The crevasse between the promise and reality in china’s illustrious market is reeking apprehensions for foreign corporations. A host of political and regulatory issues amidst and circling china are eviscerating many multinational companies’ operations and expansion plans. As a result of which, direct foreign investment in China by multinational companies has started reflecting a downward trajectory as investors are getting jittery and going pessimistic about the Chinese economy, for the indisputable reason that China is the inception point and has come out to be the undisguised emissary of COVID. Besides COVID, the despondency towards the Chinese economy from global investors was spiked because of its stance on Russia’s war on Ukraine. The concerns at the global level have stirred up that china will act on its long aggressive intentions to invade Taiwan as well.
Every action has consequences is a fact. But China is learning this lesson the hard way. For the larger part of 2021, the Chinese government cracked down on Chinese corporates. Regulators in Beijing went after Chinese corporate titans. The campaign wiped out a staggering amount of more than one trillion dollars of wealth. The market value of Chinese companies is also getting eroded. With the clear intention of taming its own private sector and shrinking the excess wealth to make businesses commit to its idea of ‘common prosperity, the Chinese government spearheaded its private sector. This stunt by the Chinese president is ratifying to start a domino effect of some far-reaching consequences, which china had not dreamed of. Global investors are spooked and they are withdrawing investments. More than eleven billion dollars were pulled out of the Chinese market in March this year alone. To add to this, the value of Chinese stocks is touching an all-time low. In one year the tech index which tracks china’s biggest tech companies has fallen by 45%. The redemptions from Chinese equity funds were at their highest since 2021.
Global investors are looking at China in a new light. There is a massive rethink on their part. Investors are taking their money elsewhere, for the first time. Global term investors do not see China as a secure investment anymore. Apart from this, the latest home-grown Wuhan virus outbreak has also raised investors’ eyebrows once again. The other worry for china is the Russian invasion. Beijing’s support for Moscow has not gone down well with investors. According to one report, Chinese companies have suffered 2.4 trillion dollars of sell-offs, which were triggered by Russia’s invasion of Ukraine. Investors are dumping Chinese stocks in the fear of Chinese companies facing sanctions because of Beijing’s actions.
Now all these events can harbinger a fundamental shift in how the global economy works. China might not remain the hottest destination for western multinationals anymore. India can utilize china’s compounding problems in its favour to become the next most sought-after destination for western investors and multinationals seeking to offshore manufacturing operations or ramp up sales. India is already catching numerous eyeballs across the world, because of its serious efforts in lieu of develop the nation. Unlike China, India has been very successful in establishing itself as the benefactor for its allies across the world. The Ministry of Electronics and Information Technology (MeitY) has formed an advisory board on making India a $300 billion electronics manufacturing hub by 2026. Called the “Digital India Electronics Mission $300 Billion”, the board is composed of members from major local and multinational electronics brands and industry bodies. It succeeds in a fast-tracked task force set up in December 2014 that focused only on smartphone manufacturing. With the new group, the ambit has been expanded to include other categories like IT hardware, wearables, LED lights, etc.