Welcome Chinese FDI but keep an eye on possible espionage bids

The government’s move to streamline the process of granting business visas to Chinese technicians is in line with the policy shift to encourage Chinese investment into the country. However, it must be ensured that such investment is not at the cost of national defence and security. The Economic Survey 2023-24 had alluded to the change in government stance on foreign direct investment (FDI) from the country with which we don’t have very cordial relations. The ‘China plus one’ strategy that many MNCs follow to de-risk themselves from China may not result in a total movement of trading relations away from the country. As the survey says, “Therefore, the world cannot completely look past China, even as it pursues China plus one.” India faces two choices to benefit from China plus one strategy: it can integrate into their supply chain or promote FDI from China. Among these choices, the survey said, focusing on the latter seems more promising as regards boosting India’s exports to the US, as done by East Asian economies in the past. Basically, the idea is to let Chinese companies produce the goods they supply to our companies in India rather than import them.

It is not a bad idea, especially as Beijing also wants to bring FDI to India. In the wake of the Galwan outrage in June 2020, which resulted in the death of 20 Indian soldiers, India took a variety of steps to scale down economic ties with its northern neighbour, including imposing ban on Chinese apps and restrictions on visas for Chinese nationals. While India-China relations have not improved much since then, there has not been a major rise in tensions. It is in this milieu that Delhi has decided to attract FDI from China. Quite apart from attracting the much-needed investment, the move may also help improve their relations. When a country invests a lot of money in another one, the costs of military skirmishes become economic too. This is something that China, given the state of its economy, can ill-afford in the short and medium term. Chinese investment, however, should not be seen as an unmixed blessing.

In November 2022, the US authorities found that a Chinese national, Xu Yanjun, was actually a career spy. He was prosecuted and sentenced to 20 years in prison for plotting to steal trade secrets from several US aviation and aerospace companies, including General Electric. In July 2022, FBI director Christopher Wray told a gathering of business leaders and academics in London that China aimed to ‘ransack’ the intellectual property of western companies. He warned that it was snooping on companies everywhere “from big cities to small towns—from Fortune 100s to start-ups, folks that focus on everything from aviation, to AI, to pharma.” Spying by a top executive of the Chinese tech giant Huawei in Canada is well also known. If the most technologically advanced companies are finding it hard to check snooping by the Chinese, defence and security officials in India will find it harder. But failure is not an option. It is plain and simple-the government, while focusing on the economic imperative, should never lose sight of national security.