NEW DELHI: Big-ticket investment plans of two Chinese firms appear to have hit the Great Wall of India’s home ministry over apparent security concerns.
Shanghai Fosun Pharmaceutical (Group) Co’s $1.4-billion deal struck about six months ago to acquire 86% stake in Hyderabad’s Gland Pharma Limited is yet to fructify, as is the Bank of China’s move announced in 2015 to open its first branch in India.
The ministry is yet to give its assent in both cases, according to people aware of the matter, triggering concerns that this may deter potential investors who had expressed interest in the country as part of Chinese President Xi Jinping’s announcement in 2014 to invest $20 billion in India in five years.
“Fosun Pharma’s proposal, marking the first billiondollar takeover of an Indian company by a Chinese firm, is among the biggest Chinese investments in India, that too in a sector which does not pose any security concerns,” said one of the persons, who did not wish to be identified. “Yet, the ministry of home affairs is not clearing the Chinese company’s investment proposal.”
Such an approach is detrimental to plans of other Chinese investors at a time when India is actively seeking investments from the neighbouring country to boost its economy and create jobs, the person said.
In the case of Bank of China, a second person said, the ministry is not granting permission due to the roadblocks that the State Bank of IndiaBSE 0.20 % is facing in China. “The refusal to give permission to Bank of China to open its India chapter beats all logic,” the person said, citing the launch of Indian operations by the Industrial and Commercial Bank of China (ICBC), the world’s largest bank in terms of market capitalisation, in 2011 by opening a branch in Mumbai.
Although India does not encourage Chinese investments in sensitive sectors such as ports and areas such as bordering states owing to security concerns, the government last year liberalised business visas in non-sensitive areas and removed China from the list of countries requiring prior referral. In June 2016, India allowed automatic approval for foreign investments up to 74% in pharmaceutical manufacturing.
A senior home ministry official said on condition of anonymity that the ministry has received Shanghai Fosun Pharma’s proposal recently and it will be processed. The Bank of China’s proposal is, however, not pending with the ministry, the official said.The delay on the part of the ministry is inexplicable, another person said, because India wants to attract Chinese investments across non-sensitive sectors to build confidence to tide over political differences as much as strengthen bilateral trade.The Minister of State for External Affairs VK Singh, at a press meet on Wednesday, outlined India’s interest in attracting Chinese investments and highlighted progress in the industrial parks that China is setting up in Gujarat and Maharashtra.
China is the 17th biggest investor in India, lagging smaller economies such as Italy and Spain. Between April 2000 and September 2016, India received $1.587 billion from China as foreign direct investment, according to the Department of Industrial Policy & Promotion.
Shanghai Fosun Pharma is part of Fosun International, headed by Guo Guangchang, which has been active in mergers and acquisitions across the globe in sectors ranging from property to finance. The company wants to integrate Gland Pharma with its current business to tap into markets in India, Europe and the US, besides expanding its manufacturing network in India.
Chinese real estate firm Wanda is hoping to make progress with its projects in India, though, having finally acquired land in Gujarat for the industrial park that was announced during Xi’s visit in 2014.