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  • Ekta Kumar

World is Wary


The world has always been wary of Chinese money flowing into strategic sectors. But now the fear is palpable. Globalisation, the buzzword for the past twenty years or more, has started to unravel. There is no pretence anymore of a higher moral principles, or adherence to international standards of acceptable behaviour. Governments are clamping down.




Everyone loves a bargain. I’m not talking about the Diwali sales, or the insane discounts online. Sometimes it happens on a much larger scale, involving countries and corporations, where the stakes are much higher.


The government recently announced stringent changes to the rules governing FDI in Indian companies, making government approval compulsory in case of investments from our neighbours (importantly, China). We are not the only ones worried.


The world has always been wary of Chinese money flowing into strategic sectors. But now the fear is palpable. The pandemic has unleashed an economic crisis. Stock markets across the globe have crashed, losing almost 35 per cent, and wiping off trillions of dollars. Companies, big and small, are struggling to cope with the COVID 19 crisis. The future of millions of business is uncertain. Valuations have dropped, and cash-rich opportunistic investors, are on the prowl looking for ‘deals’.


There is growing unease about predatory investments, and hostile takeovers of domestic companies by foreign agencies at a vulnerable time like this. Governments are clamping down - Australia, Germany, Spain, America, Italy and now India, are all introducing stricter rules to defend their domestic industry.


There was a time when concerns around China were limited to ‘key technology’ areas or ‘sensitive infrastructure’. But not anymore. Even small and medium-sized enterprises which are strong in their niche segments can be attractive acquisition targets.

China’s overseas investment policy has traditionally been politically driven, with nationalistic objectives - eg. ensuring the supply of natural resources, creating world-class companies through acquisitions, securing strategic assets in technology and national priority industries and so on. We’ve seen the row over Huawei, and numerous other examples dotting Europe and America, as well as closer home, in India.


It is a politically polarising issue. China has deep pockets, the state and its subsidiaries have lent about $1.5 trillion dollars in direct loans and trade credits to over 150 countries. 18 of the 30 unicorns in India are funded by the Chinese.


There are lessons from the past as well. Policymakers across continents are conscious of Chinese state-owned companies buying dozens of assets after the 2008 financial crisis, and also in Europe (Greece and Portugal) when their economies were hit by the European debt crisis. Most are afraid of their local economies being exploited again at an unprecedented time like this.


The Chinese origins of the pandemic make things even more difficult. It has led to a rise in anti-china sentiment, making a compelling narrative against the Asian superpower. It is fuelling public outrage and therefore also inviting political intervention.

Rules are being changed across the world. Calls for protectionism and self-reliance and growing stronger. Globalisation, the buzzword for the past twenty years or more, has started to unravel. There is no pretence anymore of higher moral principles or adherence to international standards of acceptable behaviour.

Globalisation was built on trust, by creating bonds of mutual dependency. But we are seeing a resurgence of economic nationalism. Solidarity is giving way to self-interest.

Countries are moving away from multilateralism and putting themselves first. They are fighting to protect their own people and their own economies. The government are announcing stimulus packages and measures to save jobs and livelihoods. They are now also stepping up to change the rules of the game, and play watch guards to industry.


The mood at present is grim and suspicious. The months ahead are going to be volatile and dynamic. There will be economic and political consequences of the decisions taken today. We seem to be moving inwards, but the fact is that we are an interdependent world. Trust and transparency is the key to building a stable future. But how is the question.

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