China is doing more business with India, but it’s still far from smooth sailing

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Chinese FDI in India has increased even as India and China have picked new points of political disagreement in the last two years.
Chinese FDI in India has increased even as India and China have picked new points of political disagreement in the last two years.

By Reshma Patil

China has emerged as one of the fastest-growing sources of Foreign Direct Investment (FDI) into India — it was 17th largest in 2016, up from the 28th rank in 2014 and 35th in 2011.

In 2011, the total Chinese investment in India was $102 million. Last year, a record $1 billion of Chinese FDI reportedly flowed in, but official Indian and Chinese statistics differ on cumulative figures. The Department of Industrial Policy and Promotion (DIPP) last year estimated that total FDI from China between April 2000 and December 2016 was $1.6 billion. Indian industry analysts and media reports have estimated the figure to be over $2 billion.

“Actual Chinese investment in India is at least three times higher than the official Indian figure,” Santosh Pai, partner at Gurgaon-based Link Legal India Law Services, which provides legal services to members of the China Council for the Promotion of International Trade, told IndiaSpend.

Indian statistics capture direct investments from mainland China, but a majority of Chinese overseas direct investment, Pai noted, flows through tax havens such as Hong Kong. Last year, Chinese Vice-minister for Finance Shi Yaobin was quoted saying China has cumulatively invested $4.07 billion in India, and India has invested $650 million in China.

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