The Ministry of Foreign Affairs responds to "Indian officials' statement that if there is peace at the China-India border, India may relax scrutiny on Chinese investments." What information is worth paying attention to? What does it reveal?

Analysis of India’s Policies Toward Chinese Investments

The dubious nature of India’s approach lies in two aspects:

1. The so-called “peaceful China-India border,” implying that China should concede in territorial sovereignty issues (given the territorial disputes along the China-India border);
2. Once the above is satisfied, I could relax conditions for investing and setting up factories.

In essence, this suggests that China is expected to invest in India (providing sustenance) and yet adhere to India’s terms and conditions (beholden to their whims).

The logic is entirely reversed; it should be about what incentives India can offer for us to consider investing there!

What does this indicate?

It indicates a failure in our policies towards India!

As a potential adversary who consistently opposes China, India should be contained. Policies of investment and technology scrutiny should be implemented. We should not allow companies to export technology and equipment to India, aiding their economic development, only to be bitten back in return.

In reality, some Chinese enterprises investing in India often face exploitation by the local government.

Last April, India seized $725 million from Xiaomi, which has not been unfrozen to this date.

In July, several of Vivo’s offices in India were raided, and over 100 bank accounts related to Vivo India were frozen, including more than $50 million in funds. Although Vivo regained account access after appealing, the audacity was in demanding nearly $120 million as a security deposit;

Two months ago, four senior Vivo India executives, including the CEO and CFO, were arrested, followed by two more Vivo executives recently. Though released, there’s no guarantee against future incidents.

Why do so many Chinese companies invest in India?

There’s no early rising without profit.

Currently, Chinese smartphone brands hold nearly 60% of the smart phone market share in India. Xiaomi, Vivo, Realme, and OPPO occupy four of the top five spots. In just the second quarter of 2023, these four brands shipped 19.8 million smartphones.

For these manufacturers, the Indian market’s scale is hard to replace. Withdrawing now would mean handing over the market that Chinese brands have nurtured, a market they are reluctant to abandon despite many hardships.

What is India’s Perspective?

Similar to the USA’s strategy, one of the Modi government’s objectives is to economically “decouple” from the Eastern giant.

The Indian cabinet has convened several times to discuss reducing imports from China while also limiting Chinese investments in India and significantly tightening scrutiny over Chinese smartphone/software developers.

On June 15, nationalistic sentiments in India were reignited. Two weeks later, the Indian government blocked nearly 60 Chinese-developed apps, including WeChat and TikTok, citing security reasons. This expanded to 118 apps two months later.

Furthermore, as per the Modi government’s directives, Chinese companies establishing new contract manufacturing plants in India must have over 51% Indian capital ownership. Also, smartphones assembled in India by Chinese brands must incorporate parts from local Indian suppliers.

Consequently, India keeps testing the resilience of Chinese smartphone brands with actions like office searches, freezing/seizing assets, and arresting executives, gradually pushing these brands to transform into true “Indian smartphone brands.”

India’s smart phone supply chain is still nascent and lags significantly behind China in most key components. This is one reason behind the Indian government’s pressure on Chinese brands to use more Indian components.

Under the regulatory pressure of “earn in India, spend in India,” it has become increasingly difficult for Chinese smartphone brands to repatriate profits. Alternatives or different channels might be needed.

Hence, it’s advisable for Chinese capital to steer clear of the Indian market.

Moreover, historically speaking, dealing with a nation like India, a firm hand has proven more effective than incentives.

India is currently in dire need of foreign exchange, so they’re avoiding conflict and enticing Chinese investments. Once the infrastructure is established, they plan to provoke border tensions to stir up nationalism. Then, by amending laws retrospectively and invoking enemy property acts, they aim to confiscate the industries built by these investments. It’s a clever strategy. Fun fact: India still has enemy property laws against China, allowing for the seizure of Chinese assets whenever necessary. They even have camps specifically for Chinese nationals. In this context, those still investing in India are either doing so for the sake of improving financial reports to deceive investors, or they’re colluding with India to transfer domestic assets abroad.

The next episode is:

“Due to the China-India border issue, the previous Chinese investments were confiscated.”

The logic loop is complete.

Who do you want to trap? BYD! I guess you’ve set your eyes on BYD, ready to pit against BYD.

Scammer is hungry.

Needs to associate with Xiaomi to increase the feeding.

…

Wait, Chinese companies? Something seems off here??

India’s Claims and the Economic Exchange

Firstly, at the China-India border, we have always exercised restraint, never initiating provocations or causing trouble. On the contrary, India has continuously increased its troops, built roads, and even crossed the actual control line.

Secondly, Indian high officials have mentioned that if the China-India border remains peaceful, India “may relax its strict scrutiny of Chinese investments.” This suggests that India’s discriminatory measures and selective enforcement against Chinese companies in India are indeed a reality and not baseless claims.

In summary, it is only when we remain silent or make concessions in response to India’s provocations and encroachments at the China-India border that India will refrain from creating obstacles and difficulties for Chinese companies in India. In simpler terms, only if we compromise on territorial issues will India refrain from acting like a bully and demanding protection money from Chinese companies.

Trading territory for economic benefits is a choice that any country would make. India’s proposition in this regard can be considered a bit unrealistic.

How about ceding Tibet to India? Otherwise, what can Xiaomi, Vivo, and other companies do if they can’t make money in India?

As long as you don’t stop me from taking advantage of you at the border, I’ll give you several more chances to be fooled by the company.

He wins on both sides, impressive.

Before discussing investment, let’s talk about the border issue. Do you know what India’s negotiation demands were before 1962?

Tibet to belong to India, while Qinghai, western Sichuan, and Yunnan would become independent nations. The People’s Liberation Army (PLA) would withdraw, and the Indian Army would be stationed, with Indian forces entering Chengdu.

Even Zhou Gong (an ancient Chinese historical figure) would be at a loss for words. It’s a pity that Zhou Gong has to deal with such anthropomorphic beings without being able to turn hostile.

India’s Diplomacy: A Battlefield Without Gunfire

Recently, India attempted to shift the blame for border conflicts onto us by slyly playing its cards in the diplomatic arena. While their maneuver aimed to suppress Chinese investments using the border issue as leverage, it ended up being a “pot calling the kettle black” scenario.

Diplomacy is indeed a battlefield without gunfire!

However, from a different perspective, the statements from India’s Ministry of External Affairs did save face for India. Known for its unfair practices not only against us but also toward all foreign investors, India’s border conflicts were essentially an attempt to salvage its reputation.

Even now, many people harbor unrealistic fantasies about India, believing that their adeptness at exploiting foreign capital is solely due to an imperfect legal system. They hope that one day, as they fully integrate into the warm and loving international supply chain family, things will improve.

But that’s not the crux of the matter. Many African nations lack robust legal systems, yet we can still engage in friendly business with them. The key issue is India’s inherent moral deficiency!

An Indian expert on the country’s issues once said, “The Indian nation lacks a culture of shame." While we may consider India’s failure to pay its trade debts and its imposition of fines on companies like Xiaomi and OPPO as deceitful and unethical, India might see it as a sign of cleverness and self-reliance.

What’s more interesting is that despite their moral shortcomings, India is one of the countries most inclined to vocalize their moral superiority. So, despite their dark intentions, they often appear as a virtuous lot on the surface!

In the “Nirbhaya” gang rape case in December 2012, the bus driver involved shamelessly stated in an interview, “A respectable girl from a decent family wouldn’t be out wandering past 9 PM. Women are more responsible than men when it comes to rape." This is the logic in India, which contradicts our understanding of shame and right and wrong.

This logic mirrors their approach last year when dealing with BYD, Xiaomi, and OPPO. India accused them of tax evasion and adopted a tough stance – multinational corporations sucking India dry should not evade taxes and transfer profits out of India. Given the negative impression Indians have of multinational companies, any mention of tax evasion irked them, and they clamored for heavy fines. If the penalties were lenient, India’s 1.4 billion people wouldn’t approve.

So, you see, in India’s grand narrative, everyone is inherently sinful, everyone is a wrongdoer. If robbing wrongdoers is also wrong, then the Indians say, “Let me continue being wrong forever!"

In conclusion, unless India undergoes a complete cultural revolution to rectify its debased culture, its business environment will forever lack a spirit of contract. India’s supposed growth potential and market prospects will always remain as elusive as a moon reflected in water and a flower seen in a mirror. Foreign investors must think twice before investing in India.

Believe it or not, undermining China is India’s fundamental national strategy. As long as China remains strong, India cannot hope to become the world’s factory. Therefore, obstructing and extracting from Chinese investments is a necessity. No matter how much face you give them, it’s futile.

The best approach now is to maintain high pressure at the border, constantly create incidents to force India to stockpile heavy troops at the border. It would be even better if we could fragment India. Once the scattered pieces of India are squeezed together, it will truly become a formidable opponent.

The Inexplicable Pride of India

Indians have an inexplicable sense of pride.

For a manufacturing powerhouse like China, two things are crucial: importing raw materials and exporting products.

Countries like Saudi Arabia, Iran, and Russia are crucial to China because of their resources, while markets like Europe and the United States are equally important.

China finds itself in a weak position when facing pressure from a country like the United States. It’s a difficult balance between counterattacks and minimizing the impact on itself.

India, on the other hand, neither imports raw materials significantly nor possesses a large-scale market, despite its massive population of 1.4 billion. In reality, as many people joke, India only has a population of 100 million; the rest are like cattle.

Furthermore, India has been trying to transition from an agricultural nation to an industrialized one. The most crucial step in this process is taking over the mid-to-low-end industrial chains coming from China.

Therefore, the economic relationship between India and China is similar to that between China and the United States. India does not have many means to affect China without hurting itself.

As a result, Indians act recklessly without considering national interests. For example, before Foxconn, there was a subcontracting factory in India called Wistron that was forcibly troubled by India, only to be eventually acquired by Tata.

The reason India dares to do this is because in their eyes, even if they trouble one, others will come. They are self-assured, believing that India’s market is so vast that it can attract anyone.

This is the typical case of showing off one’s edge.

In this context, China serves as a typical example.

During the rapid development of China in the 1990s, its military development lagged behind its economic growth. Many attribute this to China’s inadequate technological level and insufficient investment in the military.

However, many overlook an important issue. China urgently needed foreign capital and industrial transfer to complete its industrial transformation. Although it had the financial means to support military equipment development, this kind of development posed geopolitical risks to foreign investments – in other words, it was prone to conflict, which raised doubts about foreign investments and industrial transfers.

Most importantly, a country like the United States would notice that China’s rapid military development was making it difficult to contain China’s rise militarily, and economic means were ineffective when military coercion failed.

This was the situation China faced at the time. It wasn’t that China lacked the financial resources to develop military equipment; it was that China couldn’t aggressively pursue military development at that time.

India, on the other hand, clearly can’t do this. They don’t understand the concept of keeping a calm demeanor regardless of the circumstances, and they can’t prioritize “economic development.” If someone gives them a dirty look, they are quick to retaliate.

For example, their involvement in the Houthi conflict is an example. When you lack the strength, why get involved in issues that have nothing to do with you?

Are they afraid that foreign capital might think India is too safe?

India’s Challenging Business Environment

Let me put it this way: I had a colleague who had spent several years in Africa, tried living in India for just two months, couldn’t handle it, and ended up relocating to the Philippines, where he felt much more comfortable.

Considering the global Chinese diaspora, including Europe, South America, North America, Australia, Southeast Asia, and even Central and South America, there are plenty of compatriots or Chinese immigrants with Chinatowns and Chinese restaurants.

India, despite its proximity to China, lacks Chinatowns and has very few Chinese restaurants. In Northeast Asia, including China, Japan, and South Korea, although we may look down upon Japan and South Korea at times, these two countries have strong foreign trade and cultural influence worldwide. In the Philippines, airport signs are in English, Chinese, Japanese, and Korean. Their influence extends to other countries as well. However, even Japanese and Korean companies struggle to thrive in India.

India is essentially a challenging market. Its so-called market potential is nothing more than an illusion. Entering it is a struggle for survival, and even if you manage to survive, you may end up with nothing due to exorbitant fines.

Why can’t India support Chinese restaurants or Chinatowns? Why do not only Chinese but also European, American, Japanese, and South Korean companies struggle to make it in India?

Because Indians generally have a mindset of opportunism. If you want to cooperate with them, they believe you are in need of them, and they will demand exorbitant prices, always looking for an advantage. They tend to think that if they can’t gain an advantage, they are at a loss.

They are always trying to get an upper hand, and they don’t hesitate to take advantage of any opportunity. When you invest, they believe they have the final say in whether there will be peace along the borders. They think, “Today, I’ll take some of your land. Tomorrow, I’ll take more. If you dare to fight back, you’re disrupting peace. You came to invest here, seeking an opportunity from me. What’s wrong with me taking some land? If you dare to retaliate, then I’ll retaliate.”

This mindset is prevalent among Indian politicians and the general population. They constantly promote anti-China sentiment, and politicians like to appear tough on China. Isn’t investing there akin to entering the lion’s den?

I also advise some domestic companies that have just started going international not to throw their money around blindly. They shouldn’t send investments to India without a clear understanding. Looking at the experiences of leading Chinese telecommunications companies like Huawei and ZTE over the years, if India were genuinely profitable, with its massive population, these companies would have established subsidiaries, research centers, and even production facilities for basic materials in India a long time ago. They would have made significant profits in India by now. So, why haven’t they?

Abandoning territory in exchange for a spot in the Indian pork market? Indians sure know how to have their cake and eat it too!

Chinese Perception of Peace: Friendly communication, border demarcation, and adherence to agreements.

Indian Perception of Peace: Give me everything I want.

Chinese Perception of Investment: Mutual benefit.

Indian Perception of Investment: Give me money.

So, in Indian terms, the translation would be: If China fully agrees to India’s territorial demands, India will consider accepting the money from China, emphasis on “consider.”

This message reveals the unique thought process of Indians.

The populism among the citizens has reached this point, and it’s unclear if there is any reflection within India domestically.

By the way, they keep talking about India surpassing us every day; the possible reason for their potential surpassing might be that they are genuinely populist.