China’s protest of India’s revised FDI Policy: A process of de-globalization begins opine experts

Source: Financial Express

April 22 2020

On Monday, the Embassy of China in New Delhi issued a statement asserting “The development of the Indian industries including mobile phones, household electrical appliances, auto and infra sector which have created jobs in India is due to the Chinese investments.”

Anticipating greater control of Chinese investors or eventual hostile takeover, the government of India changed the norms of investment from China. The new rule also applies to third party investment if it is funded partly by China. On Monday, the Embassy of China in New Delhi issued a statement asserting “The development of the Indian industries including mobile phones, household electrical appliances, auto and infra sector which have created jobs in India is due to the Chinese investments.” The statement issued by the spokesperson of the Chinese embassy, has expressed hope that India “Would revise relevant discriminatory practices, and treat investments from different countries equally. And foster an open, fair and equitable business environment.”

Till last December, according to the statement their cumulative investment in India has exceeded $ 8 billion in comparison to other neighbouring countries.

What is the Revised FDI Policy?

Last week, in the revised Foreign Direct Investment Policy (FDI), the Department for Promotion of Industry and Internal Trade (DPIIT), now all investments coming in from countries with which India shares borders, have to get the governmental approval.

This was done to ensure there are no hostile takeovers due to deteriorating market and economic conditions due to the spread of COVID-19.

What does it mean?

The foreign investments from other countries can come in through the automatic route in sectors which are open to FDI. Now, with the amendments made last Saturday, if goods made from investors in China and other six neighbouring countries, government approval is needed. This restriction was in place only for Pakistan and Bangladesh earlier.

EXPERTS’ VIEWS

Prof Rajan Kumar, School of International Studies, JNU, tells Financial Express Online that “Such policies are not uncommon in the times of economic distress and many of the European countries imposed such restrictions after the economic recessions of 2007-8. India is not the first country to do this; it is only reflecting a general global sentiment. Many of the other countries are also likely to firewall hostile investments from China.”

There is a rising concern that China may take advantage of falling share prices in companies with prospects of resurgence. Given the liquidity crunch and rising debt, many of the companies will find it service their debts and sustain services in the months to come. This may lead to a hostile takeover by foreign entities.

In his opinion, “In the case of China, the distinction between the government and the private entities are not very clear. Many of the private investments are backed by the government which gives an unfair advantage to Chinese companies vis-à-vis other companies. A private entity in other countries finds it difficult to compete against the state-backed Chinese companies.”

As expected, the embassy of China criticizes the new Indian law which seeks to regulate direct or indirect investment from China. It also alleged the violation of WTO rules on unrestricted trade and investment. But China itself has not been very fair in allowing products from other countries. Just a few months earlier, President Trump forced China to reduce tariffs on import of US products worth $200 billion. China also imposes unreasonable restrictions on movement of service professionals in its territory.

According to Prof Kumar, “India has to play its game carefully because some experts fear that restricting investment from China may only add to the existing resource crunch. With a widespread recession in the US and Europe, there may not be many investors from those countries. China, Japan and the Gulf States may help overcome the liquidity crunch to starving companies.”

At a larger level, what we are witnessing is a rising wave of myriad protectionism in different fields. The emerging economic order is going to be very different from what we are used to in the last three decades. “A process of de-globalisation is unfolding, and China will also react in its own way,” he cautions.

Sharing his views, Ranjit Kumar, Senior Journalist and China watcher, says “At a time when Chinese State apparatus is embroiled in worldwide controversy in displaying alleged opaque behaviour and less transparency in dealing with COVID-19 pandemic in its city of Wuhan , the greedy Chinese enterprises in collusion with the State are not doing credit to the image of their country.”

In his opinion, “China has overreacted by levelling allegations of discriminatory practices, on India’s revised foreign investment policy. The European economies are similarly worried and India’s actions cannot be dubbed as anti-China. First there were reports of Chinese companies aggressively trying to take over the business houses in European countries and now they have put their footprints on Indian soil also, Like European countries Indian government has truly been alarmed over the reports of acquisition of over one per cent of shares of Indian financial giant HDFC. There are reports of over US$ 26 billion acquisition plans by Chinese companies in India. The Indian government took a swift action by putting in place new Foreign Investment rules, which indirectly will deny the Chinese companies to automatically sit over the management of Indian companies, as they have earlier tried to do in case of Indian online payment and e-commerce platforms”.

“Though the market meltdown in the wake of corona pandemic has come as a shock to the investors, but probably it is a welcome development for moneyed tycoons, who can park their overflowing cash in a depressed market which is bound to rebound sooner or later. The Chinese enterprises are doing exactly the same and are planning to buy stocks at attractive prices.”

China Overtakes US for Foreign Investment

Πηγή: Farsnews
Feb 1 2015

TEHRAN (FNA)- China was the world's largest recipient of foreign direct investment (FDI) in 2014, overtaking the US for the first time since 2003.

The United Nations Conference of Trade and Development (Unctad) revealed that estimated FDI inflows to China increased by 3 percent to $128bn (£85bn, €113bn) in 2014, while the US saw its FDI declining to $86bn – almost of a third of its 2013 level, IBT reported.

Cross-border M&A sales in the US declined from $60bn in 2013 to just $10bn in 2014, primarily due to the Verizon-Vodafone deal, the UN body responsible for international trade said.

The China-administered region of Hong Kong received $111bn of foreign investment – the second-largest in 2014.

Singapore and Brazil came fourth and fifth, with FDI flows of $81bn and $62bn, respectively. The UK came sixth with $61bn of foreign investment.

Chinese Foreign Direct Investment (FDI): Going On A ‘Shopping Spree’ In Europe

Πηγή: IBT
By Moran Zhang
Feb 27 2013

With trillions of dollars in foreign-exchange reserves, China is gradually diversifying from its custom of simply parking that wealth in low-risk government bonds. The Chinese are now buying up depressed assets on foreign soil. And their favorite destination is Europe.

Since 2008, China has been allocating an increasing share of its $3.18 trillion worth of foreign-exchange reserves, the world’s largest, to both Europe and the U.S.

The world's second-biggest economy’s outbound direct investment from non-financial firms in January totaled $4.9 billion, up 12.3 percent from a year ago, according to China Commerce Ministry data released last Wednesday.

The debt crisis in Europe presents the prospect of discounted prices, while an increasingly strong yuan is making European (and American) assets look more attractive. Just seven years ago, the Chinese yuan (CNY) traded at 8.23 to the dollar. Now the CNY trades at 6.23 and continues to strengthen.

(Photo: Rhodium Group) Annual Chinese foreign direct investment in the U.S. and Europe.

After a similar take-off phase, patterns diverged in the past two years, with Europe receiving almost twice as much investment as the U.S., according to a new report from the Rhodium Group.

Annual flows to the European Union grew from less than $1 billion annually before 2008 to an average of $3 billion in 2009 and 2010, before tripling to more than $10 billion in the past two years. Ten years ago, there were fewer than 20 cross-border deals. But that has changed: 573 deals have been done between 2000 and 2011, with Germany in the leading position.

Meanwhile, in the U.S., Chinese investment surged from less than $1 billion in 2008 to $5 billion in 2010, before dropping again to $4.7 billion in 2011. In 2012 investment reached a new record of $6.5 billion, but values remained below the levels seen in the EU in the past two years.

(Photo: Rhodium Group) Chinese FDI in the U.S. vs. E.U. by industry

“Chinese investors seized opportunities to buy into cash-strapped European industrials and assets promising stable long-term returns such as utilities and other infrastructure,” the Rhodium report said.

Geographically, Chinese investment is concentrated in a few large EU economies – namely, France, the UK and Germany.

China's foreign-exchange regulator has been actively but quietly investing in British property and infrastructure, the Wall Street Journal reports. Since last May, U.K.-registered Gingko Tree Investment Ltd., a wholly owned unit of China's State Administration of Foreign Exchange, has invested more than $1.6 billion in at least four deals, including a water utility, student housing, and office buildings in London and Manchester.

Rhodium Group researchers Thilo Hanemann and Adam Lysenko found that U.S. security reviews have killed some deals and likely dissuaded other investors.

By contrast, European officials welcomed Chinese investment in sensitive, high-profile assets like airports, electricity grids and ports. Including utilities, Chinese firms spent close to $6 billion on European infrastructure assets.

Investments in U.S. infrastructure assets would make commercial sense for Chinese state enterprises and sovereign investment vehicles as well, but the reactions to similar earlier investments such as the Dubai Ports World controversy in 2006 seem to have made Chinese investors cautious about U.S. infrastructure plays.

National security concerns are also affecting investment in high-tech sectors. Chinese telecommunications equipment firms, for example, spent more than three times as much in Europe than in the U.S., where the Committee on Foreign Investment in the United States (CFIUS) has interfered with several deals and firms have seen their business prospects diminished by intervention from U.S. government officials, members of Congress and security agencies, according to the report.

While much of the world, including Europe, is embracing China’s telecommunications giant Huawei Technology Co. Ltd. (SHE:002502), the U.S. market is wary.

A House Intelligence Committee report released in October urged the U.S. government to block acquisitions or mergers by Huawei and ZTE Corporation (HKG:0763), China’s two largest phone-equipment makers, for fear that this will provide opportunities for Chinese intelligence services to tamper with U.S. telecommunications networks for spying.

The congressional report concluded that with their ties to the Chinese government, neither of these companies can be trusted with infrastructure of such critical importance.

“The risks associated with Huawei’s and ZTE’s provision of equipment to U.S. critical infrastructure could undermine core U.S. national security interests,” the report said.

“As the Chinese economy matures and firms become more experienced at doing business abroad, Chinese interest in advanced economy assets will continue to be strong in coming years,” the Rhodium report states. “The political response will be critical for future deal-making in both economies.”

Foreign investment into Europe rises despite Eurozone crisis

Πηγή: Ernst&Young
June 20 2012

Despite the fragility of the Eurozone economy, inward investment continued to rise in Europe in 2011 with the total number of projects significantly higher than precrisis levels, according to Ernst & Young’s 10th annual European Attractiveness Survey. This report combines an analysis of international investment into Europe over the last year with a survey of more than 800 global executives on their views about how and where global investment will take place in the next decade.

Across Europe there was a 2% increase in projects from 3,757 in 2010 to 3,906 in 2011. Even more striking, the average project was markedly larger and foreign direct investment (FDI) job creation was up 15%. The US continued to be the largest investor in Europe, providing 1,028 projects, 26% of the total. This is a 6% increase on the number of projects that the US invested in last year and the highest number in the decade since the survey began.

Marc Lhermitte, head of Ernst & Young’s International Location Advisory Services and author of the report comments: “Despite the current turmoil in Europe, its fundamental strengths continue to endure. While the spotlight has focused on the world’s rapid-growth economies, Europe, too, remains a key destination for foreign investors. It remains the world’s largest single economy, and the attraction of its 500 million high-spending consumers, together with a stable and transparent legal and regulatory environment, remains a powerful draw for investors.”

Analysis by country and sector

The UK remained the most attractive country in Europe for investment with 679 projects, 17% of the total. The French total fell to 540 from 562 in 2011 as France, who was in second place last year, was overtaken by Germany who secured 579 projects in 2011. The increasing investment into Germany reflects its relatively strong economic performance.

More surprisingly, Spain achieved a remarkable 62% increase in the number of projects to 273 (+ 104 FDI announcements over 2010) as investors saw opportunities in cities and regions providing relatively low labor costs and a highly skilled and educated workforce.

With the exception of Poland, Central and Eastern Europe (CEE) saw a disappointing decline in investment as investors aired their concerns about CEE’s dependence on exports to Western European economies and a weak and largely foreign-owned banking system. Russia experienced a 36% decline with numbers falling to 128 projects.

Business services and software sectors remain the biggest recipients of FDI projects in Europe with an increase of 19% to 666 and 15% to 436 respectively. Altogether the two sectors accounted for 28% of total projects in 2011, providing more than 16,000 jobs. The automotive sector also saw an increase in the number of FDI projects to 270 from 258 last year and it was also the sector that created the highest number of jobs, at 37,790. The sectors that saw the biggest declines were financial intermediation which fell by 16% and electronics by 8%.

Where is investment coming from?

Although the US remains by far the largest single investor in Europe, Europeans also like what they see in their neighbors and in 2011 seven European countries were among the region’s top 10 inward investors. Germany, the UK and France remain the top three investors with 412, 294 and 192 projects respectively. Aside from the US, Japan and China were the only two countries outside of Europe that were in the list of top 10 investors with 150 and 140 projects respectively.

When measured by project numbers, Germany outpaced the UK, securing 69 projects from BRIC companies, up 35% from 2010. The UK, with 54 FDI projects, was second followed by France and Belgium.

Investors express “cautious confidence”

More than 80% of respondents are confident that Europe will overcome the ongoing economic crisis. In terms of Europe’s investment attractiveness in the medium-term respondents are broadly optimistic.

The fragility of the Eurozone economy has left investors more hesitant than usual about the ongoing challenges faced by the region. Research from the 840 global executives interviewed for the European Attractiveness Survey in late spring 2012 shows that only 26% had plans to establish operations in Europe during 2013, down from 33% who were planning to invest in the 2011 survey. However, more than a quarter are eyeing possible acquisitions: a sign that many European assets are expected to become available as vendors adjust to be more realistic about recovery prospects and valuations. With many companies sitting on cash, M&A could be an important complement to Greenfield investment in 2013.

Europe still demonstrates a strong, perhaps surprising, level of attraction. In terms of investor perception, Western Europe and Central and Eastern Europe rank second and third respectively behind China as the most attractive destinations for FDI.

Among survey respondents, 36% say that Europe’s future attractiveness will improve but it’s interesting to note that this rises to 51% among investors from the US, India, China and Japan who are more confident about Europe’s future prospects than Europeans themselves.

Indications for 2012

In terms of how the weakening European economy and ongoing political challenges are already impacting FDI flows into Europe, the indications for 2012 are encouraging.

As Marc explains: “Despite investors remaining cautious, early indications show that foreign investment into Europe is holding up. However, given the current economic climate it remains to be seen if this will hold true for the rest of the year.”

Mark Otty, Area Managing Partner for Europe, Middle East, India and Africa concludes: “Against the backdrop of the Eurozone crisis it is essential that solutions are found to Europe’s pressing educational, entrepreneurial and innovation challenges. These issues must be addressed to create the conditions for balanced and sustainable growth. Continued strong FDI will be pivotal in achieving this goal.”

FDI into Ireland, Greece and Portugal before and after the EU bailout

Πηγή: FDI Intelligence
By Ailbhe McLoughlin
April 18 2012


Ireland, Portugal and Greece have had varying levels of success in attracting FDI since their eurozone bailouts.

Out of the three countries to have received EU bailouts – Ireland, Portugal and Greece – Ireland is the only one to have enjoyed an increase in recorded FDI since the financial crisis began in 2008. Data from greenfield investment monitor fDi Markets  shows that Ireland recorded 77% more projects in 2011 than it did in 2007. Conversely, Portugal recorded 63% fewer projects in 2011 compared to 2007 and Greece recorded 20% fewer.

In 2007, Ireland's financial services sector enjoyed a significant level of investment from UK-based banks, including Royal Bank of Scotland and its subsidiary Ulster Bank. Since the financial crisis, however, investment from such UK-based institutions has decreased. In 2011, a number of investments from US-based banks such as Citigroup and Bank of NY Mellon helped Ireland's FDI levels recover. Fund administrators and financial consultancies have also helped plug the gap left by UK-based institutions, with Switzerland-based deVere Group and global hedge fund administrator HedgeServ both investing in Ireland.

The growing levels of investment in Ireland’s software and IT sector have also helped bolster the country's FDI levels. Again, it is the US-based firms that have invested most heavily. Online auction site Ebay, search engine Google and social networking site Twitter have all all established or expanded their presence in the country.

Before the financial crisis, in 2007, Greece experienced FDI investment across a diverse range of industries, but particularly in the energy sector. In the same period, Portugal attracted a broad range of investments, with companies such as Finland-based communications corporation Nokia, Spain-based bank Santander and France-based automotive company PSA Peugeot-Citroën all investing in the country.