Recently, the Indian government has become increasingly strict in reviewing China’s funds. Since 2020, India has been conducting tax and security issue reviews on mobile phone manufacturers, construction companies, application software, etc. The Chinese media commented that this powerful blow had been “unparalleled” since Chinese companies have been doing business in India.

According to China’s Caijing Eleven, at least 500 Chinese-funded companies have faced tax and legitimacy investigations in India. The newspaper said, “The scope and severity of the attack on Chinese companies has been unprecedented since Chinese companies did business in India.” According to the statistics from the Chinese commerce ministry, in 2021, direct investment of Chinese companies in financial services in India and Africa fell nearly 70% compared with the same period last year, down to $63.18 million.

The Indian government has frequently introduced restrictive measures against Chinese companies in the past two years. The first subjects to bear the burden are Internet companies. Up to 224 Chinese software have been banned in India, including Tik Tok, WeChat, etc. As a result, Chinese software almost disappeared from India. The strained relationship between China and India also caused China’s investment to “fall off the cliff.” Also, on July 22, Zhao Ming, chief executive of Huawei’s Honor handset line, told the media that the Indian judiciary is investigating Xiaomi’s tax evasion and Vivo’s money laundering incident. Since Honor, Huawei’s mobile phone subsidiary, withdrew from the market, 80% of small and medium-sized businesses in China’s mobile phone industry chain in India have been closed. Another group of companies gave up the Indian market, leaving only some companies that were finding it difficult to survive.

According to Newtalk, the Indian government’s move is seen by outsiders as preventing excessive penetration of Chinese investment while supporting local industries and wishing to maintain good relations with the U.S.

After Biden visited Asia, the U.S. first introduced the “India-Pacific Economic Framework,” consisting of 13 founding member countries, including India. After that, the U.S. continued to hold the Quadrilateral Security Dialogue with Japan, Australia, and India. However, China also expressed dissatisfaction with this.

China’s Sina Technology reported that Gao Feng, China’s Commerce Ministry spokesman said in May this year that China was seriously concerned about the Indian government’s implementation of a series of measures to suppress Chinese companies and their products. It was causing severe damage to the rights and legitimate interests of the Chinese companies. He hopes India will improve their business environment and treat all foreign investors fairly and transparently, including Chinese companies.

Caijing Eleven said that, from March 2020, Indian Prime Minister Narendra Modi started implementing the “replacing China industry” policy. The policy includes three aspects: Industrial policy embodied by the Production Linked Incentive Plan (PLI); a global search for “alternative China” sources, and a trade policy exemplified by the signing of a new bilateral free trade agreement and a new economic policy that represented by the integration of American and Western value and innovation chains.

Among them, PLI policy is the top priority. At the beginning of the policy implementation, the India Government announced that they would use $26 billion to support the production of 14 critical industries, including semiconductors, photovoltaics, electronic apparatus, pharmaceuticals, medical devices, automobiles, etc. Most of them are heavily dependent on manufacturing in China.

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