Commentary on Political Economy

Friday, 24 July 2020

India to curb Chinese bids for state contracts

India has banned dozens of Chinese apps © AFP via Getty Images
India will restrict Chinese companies from bidding for government contracts, citing “national security” concerns as New Delhi looks to loosen economic ties with its neighbour after a fatal border brawl.
The government said that any bidder from a country sharing a land border with India would be required to register with the commerce ministry and receive “political and security clearance” from the foreign and home ministries.
The move most explicitly affects China as the new rules make clear that some other neighbours, such as Nepal and Bangladesh, would effectively be exempt.
The curbs are designed “to strengthen the defence of India and national security”, the finance ministry said. They also apply to state governments, state banks and other public-sector companies.
The move is the latest effort from New Delhi to restrict Chinese economic activity in India. Concerns about a growing trade deficit took on added urgency after a clash along the disputed Himalayan border between the two last month, in which 20 Indian soldiers died. There was an unspecified number of Chinese casualties.
While trying to defuse military tensions, Indian officials have outlined plans to reduce the country’s economic dependence on China.
India has since taken a number of steps — from banning dozens of Chinese apps, including the popular ByteDance-owned video platform TikTok, to delaying imports of mobile phones and other Chinese goods at ports.
It also required vendors on a government-run online marketplace to identify the country of origin of goods for sale.
Even before the border clash in April, India had changed its rules to require all foreign direct investment from China to first receive government approval. This was to allay concerns that Indian companies were vulnerable to “opportunistic takeovers” by foreign buyers.
The latest restriction carves out an exception for the procurement of medical supplies to help battle the coronavirus pandemic for the remainder of the year.
India has been overwhelmed by the virus, which was first detected in the central Chinese city of Wuhan. With more than 1.2m confirmed coronavirus cases, India’s creaking health services have come under immense pressure.
Before the latest spike in tension, Chinese investors and companies had in recent years expanded their presence in India, despite historically frosty relations.
Chinese internet companies, for one, had become some of the most important tech investors, while car and mobile phone companies had also invested in Indian operations.
China’s share of India’s total imports rose from less than 3 per cent in 2000 to 14 per cent this year.
But the border conflict has stoked popular fury in India, with many consumers backing a widespread “boycott China” movement.

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