Chinese capital continues moving into India, waits for improving ties: insider
Published: Aug 19, 2021 07:43 PM
Vendors resume business as the COVID-19 restrictions ease at one of the oldest market in Bangalore, India, July 16, 2021.Photo:Xinhua

Vendors resume business as the COVID-19 restrictions ease at one of the oldest market in Bangalore, India, July 16, 2021.Photo:Xinhua

Chinese investment is still flowing into India, although in an indirect and low-profile fashion, after the Indian government moved to restrict Chinese investments amid bilateral tensions, an industry insider said on Thursday.

The Indian government rolled out a discriminatory regulations targeting Chinese investment in 2020, and it banned over 200 Chinese apps including Baidu, Tencent's WeChat, and several Alibaba-backed apps. As a result, Chinese companies' investment in India declined by 15.7 percent to $200 million in 2020, data from the Ministry of Commerce showed.

However, there has been a thawing of Chinese investment in India's tech scene, and Chinese investors who choose to stay and accept the high operational risks in India's deteriorating business environment are waiting for their moments.

Sha Jun, executive partner at the India Investment Services Center of the Yingke Law Firm, told the Global Times that Chinese investors are still putting money into Indian companies, but through more obscure channels due to the Indian government's targeted restrictions on foreign direct investment (FDI).

However, "it's entirely different from the white-hot market three to five years ago, before the COVID-19 pandemic," Sha said. "Now, every Chinese investor has realized or even felt the risks of the Indian market, and those who do not want to take the risks have left."

Chinese investment in Indian start-ups rapidly slowed in 2020 amid geopolitical tensions. In terms of private equity funds and venture capital (VC) investment, Chinese companies put just $1.05 billion in Indian start-ups, plunging from 2019's $3.5 billion, financial news portal reported in February.

"I haven't seen typical VC investors in China do any new deals, although some of them have exited previous investments and achieved good returns. Until the political situation improves, I don't see new investment happening," Ntasha, co-founder of Venture Gurukool Capability Fund, told the Global Times on Thursday.

Despite the Indian government's strict ban on Chinese investment, some Chinese companies still managed to invest in Indian tech start-ups, and many saw their businesses prosper during the lockdowns caused by the pandemic.

Chinese internet company Tencent was among those companies investing through an overseas vehicle when it channeled $225 million into Indian social media start-up Sharechat in April, the Financial Times reported.

More optimistic industry insiders like Sha noticed that while there is no sign that India will relax its FDI rules, there have also been no crackdowns that specifically targeted Chinese companies for the past year or so.

"There has long been room for cooperation toward win-win results between Chinese investors and India tech start-ups, and their complementarities remain unrivaled," Sha said on Thursday. "Once bilateral ties improve, Chinese venture capitalists will be back."

In the first half of 2021, global investors pumped at least $11 billion into Indian tech start-ups in over 600 deals, the Business Standard newspaper reported in July.

US-based investment firm Tiger Global and VC firm Sequoia Capital were among the top investors in the burgeoning Indian start-up ecosystem.