enterprises, where the Chinese government is the biggest shareholder.

As India's manufacturing sector expands, Sino-Indian ties have become more competitive than complementary in economics and trade, increasing uncertainty in the bilateral relations. However, encouraging more Chinese firms to invest in India is one of the most effective ways to enhance economic complementarity, and could help promote mutual trust.

Chinese Foreign Minister Wang Yi said Wednesday that China would explore the model for "BRICS Plus" to hold dialogues with other developing countries in a bid to expand BRICS' circle of friends. Indian media have read too much into Wang's words, as some of them suggested China is trying to dilute India's influence by inviting pro-Beijing countries, Pakistan included, to join the club, which is simply speculation and lacks factual basis. It is a lack of trust between China and India that sparks such speculations. Expanding BRICS' circle of friends will inevitably bring benefits to all members of the BRICS club, and enhanced cooperation will help build a community of a shared destiny so as to eliminate mistrust between China and India.

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