China bets on India story, invest heavily in startups

The ongoing economic slowdown in the world’s second largest economy has not deterred it from going ahead with its India plans. China is betting big on the India story, and has decided to scale up its investment in India.

The total Chinese investments in India were $1.2 billion between 2000 and September 2015. This was only 0.47 percent of the total foreign direct investment inflow. China became India’s largest trading partner in 2008. However, investment flow from the country has remained much below potential for a host of reasons.

The investment scenario is expected to change significantly given the spate of announcements in the last few weeks. Wanda, China’s largest commercial real estate developer, has announced investment worth $10 billion in Haryana. China’s largest carmaker SAIC Motor has proposed to buy GM’s Gujarat facility. There are around 100 small and medium enterprises in China that have promised investments worth $1 billion in India.

While Chinese companies are no more restricted to proposals, they have been making aggressive and widespread investments especially in startups. Recently, China’s online travel company Ctrip pickied up a strategic stake in Makemytrip and Baidu unveiled discussions with multiple Indian internet startups for investments.

These investments come in the backdrop of Alibaba’s high profile investments in Snapdeal and Paytm last year. Another Chinese internet giant Tencent Holdings started investing when it took a wager on Bangalore-based healthcare startup Practo last year. “Chinese internet companies have recognized the big potential in India’s digital startups where there are similarities in learning curves and experiences,” Frank Hancock, managing director, advisory, Barclays said.

Start up initiative

Giving the required push to startups in India, the government recently unveiled the ‘Start up India’ initiative that would encourage innovation. Prime Minister Narendra Modi announced a slew of incentives that would encourage more startups in India. The ‘Start up India’ is expected to change the ecosystem and the ease of doing business in India.

Some of the major investors from China that have agreed to invest in the country are Tencent holdings, Alibaba, Baidu, Wanda, SAFE, SAIC. Highlighting that India’s internet and e-commerce journey bears close similarity with that of China, with a lag of 8-10 years, a Credit Suisse report said. “The presence of such investors on the boards of investee companies enables access to insightful market advice and winning business models,” Anup Vikal, CFO, Snapdeal said.

Wanda, Mainland China’s biggest property developer, laid out a fresh proposal of $10 billion investment in Haryana, which comes in the backdrop of joint ventures announced earlier with Anil Ambani’s Reliance Group to develop integrated townships in Navi Mumbai and Hyderabad.

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