india-said-to-likely-block-chinese-investment-in-lic

Context

  • New Delhi wants to block Chinese investors from buying shares in Life Insurance Corp. (LIC) which is due to go public, four senior government officials and a banker told Reuters, underscoring tensions between the two nations.

Background

  • Tensions between the countries rocketed last year after their soldiers clashed on the disputed Himalayan border.
  • Since then, India has sought to limit Chinese investment in sensitive companies and sectors, banned a raft of Chinese mobile apps and subjected imports from China to extra scrutiny.
  • “With China, after the border clashes, it cannot be business as usual. The trust deficit has significantly widen(ed).

Clashes between China and India

  • After the first round of talks on 6th June, 2020, clashes occurred in Galwan Valley (Ladakh) that claimed 20 Indian soldiers’ lives and an unknown number of casualties on the Chinese side.
  • While faceoffs and standoffs keep occurring on the LAC due to differences in perception on the alignment, there has been no instance of firing on the LAC since 1975.
  • India’s Response:
  • India has moved in additional divisions, tanks and artillery across the LAC to match Chinese deployments. Further, India has approved the purchase of 33 Russian fighter jets and upgrades to 59 war planes at a cost of Rs. 18,148 crore.
  • Economic: Citing the “emergent nature of threats” from mobile applications, including popular ones of Chinese origin such as TikTok, ShareIt, UCBrowser, and Weibo, the government has banned 59 apps.
    • Further, India’s trade deficit with China fell to $48.66 billion in 2019-20 on account of the decline in imports. The trade deficit stood at $53.56 billion in 2018-19 and $63 billion in 2017-18.
    • However, the tensions on the border, as well as the Covid-19 pandemic, have thrown light on India’s economic dependencies on China.
  • India remains reliant on Chinese products in several critical and strategically sensitive sectors, from semiconductors and active pharmaceutical ingredients to the telecom sector, where Chinese vendors are involved not only in India’s 4G network but in on-going 5G trials as well.
  • Foreign Direct Investment (FDI) from China in India has dipped to $163.78 million in 2019-20 from $229 million in 2018-19.
  • In April 2020, the Indian government tightened FDI norms coming from the countries which share land borders with India. Government approval has been made mandatory.

About LIC

  • State-owned LIC is considered a strategic asset, commanding more than 60% of India’s life insurance market with assets of more than $500 billion. 
  • While the government is planning to allow foreign investors to participate in what is likely to be the country’s biggest-ever IPO, worth a potential $12.2 billion, it is leery of Chinese ownership.

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