Sikkim standoff: China’s economic stakes in India is no worry for Beijing
The gap between India and China over a border dispute in the Sikkim region has led to speculation about how it would respond to the situation.
Chinese leaders have ruled out any talks with India until Indian troops come out of what they see as their territory. In response, the Indian Foreign Minister noted that the differences should not turn into conflicts between neighbors.
But the stagnation continues, focusing on its impact on China’s economic relations with India.
In social networks, including many WhatsApp groups, a campaign is underway to show how Indians will be able to meet in China rejection products produced in the country and sold in India.
This is a country full of nationalistic emotion. But how can such a campaign actually affect exports or Chinese investment? To assess this, it is important to take into account some figures on India’s trade with China and China’s investment flows to India.
There is no doubt that direct Chinese investment in India has steadily increased. Being the 37th largest foreign investor in India in 2011, it is now ranked 17th largest foreign investor in 2017.
This appears to be a rapid increase in the hierarchical order, but in reality the size of total Chinese investment in India and annual flows are very low, almost insignificant, either as a percentage of total foreign investment in India, or Percentage of China’s total investments abroad.
Keep these numbers in mind. Between April 2000 and March 2017, India received cumulative foreign investment of more than $ 332 billion.
However, China’s share is only $ 1.63 billion. In 2010-2011, China only about 2 million dollars invested in India. This year, India received foreign direct investment (FDI) totaling more than $ 14 billion.
Of course, Chinese investments in India have taken over the following years and grew by 495 million in 2014-15 and $ 461 million in 2015-16.
However, these increases were in line with the general orientation of India’s foreign direct inflows in recent years. If the rate of increase of Chinese FDI is faster, this is due to the low base effect. Total Total annual FDI inflows in India were estimated at $ 31 billion in 2014-15 and $ 40 billion in 2015-16.
Look at another way, China’s annual annual FDI is estimated at 100 billion dollars annually. Therefore, India has a very small part of less than five hundred billion dollars.
Does China really have to worry about a border conflict that harms the prospects of its annual FDI flows that at present should not exceed half a billion? The Chinese authorities were not sure to note that their investments in India in 2016-17 dropped significantly to 277 million dollars.
In the commercial arena, too, the scenario is similar. Imports of India from China in 2016-17 is estimated at 61 billion dollars, while India’s exports to China this year, only 10 billion represented.
It is true that India’s trade deficit with China accounted for almost half of India’s total trade deficit, but these figures do not seem too important as a Chinese standpoint.
China’s total annual exports are estimated at more than $ 2.2 trillion. Therefore, exports of $ 61 billion to India are a small part of total exports to China.
It is the same for imports from India, which still represent a small part of their total imports.
In summary, China’s imports and Chinese investment in India could be significant from the point of view of India.
But China’s outlook, trade links with India or investments in India are still not too important for the leadership is worried about the impact of a border dispute on them. India can keep the promise of a large market for China, but that promise has not yet been filled.