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Sikkim standoff: China's economic stakes in India are no worry for Beijing

India may hold the promise of a big market for China, but that promise is yet to be fulfilled

A K Bhattacharya 

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The current standoff between and over a border dispute in the Sikkim region has given rise to speculation over how the latter would respond to the situation. The Chinese leadership has ruled out any talks with until the Indian troops vacate what it considers to be its territory. In response, the Indian foreign secretary has noted that differences should not become disputes between neighbours.

But the stalemate continues, bringing into sharp focus its impact particularly on China’s economic ties with On social media including many WhatsApp groups, a campaign is already on to show how Indians can respond to by rejecting goods that are produced in that country and sold in

It is a campaign charged with nationalistic emotion. But how seriously can such a campaign really impact Chinese or investments? To assess that, it is important to look at some numbers on India’s with and the flow of Chinese investments into

There is no doubt that in have been rising steadily. From being the 37th largest foreign investor in in 2011, it has now scaled up to the rank of the 17th largest foreign investor in 2017.

 
That appears to be a fast rise in the pecking order, but actually the size of total Chinese investments in and the annual flows are very little, almost insignificant either as a share of India’s total or as a per cent of China’s total investments abroad.

Consider the following numbers. Between April 2000 and March 2017, received cumulative foreign investments of over $332 billion. Of this, however, China’s share is only $1.63 billion. In 2010-11, invested only about $2 million in That year, had received total foreign direct investments (FDI) of over $14 billion.

Of course, Chinese investments into picked up in the following years and rose to $495 million in 2014-15 and $ 461 million in 2015-16. But these increases were in keeping with the overall spurt in India’s foreign direct inflows in these years. If the pace of increase in Chinese is faster, it is because of the low base effect. India's total annual inflows were estimated at $31 billion in 2014-15 and $40 billion in 2015-16.

Look at it another way, China’s annual outward is estimated at $100 billion a year. Of this, has a tiny share of less than half a billion dollar. Should really worry about a border dispute harming prospects of its annual flows that at present are yet to cross the half-billion mark? The Chinese authorities would also not fail to note that their investments in during 2016-17 dropped significantly to $277 million.

On the front also, the scenario is similar. India’s from in 2016-17 were estimated at $61 billion, while India’s to that year were only $10 billion. It is true that India's deficit with constituted almost half of India's total deficit, but these numbers do not appear too large from a Chinese point of view.

China’s total annual are estimated at over $ 2.2 trillion. Thus, of $61 billion to account for a small share in China’s total The same is true for its from India, which again account for a small share in its overall

In short, Chinese or Chinese investments in might look substantial from an Indian perspective. But from China’s standpoint, links with or investments in have not yet become too big for its leadership to worry about any border dispute’s impact on them. may hold the promise of a big market for China, but that promise is yet to be fulfilled.

India’s social media campaign against Chinese products may still make an impact on Indians’ purchase decisions and Chinese to may take a hit. Indeed, Chinese investments in and Chinese in 2016-17 registered a decline after seeing healthy growth in the previous two years. But so small is the current size of the Indian market for that India’s north-eastern neighbour may not yet be bothered, let alone be inconvenienced.

Disclaimer: Views expressed are personal. They do not reflect the view/s of Business Standard.

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