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Focus: GS-III Indian Economy, International Relations

Why in news?

Despite the uproar against the use of Chinese products amid the standoff on the border in eastern Ladakh and the government’s decision to ban several apps recently, government officials say it is not possible to fully decouple the trend due to the substantial investments by Chinese companies in India.


  • While some measures can be taken, several Chinese investments are quite substantive, and it is not possible to fully block them.
  • Intelligence assessments have also cautioned on the direct and indirect links many of these companies have with the People’s Liberation Army (PLA).
  • A worrisome factor is that these Chinese companies have linkages of some sort with the Chinese military.

Significant new law

  • In 2017, China passed a national intelligence law which gave Beijing powers over Chinese companies’ overseas investments as well.
  • As per the Annual report of the U.S. Secretary of Defence to the Congress on the “Military and Security Developments involving the People’s Republic of China 2019”, this law requires Chinese companies, such as Huawei, ZTE, Tik Tok and others to support, provide assistance, and cooperate in China’s national intelligence work, wherever they operate.
  • The law has direct security implications for all overseas Foreign Direct Investment (FDI) from China.

Questions on Chinese investments

  • One of the aspects that has raised red flags is Chinese investments in Indian technology startups.
  • The U.S.-China Economic and Security Review Commission, a U.S. congressional commission, said in its 2019 report, “The Chinese government’s military-civil fusion policy aims to spur innovation and economic growth through an array of policies and other government-supported mechanisms, including Venture Capital (VC) funds, while leveraging the fruits of civilian innovation for China’s defence sector.”
  • This raises a direct question mark on Chinese VC investments in India including big names like Alibaba and Tencent, the second official stated.

-Source: The Hindu

February 2024