GT Voice: Handling of BYD plan a litmus test of India’s business climate
Published: Jul 23, 2023 11:06 PM
Illustration: Tang Tengfei/GT

Illustration: Tang Tengfei/GT

Although it hasn't yet been confirmed by Indian authorities whether they will reject Chinese automaker BYD's proposal to set up a factory in the country, relevant media reports have attracted a lot of public attention. It is hoped that India will not be politically biased against Chinese investment, refrain from setting invisible entry barriers for Chinese manufacturers under the disguise of protecting economic security.

The Times of India reported on Saturday that the Indian government has rejected BYD's proposal to set up a $1 billion factory in India in partnership with Hyderabad-based Megha Engineering and Infrastructures. 

"Security concerns with respect to Chinese investments in India were flagged during the deliberations," the report quoted an Indian official as saying. It was not an official notice issued by the Indian government, but it still attracted a lot of public attention. Why? It reflects market concerns about whether India will continue to harass and stymie Chinese companies, and whether the business environment in India will deteriorate.

China's new-energy vehicle (NEV) industry has entered the fast lane of development in recent years, and a number of leading enterprises with international competitiveness have emerged. As a result, China's NEV companies are at the frontier of the nation's outward direct investment, reflecting the increasing internationalization of Chinese companies. BYD, China's largest electric vehicle manufacturer, has begun to turn its eyes to the potentially huge market in India. BYD's operations in India could become a litmus test for whether India will provide a fair business environment for Chinese companies.

In recent years, India has intensified its assault on Chinese companies operating in the South Asian country, which analysts said was blunt bullying, and the theft of Chinese companies' achievements under the disguise of so-called posing security threats. Overseas direct investment by Chinese firms increased several times over the past decade, making the country an important investor in the global market, but now, most Chinese enterprises have taken a wait-and-see attitude when it comes to ramping up investment in India. 

If the Times of India's report is true, it is very likely that Chinese companies' confidence toward the business environment in India will deteriorate further. This will be a huge blow to India's efforts to attract foreign investment.

US electric car producer Tesla has proposed setting up a factory in India to build electric cars for domestic sale and export, the company told government officials, Reuters reported in May, citing a source with direct knowledge of the matter. If India treats Tesla and BYD differently, won't it be utter discrimination against China? Then, India's efforts to provide a good business environment for international investment and to continuously attract global companies will be an empty promise.

Although competition in the Indian NEV market is fierce, the participation of Chinese enterprises would improve the efficiency of competition and benefit India's economy and its NEV sector. Also, investment from China can enhance technological exchanges and cooperation among the companies of both economies. 

In the wake of the COVID-19 pandemic, India enacted ambitious structural economic reforms that analysts believe can help attract more foreign direct investment. Attracting Chinese funds should become part of India's efforts to make itself an attractive destination for global investment.

In recent years, the US has fabricated excuses to clamp down on leading Chinese enterprises with global competitiveness. Compared with economic ties between China and the US, relations between China and India are equally complex and constrained by many factors. However, as large emerging economies, sustainable development is the common goal and wish of both China and India.

In this regard, the two economies have more common interests than divergences. That is why it serves the fundamental interests of both countries to develop friendly economic relations. India's government needs to foster an efficient, transparent and fair business environment so that Chinese companies, including BYD, can be treated fairly in the country and make positive contributions to India's future development.