China Threatens To Block Medical Supplies To India After New FDI Restrictions

Recently, Beijing accused India of violating Foreign Direct Investing (FDI) norms after New Delhi introduced a new FDI policy that tightened investment options for entities or individuals from a country that shared a land border with India. 

The FDI move was aimed to counter Chinese investments from taking over Indian firms at a time of falling share prices and lower asset valuations caused due to a slump in economic activity due to the COVID-19 pandemic.

A Chinese embassy spokesman in New Delhi said, “We hope India would revise relevant discriminatory practices, treat investments from different countries equally, and foster an open, fair and equitable business environment.”

Meanwhile, experts from the Global Times, often considered the mouth of Beijing writes – thanks to the huge workforce in China, the country is now capable of producing medical supplies for the world and itself.

The Indian government has overlooked this fact and only sees the COVID-19 crisis as a reason to tighten FDI rules. Given India’s dependence on China for medical supplies,  restricting so-called “opportunistic takeovers of Indian companies,” would only hurt India’s chance at getting necessary supplies in these crucial times.

India imports approximately $2.5 billion worth of APIs (active pharmaceutical ingredients) from China, according to Pharmexcil data. The industry had earlier expressed apprehensions over the interruption of imports from China which could badly impact India.

Although it is a matter of concern that China could take this opportunity caused by the coronavirus pandemic to acquire organizations and take control of some Indian sectors, but such fears are completely unnecessary, the GT report says.

The decision was seen as an optional one because existing policies of the government suffice in protecting Indian companies from a possible takeover. Experts say this restriction on Chinese investment will prove to be fatal, especially on India’s manufacturing sector. Soon, the new policy will reflect on Chinese investment in India and vice versa.

While this opened many other doors for India with Japanese and South Korean companies who are looking at the possibility of relocating to India, China’s importance to India’s manufacturing sector is irreplaceable, claims the GT.

There is also a fair chance that India might become the next manufacturing hub following the new FDI restriction. But the current economic crisis has left the supply chain disrupted. It is expected that it will take a long time for India to achieve the ambition of being the manufacturing center and encouraging cooperation with China will only help.

GT further writes that what seems like a closed-door for India might be a window of opportunities for South-East Asian nations. Many Chinese businesses still have intentions to extend their overseas ventures after the pandemic ends. If it is now unsafe to turn to India, they will assuredly turn to Southeast Asia, which appears more than willing to accept Chinese assistance.