China says India's FDI restrictions against WTO rules, G-20 consensus

China has taken on India for imposing additional restrictions on investors from the country and has said that the barriers directed only at a few nations violated World Trade Organisation's (WTO) principle of `non-discrimination'.

"We hope India would revise relevant discriminatory practices, treat investments from different countries equally, and foster an open, fair and equitable business environment," according to a statement by the spokesperson of the Chinese Embassy in India on Monday.

The statement asserted that Chinese investment had driven the development of India’s industries, such as mobile phone, household electrical appliances, infrastructure and automobile, creating a large number of jobs in India, and promoting mutual beneficial and win-win cooperation.

"As of December 2019, China’s cumulative investment in India has exceeded $ 8 billion, far more than the total investments of India’s other border-sharing countries," the statement pointed out, adding that the impact of the policy on Chinese investors is clear.

Revised FDI policy

The Department for Promotion of Industry and Internal Trade (DPIIT), on Saturday, revised its foreign direct investment (FDI) policy, making it mandatory for all foreign investments from countries with which India shares a land border with, to come through the government approval route. This was done based on apprehensions that if investments were allowed to be made freely from the neighbouring countries without checks there could be hostile takeovers because of the deteriorating market and economic conditions in India due to the spread of COVID-19.

This means that while FDI from rest of the countries could come in through the automatic route in sectors where it is allowed such as automobiles, auto parts, construction, asset reconstruction, agriculture, single brand retail, manufacturing, coal, gems & jewellery, and textiles, capital goods, pharmaceuticals,electronic systems and ports and shipping, if it is made from investors in China and six other neighbouring countries it will need to have prior government approval. Earlier, these restrictions were applicable only on Pakistan and Bangladesh.

"Where companies choose to invest and operate depends on the country’s economic fundamentals and business environment," the statement said. Facing the economic downturn caused by COVID-19, countries should work together to create a favorable investment environment to speed up the resumption of companies’ production and operation, the spokesperson added.

India's new FDI restrictions not only violated WTO norms but more importantly, they do not conform to the consensus of G20 leaders and trade ministers to realise a free, fair, non-discriminatory, transparent, predictable and stable trade and investment environment, and to keep our markets open, it said.

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