Beijing Nexus with Pak may Raise A Great Wall in India
This has cast a shadow on several deals in the pipeline, including appliance maker Haier's plan to sell stakes in its Indian operation, and two other joint ventures (JV) that are awaiting government clearance under
Press Note 3
, they said.
Indian contract manufacturers have also been in active talks with companies from China on joint applications to the electronics components production-linked incentive (PLI) scheme.
A large domestic company that was evaluating the Haier India stake has decided to go slow. A senior executive said it will only proceed after evaluating the regulatory scenario on China deals. Reliance Industries, and a consortium of Sunil Mittal of Bharti Group and Warburg Pincus, are reportedly the frontrunners, with the Chinese company wanting to offload 25-51% equity at a $2-2.3 billion valuation.
In 2020, India turned cold to Beijing after military clashes, and issued Press Note 3 norms that require multi-department approvals for investments for those based in bordering countries. Only a handful of large Chinese companies have got such clearances, forcing others to sell stakes or enter JVs with Indian entities.
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Government officials indicated over the weekend that Chinese entities will only be allowed a small stake in joint ventures under the PLI scheme, provided these are for critical components not available elsewhere.
'The government's stand on China is changing again. We fear most proposals will not receive Press Note 3 approvals, which will jeopardise our investment plans under the PLI scheme,' said one CEO cited earlier. 'We have started an evaluation, where we can go solo in the current circumstance.'
Chinese companies are not keen on technical alliances with Indian partners and prefer joint ventures.
Pakistan's foreign ministry had cited China's foreign minister Wang Yi as saying on Saturday that China 'will continue to stand firmly by Pakistan in upholding its sovereignty, territorial integrity, and national independence' in a phone conversation with deputy prime minister and foreign minister Muhammad Ishaq Dar.
The statement on X said China was Pakistan's 'all-weather strategic cooperative partner and ironclad friend' and that both the leaders had 'emphasised the importance of close communication and agreed to maintain ongoing coordination in the days ahead.'
This came after India and Pakistan reached an agreement to stop firing and military action on May 10.
The chief executive of a smartphone contract manufacturer said he expects most Press Note 3 applications will now be put on hold or get rejected.
Still, the electronics industry needs the technology that China has, he said. 'There are options in Japan and South Korea, but Chinese tech is more cost competitive,' the CEO said. 'We hope economic pragmatism eventually takes centrestage, otherwise India's manufacturing plans will get affected.'
Homegrown Dixon Technologies has two Press Note 3 applications pending with the government—one for a joint venture with smartphone contract manufacturer Longcheer and another with HKC Corp to make display modules. Tata-owned Voltas and Shanghai Highly Group were in talks for a joint venture for compressor manufacturing. So were other homegrown contract manufacturers such as Micromax-owned Bhagwati Products, PG Electroplast and Epack Durable for applications under the PLI scheme for electronics components.
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