For decades, China viewed India as a market to sell its goods. Since 2016, though it has started putting money into the Indian startup space, though on a scale that is much smaller than its moves on the trade front.
In the last 20 years, China has accounted for just 0.51% of the total foreign direct investment (FDI) that has come into Indian companies, and ranks a lowly 18, according to Indian government data (chart 1).
India, in turn, looked at China as the factory of the world, driven by state support, top-notch infrastructure and economies of scale. In fact, the big story in the 2000s was about Indian manufacturers setting up factories in China to tap these advantages.
China welcomed them. When Indian automobile component company Sundram Fasteners set up a factory in Wuyuan town in China’s Zhejiang province more than a decade ago, local authorities named a road in the town after the Chennai-headquartered company. Till 2018, as per Indian government data, Indian companies had invested $1.09 billion in China.
Initially, foreign direct investment from China to India was predominantly by state-owned companies investing in the infrastructure space. Over the last 10 years, however, this has started to change with China’s reputation as a technology superpower growing.
Chinese tech giants such as Baidu, Alibaba and Tencent started investing in fledgling Indian companies. According to data from technology research firm Tracxn, 28 Chinese corporates have invested in Indian startups since 2010. Leading them are Tencent and Xiaomi.
Tencent, for instance, has 16 Indian companies in its portfolio, including the unicorn startups—those valued at more than $1 billion—Byju’s, Dream11, Flipkart, Hike, Swiggy and Udaan. Other companies in which it has a stake include Ibibo Group, KhataBook, MyGate, NewsDog and Practo. All of these companies are visible and flag bearers of the Indian startup ecosystem.
Another set of investors are Chinese venture capital (VC) firms, and 41 of them have invested into Indian startups. Shunwei Capital leads with 16 portfolio companies (Cashify, Chalo, Clipapp and KrazyBee, to name a few). It is followed by Swastika, with 12 companies (including HelloDhobi, InstaCar, Makkajai, Pickrr and Pocketin).
In all, these 69 Chinese companies and VCs have invested in 104 Indian startups. In the overall Indian startup landscape, that’s a small patch. Only 17 of these companies and VCs had more than one company from India (chart 2). According to Tracxn’s India Tech Annual Factsheet 2019, till the end of last year, 6,114 Indian startups had received funding. Unlike trade, investment in India is a small space for China so far.
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