India’s relations with China have oscillated between paranoia and deep suspicion and a calmer assessment of the situation.   Last August, when the two countries clashed in their worst border crisis in four decades over Doklam, the Chinese government publicly reminded India of the lessons of the 1962 war.   But the nature of India-China relations – and their unpredictable ups and downs – is such that last week Prime Minister Narendra Modi held an unprecedented “informal” meeting with Chinese President Xi Jinping, without attendees or agenda, in the Chinese city of Wuhan.

Also in Forbes: When Modi and Xi meet in Wuhan, investment will most likely drive the agenda

Interestingly, despite bilateral and geopolitical differences, economic ties have continued to grow over the years between the two countries.   China is among the fastest developing foreign direct investment resources in India.   “In 2017, China invested around $2 billion, up from $700 million in 2016, tripling investment in a single year,” says Mohammed Saqib, secretary general of the India-China Economic and Cultural Council (ICEC).   Mauritius was the largest source of foreign investment in India, followed by the United States and the United Kingdom in 2016-2017.

China is also India’s largest trading partner, and India is the largest allocation market for Chinese corporations in South Asia. “Despite being caught in an antagonistic relationship over Doklam, the bilateral industry between India and China reached 84. 44 billion USD in 2017, an increase of 18. 63%, well above the 71. 18 billion USD recorded in 2016. This is a fundamental milestone for both countries,” says Saqib.

The main players join the forces.

This year, bilateral trade in Q1 hit $22.1 billion, up 15.4% year on year. In April, the two countries signed over 100 trade agreements, worth $2.38 billion, when the Chinese trade delegation visited India.

“As two major emerging countries and giant emerging market economies, China and India have a huge domestic market,” Gao Feng, a spokesman for the Ministry of Commerce, told Xinhua last week. complementary, creating ample spaces for cooperation. “

There is apparently a common confidence in both countries that a hostile stance harms their interests, and stabilizing relations at a time of global uncertainty will pay economic dividends.   India’s competitive merit in data technology, software and medicines, as well as China’s strengths in manufacturing and infrastructure development, make both sides herbal partners.  

“China and India are now trying to restore their bilateral relations in a mutually favorable manner, and their industrial ties deserve this goal,” Saqib said. “In the Asian neighborhood, India is the only country with the market and strength to absorb China’s increased excess capacity and investment. India’s GDP of approximately $2. 5 trillion is equivalent to that of all countries. ” of ASEAN combined and is developing rapidly.

What’s in it for China?

China’s economy is five times larger than India’s. In recent years, as domestic expansion slowed, China produced more steel, cement, and machinery than the country needed. And while it’s up to emerging Asia to keep their economic engine running, Chinese corporations have been courted across India to fill their infrastructure gap. Last year, China’s Sany Heavy Industry planned a $9. 8 billion investment in India, while Pacific Construction, China Fortune Land Development and Dalian Wanda planned investments of more than $5 billion each.  

In 2014, President Xi Jinping, who is exporting China’s model of state-led development in a quest to create deep economic connections, promised to spend $20 billion in Indian industrial and infrastructure projects in five years. Earlier this year, the Asian Infrastructure Investment Bank, a multilateral investment bank led by China, has approved funding for roughly $1 billion worth of projects in India.

“However, while many MoUs (memorandums of understanding) have been signed through Indian government agencies and Chinese investors, they have not yet resulted in massive infrastructure investments,” Saqib says, noting that Chinese corporations are well-positioned to invest. in the sector because they have the capital and technical expertise.

Related: How India Got Involved in China’s Belt and Road Initiative, Despite Its Opposition

Indian startups make a profit

Meanwhile, Chinese investors have been pouring money into sectors that are outside the purview of government agencies. “In the last three years, according to the data, Chinese and Chinese-born investors have invested about $3. 7 billion in Indian startups,” Saqib says. “For the Indian startup sector facing an investment crisis, such investments are an incentive for new entrepreneurs. “

In 2015, Alibaba invested $500 million in Snapdeal and $700 million in Paytm. The following year, Tencent invested $150 million in Hike, a messaging app, and a consortium of Chinese investors paid $900 for media. net.   In 2017, Alibaba and Tencent announced or closed deals value just about $2 billion: Alibaba’s moment tranche of $177 million in Paytm, $150 million in Zomato, $100 million in FirstCry, and $200 million in Big Basket. Tencent’s investments included $400 million in Ola, $700 million in Flipkart, and a moment circular of investment in Practo. Last year, even Chinese pharmaceutical giant Fosun Pharma spent $1. 09 billion to gain a 74% stake in India’s Gland Pharma.

“Apart from the virtual and startup space, investments from China have historically been concentrated in the automobile industry and have been concentrated in PM Modi’s home state of Gujarat, among others,” says Saqib, adding that there was an “exuberance ” in India during this period. . Chinese microcapital and increased investments in sectors such as prescription drugs and solar energy. “Given the good fortune of recent investments, China could soon become one of the top 10 most sensible foreign investors in India,” he says.

The Chinese generation discovers a foreign market

Chinese smartphone makers Xiaomi, Huawei and Oppo, all of which have production plants in India, have also enjoyed wonderful good fortune in the Indian market. Xiaomi’s sales in India increased by 259% in 2017. Relatively low prices for hard labor make India attractive to Chinese investors, offering an ideal hunting ground for the manufacturing sector.   According to a report by China Briefing, an average Indian employee can be hired for almost a fifth of what it costs to employ a Chinese workforce.

More on Forbes: Huawei Is Finally Making A Significant Dent In The Indian Smartphone Market

Tellingly, Chinese corporations are appearing greater confidence in the Indian economy, which is lately developing quicker than China and narrowing the competitiveness hole between the two Asian giants. India ranked 40th, whilst China is 27th in the World Economic Forum’s 2017-2018 Global Competitiveness Report.

Santosh Pai, spouse of Link Legal, a legal corporation that is helping Chinese investors gain a foothold in the Indian market, told CNBC: “Chinese investments have doubled in the last two years. I have no reason to doubt that this will not continue because they have already tasted blood. If you’re a Chinese company with unlimited capital and you look around the world and say, “Where’s the big bet you can make?””, the answer is India.

Not just sourcing capital, knowledge sharing as well Chinese investment is turning out to be a game-changer for Indian entrepreneurs. “Even as they gain financially from Chinese investment, the longterm gain comes from studying Chinese companies’ successes and failures in navigating the domestic market,” says Saqib.

Since India and China have remarkable similarities in terms of customer habits and revenue stream levels, there’s a “huge learning curve,” he adds. “Chinese investors are helping Indian startups strategically tap into various spaces of market dynamics. When it comes to market management, Indian marketers can rely on the Chinese model, not the American model.