China expands presence in India's strategic business sector as minority partner
By Nantoo Banerjee
At a time when India is baffled by China's preposterous and farcical claims over the state of Arunachal Pradesh, its government-owned Sanghai Automobile Industry Corporation, commonly known as SAIC Motor, has joined hands with billionaire Sajjan Jindal-led JSW Group to manufacture passenger cars and commercial vehicles in India. China is aspiring to have a substantial presence in India's automotive sector despite government restrictions on equity control. China seems to have opened two fronts to tackle India.
One is to claim Indian territories bordering China and surround India with its military presence. And, the other is to establish a strategic presence in the Indian market by flooding exports and steadily entering India's domestic manufacturing scene. Interestingly, Indian businessmen are willing to play the conduit between the government and Chinese investors. As the Indian authorities keep a strict watch on Chinese investments, Chinese automakers are the latest to change track and prepare for a long haul with the help of opportunistic Indian businessmen. The latter seem to be unconcerned about the deteriorating India-China diplomatic relations.
Earlier this month, China had openly claimed that India's north-eastern state of Arunachal Pradesh belongs to the People's Republic of China (PRC). The PRC officially claimed that Arunachal Pradesh is a part of southern Tibet. China refers to the territory as Zangnam. On the contrary, India has always claimed that the Aksai Chin plateau in the Himalayas belongs to India. In a quick and strong response, India's foreign ministry said that China's claims are absolutely “absurd”. Arunachal Pradesh, which shares a border with China, is and will always be an “integral part of India.” Last week, the country's External Affairs Ministry spokesperson Randhir Jaiswal said: “Repeating baseless arguments in this regard does not lend such claims any validity.” China even received a rebuff from the US State Department on the PRC's highly absurd claim of Arunachal Pradesh.
Responding to a query over China's ‘territorial claims', the United States' State Department strongly rejected China's claim on Arunachal Pradesh. On March 9, Prime Minister Narendra Modi visited Arunachal Pradesh's Itanagar and inaugurated multiple development projects. China was rattled by Prime Minister Modi's Arunachal visit and protested against the same. Reacting sharply, India's External Affairs Ministry rejected China's comments regarding Prime Minister Modi's visit. The MEA affirmed that “Arunachal Pradesh was, is, and will always be an integral and inalienable part of India”. Time and again, India has made the Chinese side aware of the country's consistent position on territorial integrity. China had promptly opposed the US recognition of Arunachal Pradesh as part of Indian territory and affirmed that Washington has nothing to do with the India-China border dispute. The PRC accused the US of “instigating and using other countries' disputes” for selfish geopolitical interests.
Surprisingly, India's business and trade seem to be totally unconcerned about the rising diplomatic tension between India and China. While the government of India has been trying to control Chinese industrial and business investments in the country by raising entry restrictions along with other neighbouring countries, including the levels of equity participation, Chinese companies are resorting to minority equity partnership with willing Indian promoters to push their projects.
The latest JSW-MG Motor deal is seen as one such case. The first major India-China joint venture in the automotive vehicle industry has reportedly taken off with $110-billion Chinese government controlled automotive behemoth SAIC, which owns and operates MG Motor brand, partnering India's JSW group. The SAIC is the world's seventh largest automobile company with a massive presence in China. According to reports, the cumulative holding of JSW-led Indian entities in the new company will be 51 percent. The company will be called JSW-MG Motor India. It is expected to see a Rs. 5,000 crore investment, initially. While JSW will get 35 percent stake in MG Motor India, local financial institutions will hold eight percent, MG employees will have five percent and dealers three percent.
Going by the projection, it seems China plans to flood the Indian market with both conventional and electric vehicles in due course. It could be bad news for existing auto manufacturers. The newly constructed JSW-MG Motors aspires to aggressively expand in the passenger car market by driving in a series of new cars, including plug-in hybrid electronics (running on both petrol engines and battery), pure electrics, fuel cells, and other greener options. It plans to ramp up MG's Gujarat-based Halol plant's production from 1.2 lakh units to three lakh units, annually. The JSW group is also talking to other global auto majors, including Chinese Leapmotor, for technology license to produce EVs.
The issue is that a major Chinese assault on India's automotive industry, may unsettle the country's existing manufacturers apart from becoming a strategic concern as China is seen as India's prime enemy in the region. India's automobile industry has steadily grown over the years. Although last year, India's overall automobile exports showed a 21 percent decline, passenger cars export was up by five percent to 6,77,956 units. Currently, there are already over 35 global and Indian car brands active in the Indian market. Some of top passenger car brands include Maruti, Hyundai, Tata Motors, Mahindra, Honda, Kia, and Renault. Last year, Tata Motors, the world's 17th largest automobile company, dominated the domestic commercial vehicle market with a share of over 39 percent.
Clearly, India's business community and China's aggressive market expansion strategy are taking full advantage of the democratic country's soft policy to make the best use of it. The business community is unconcerned about China's constant claims of Indian soil, including the whole state of Arunachal Pradesh. This could be a matter of serious concern in view of the deteriorating India-China diplomatic relations. The failure of China's Belt and Road Initiative to make an inroad in India has not foiled its expansion in the domestic market of the world's fifth largest economy. India's profit hungry business community seems to be helping China, more nilly than willy, to achieve its objective despite border and diplomatic tensions. (IPA Service)
