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REUTERS/P. Ravikumar
Masking the reality.

India’s new aversion to Chinese investment will hurt its own businesses

Prathamesh Mulye
Member exclusive by Prathamesh Mulye

In the Netflix documentary China Hustle, fraud-hunting investor Carson Block explains the significance of a Chinese proverb: Muddy water makes it easy to catch fish. It means “in clear water, you catch no fish”. But as Block, who exposed corporate malpractice in China in 2011, aptly puts it, “opacity (muddy water) creates opportunities for people to make money — that’s China’s view.”

The documentary puts a spotlight on how the Chinese government and corporates act in tandem to inflate stock prices and shield the wrongdoings of their US-listed companies. This kind of behavior has fueled mistrust against China in India, and led to new rules that may have a negative impact on Indian companies.

When the Indian government amended the rules for foreign direct investment (FDI) from bordering nations, including China, in April, few complained. “The restrictions have been placed to protect India’s interest. We don’t know where the government control ends and the private sector begins in China. There is a lack of clarity on what steps the private sector takes at the behest of its government,” warned Amit Bhandari, a fellow at Mumbai-based foreign policy think tank Gateway House.

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