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india-china border conflicts and economic trades

India-China border

A senior Indian official said on Wednesday (January 17) that if the India-China border remains peaceful, India may relax its strict scrutiny and restrictions on Chinese investment.

The Indian Minister of Industry and Domestic Trade Promotion, Rajesh Kumar Singh, made the above remarks in an exclusive interview with the media on the sidelines of attending the World Economic Forum in Davos, Switzerland.

Mr. Singh said the easing of tensions at the India-China border could lead to an improvement in investment relations between India and China. The media pointed out in the report that this is the first time a senior Indian official has hinted that the four-year-old restrictions on Chinese investment may be lifted.

The Indian government introduced a series of new measures in 2020 to strictly review investments from companies in neighboring countries, especially in terms of national security.

India-China Border Conflict

The move was widely seen as a retaliatory measure by the Indian government in response to a conflict that broke out on the India-China border in mid-June of that year. In June 2020, soldiers from India and China had a large-scale confrontation and hand-to-hand struggle in the Galwan Valley area on the disputed border between the two countries, resulting in the deaths of at least 20 Indian soldiers and four Chinese soldiers. This is also the first fatal conflict on the border between the two sides since 1967.

The investment restrictions introduced by India have had a serious impact on the investment relationship between the two most populous countries in the world. The amount of investment affected is as high as billions of dollars, causing China’s BYD and Great Wall Motors to invest and set up factories in India.

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Mr. Singh told the media in an interview that these investment rules “could potentially change once our relationship stabilizes because I think the border issues we had, the border has now stabilized.”

“Same on the investment side; if things go well, I’m sure we can get back to normal operations,” he said. However, he did not give a clear timetable for when China’s investment restrictions will be relaxed. Asked whether India’s message meant Chinese investment would depend on a peaceful border, Mr. Singh replied, “You can’t roll out a red carpet for investment while someone is encroaching on your border.”

He said that India has adopted a broad, open attitude towards foreign investment in recent years, and the investment restrictions on China are only a minor “step back.” He pointed out that India has significantly reduced restrictions on foreign investment in India, lowered or eliminated caps on foreign company ownership in many industries, and implemented automatic approval measures for foreign investment.

The media pointed out in the report that despite the border territorial sovereignty disputes between India and China (the India-China border), China is still the largest source of imported products for India. Bilateral trade has increased by 32% since the border conflict between the two countries in 2020, and the total annual bilateral trade grew to $114 billion in the fiscal year due last March.

A brief border war broke out between India and China in 1962. Although no large-scale armed conflict broke out on the border between the two countries, the border situation has always been tense. According to a recent medal ceremony held by the Indian military, although India and China have been trying to ease tensions through diplomatic negotiations and military dialogue, two conflicts broke out on the India-China border within one year in 2022. During the conflicts, Indian soldiers who performed bravely were recently commended by the military.

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Indian Foreign Minister S. Jaishankar said in June last year that India and China must find ways to disengage military contacts and avoid military conflicts in the Western Himalayas.

However, Mr. Singh told the media, “In the past year or so, there have been no incidents. So I want to express the general hope of the business community that the situation is stable and improving.”

Mr. Singh pointed out that India may eventually consider setting policies like those of the United States and Australia. A foreign investment review mechanism, but no decision has been made in this regard, and India also hopes to create an environment that is “welcoming to foreign investment.”

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