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Chinese giants are now willing to cut bets under Indian FDI norms
Shanghai and Haier are part of Chinese companies that are more abiding by Indian conditions for expansion in the country.
This includes retaining only a minority stake in the joint venture, which is not keen on, but being convinced to do it in the escalating tariffs in the United States. They said that if Chinese companies are closed, then business in India will be important. New Delhi is already shocked by investments across the big cities after border violence broke out in 2020. Shanghai, one of China’s largest compressor manufacturers, has resumed negotiations for a manufacturing joint venture with Tata-owned Voltas, which is now consistent with minority stakes, people familiar with the matter told ET.
Also read: Trump tariff impact: Chinese giants such as Shanghai highly agree with minority equity under India’s FDI regulations
“The attitude of Chinese companies has completely changed, and they now have minority ownership of minorities for owning minorities,” said Rajesh Agarwal, director of telecommunications and electronic contract manufacturer Bhagwati Products. “Chinese companies don’t want to lose their business because India is a big market and has export scope under the tariff regime. The icing on the cake is the PLI program, which will make production costs neutral compared to China.” He refers to the production link incentive scheme for electronic components just announced by the government.
According to industry experts and analysts, Trump’s tariff plan makes its products more costly in the United States, so Chinese companies don’t want to be blocked from growing in India and are more willing to join the terms. The government said it would have a joint venture with Chinese companies, with the board being the main owner of India if they have minority ownership and the company provides value-added or brings new technologies needed to develop local production.
The government said it would have a joint venture with Chinese companies, with the board being the main owner of India if they have minority ownership and the company provides value-added or brings new technologies needed to develop local production.
Electronics joint ventures’ Chinese companies may be limited to 10%
India is playing hard balls as Chinese companies show greater willingness to join India to invest, and given that the tariff war with the United States may make their products too expensive, they can expand in major markets. Officials familiar with the matter recently told ET that India could limit Chinese companies to 10% equity investments in electronics joint ventures and only under technology transfer conditions because local knowledge is unavailable.
Officials told ET that electronic contract manufacturing partners or supply chain companies owned by China will prioritize Chinese brands as the center wants the local manufacturing ecosystem to develop. In addition, if US or European companies want to move Chinese units to India, the government will also open up adjustments to Chinese equity rules. Officials told ET that Chinese suppliers of these companies can own up to 49% stake, but that would be an exception.
TOI recently reported that even if we call for a review of Foreign Direct Investment (FDI) rules, the Indian government is unlikely to relax investment inspections on Chinese companies. Authorities are cautious about capital flows from the border, especially when Trump’s tariffs intensify concerns about Chinese companies and redirect their exports to India and other Asian markets. Private companies have been pushing the Modi government to redefine the current investment system that tightened in 2020 after the outbreak and China’s tension along the Ladakh border with China.
Also read: Technology: 10% of the hats may be Chinese companies in electronics joint ventures
Indians should avoid shortcuts
Economic think tank GTRI warned that to “shortcuts” that domestic exporters should not use India as a destination for rewired goods, originating from high-end countries like China to the United States, but should establish true value-added and supply chain transparency. GTRI founder Ajay Srivastava said that for a country like India, opportunities are real, but only if exporters follow the rules.
According to Bloomberg, some Chinese-based companies are hit by U.S. tariffs and are in contact with Indian exporters to fill out orders on their behalf and help them retain U.S. customers when global trade shocks are caused by earthquakes in the trade war.
Ajay Sahai, Director General of the Federation of Indian Export Organizations, told Bloomberg that at the world’s largest trade show (the world’s largest trade show) lasted to Guangzhou (the world’s largest trade show), several Indian companies provided goods to Guangzhou. In return for the sale, Indian companies will pay commissions to Chinese companies.
Many exporters of Trump’s tariffs during his first term turned to Southeast Asian countries, setting up factories in Vietnam or shipping goods to places like Thailand and then exporting them to the United States. This time, as Trump hits 46% reciprocal tariffs in countries like Vietnam, Indian exporters may see more orders shifting their way. However, unlike Southeast Asia, India’s government maintains restrictions on Chinese investment, which makes it difficult for companies to establish operations in the country or ship goods to the United States through India. Instead, Sahai said the Indian company at Canton Fair offers merchandise to US companies under the brand of Chinese companies, or co-brand with Indian companies.
