Beijing’s appetite for trade deals is robust

Kartick Maheshwari, a partner at Khaitan & Co, an Indian law firm, talks about the economic relations between India and China.

QHow would you describe economic relations between India and China in the past few years and how will the current dispute affect these relations? A

India has a large – and growing – current account imbalance with China, and the only way it can be offset for the time being is via larger capital account investments from China, including mergers and acquisitions, greenfield business units. Besides, most Indian conglomerates are in a stressed financial situation today, which leads to quality assets being available on the market at good valuations. At the same time India offers a large and viable consumer market for China, so we don’t expect Chinese companies to let up on their efforts in India.

What is the trend for Chinese investments in India?

The largest deals have all been in the e-commerce and tech space. We are seeing more deal activity picking up in manufacturing and real estate. In manufacturing, Chinese auto and auto parts manufacturers are increasingly looking at India. Saic Motor Corporation has just announced plans for India.

Which other sectors are of interest to Chinese companies?

In real estate, some of the larger firms have already opened country offices, but are struggling to calibrate strategy for India. Project size, land availability and speed of execution is not what they are used to – hence their investment activity has been muted. We have seen Chinese bidders come out strongly for some Indian IT assets and pharma assets recently. There’s also good interest from China acquirers (investors) in infrastructure assets and cement companies. Distress situations in Indian infrastructure companies due to their high leverage are also driving up this interest on the part of Chinese investors.