MUMBAI, Aug 28 (Reuters Breakingviews) – A meeting of Asian neighbors in faraway South Africa is raising hopes for businesses back home. Indian Prime Minister Narendra Modi’s exchange with Chinese President Xi Jinping on the sidelines of last week’s BRICS summit may signal an official interest in re-thawing financial ties that have been paralyzed by border tensions since 2020. A review policy that has dramatically slowed investment in India seems ripe for fine-tuning.

While the dialogue between the two leaders appears to have focused on unresolved issues along their shared 1,860-plus-mile border, it sets the tone for broader engagement on bilateral issues at next month’s G20 summit in New Zealand. Delhi to. India appears to be gearing up for a larger Chinese presence in its businesses, three years after it introduced an approval system for investments from countries sharing a land border. The impact of the screening was significant: According to Gateway House, a think tank, foreign direct investment from China was small, amounting to around $6 billion, including in pharmaceuticals, technology and automobiles. However, official Indian data shows that it fell to US$11.7 million in 2021.

A weakening of attitudes towards the second largest trading partner is now noticeable, albeit with tight controls and restrictions. Authorities in New Delhi have approved proposals in sectors such as renewable energy and electronics, driven in part by companies like Apple (AAPL.O), which wants its Chinese component makers involved in building iPhones in local factories. Business combinations are also planned. Fast-fashion retailer Shein, whose app banned India 2020, is returning in collaboration with Reliance Industries (RELI.NS) retail unit, The Wall Street Journal reported in May. Sajjan Jindal’s steel-to-paint conglomerate JSW is acquiring a large minority stake in SAIC Motor-backed MG Motor India, the Economic Times reported in June.

Faster and more frequent releases may be on the horizon – as of March 2022, India had only given the go-ahead 66 of 347 FDI proposals under the screening mechanism. Actual investments are currently lagging behind the number of permits; A better geopolitical relationship could narrow the gap. A focus could be anything that eliminates the import of foreign products and promotes domestic production, such as the manufacture of electric vehicles. India’s digital economy – previously a big area of ​​interest for Chinese companies – may remain out of reach due to privacy concerns.

Modi has tied a deepening of financial ties with China to a warming political relationship. As long as the relative calm at the border persists, there could be warmer handshakes.

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CONTEXT NEWS

Indian Prime Minister Narendra Modi spoke with China’s President Xi Jinping on the sidelines of the BRICS summit in Johannesburg and highlighted India’s concerns over border issues, Reuters reported Aug. 24, citing India’s foreign minister.

Chinese automaker BYD has told its Indian joint venture partner that it is shelving plans for a new $1 billion investment to build electric cars after its proposal was reviewed in New Delhi, Reuters reported in July.

India is “open” to investment from China, former Minister of State for Electronics and Information Technology Rajeev Chandrasekhar told the Financial Times in an interview published in July.

A private company owned by Sajjan Jindal, chairman of India’s JSW Group, plans to buy up to 48% of MG Motor India, a wholly-owned arm of Shanghai-based SAIC Motor, The Economic Times reported in June, citing unnamed people knowledge of the matter.

Shein will regain a foothold in India through a partnership with Reliance Retail, The Wall Street Journal reported in May. The Chinese fast fashion brand has agreed to a strict licensing deal with the Indian company, Bloomberg reported in June.

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