Escalating tensions following the Galwan border conflict saw the Indian government ban a substantial number of Chinese apps including TikTok and WeChat. In early June, Indian railways — the world’s fourth largest railways network — cancelled a project worth Rs 470 crore with a Chinese firm on account of ‘non-performance’.
In the backdrop of an anti-China sentiment festering in Indian markets, GoI has been closely monitoring Chinese investments amid a push for Atmanirbhar Bharat. A new set of rules has made prior government approval mandatory for investments from countries that India shares a land border with — a move expressly aimed at curbing China-style ‘opportunistic takeovers’.
Despite all this, an unfazed People’s Bank of China (PBOC) has been steadily adding to its India tally. A couple of days ago, the Chinese central bank followed up its March stake buy in HDFC with another fresh purchase — this time in ICICI Bank‘s QIP.
Coming just a few months after the HDFC episode that later prompted a tightening of FPI rules, the latest ICICI stake buy seems to have touched a raw nerve with some quarters in India — most notably the Confederation of All India Traders (CAIT), the powerful traders’ body.
CAIT National President BC Bhartia said that the sudden Chinese interest in India’s banking sector raises an alarm for the entire sector, and the Reserve Bank of India being the custodian of India’s banking must now be on high alert to closely monitor this sinister strategy.
It appears to have riled CAIT to such an extent that the traders’ body has requested finance minister Nirmala Sitharaman to direct ICICI Bank and HDFC to return investments made by the PBOC.
“It seems quite clear that China has designed a well-planned strategy to make an intrusion into the Indian Banking sector which is quite well regulated and is very important for the financial health of the country,” said Praveen Khandelwal, Secretary General, CAIT.
“Even though the Government had introduced a mechanism to check the foreign portfolio investments, there is nothing concrete yet from the RBI to restrain and control the funding coming in from China,” he added.
CAIT also criticised the private lenders for allowing PBOC to invest despite Indo-China conflicts.
For the record, the People’s Bank of China on Tuesday bought 0.006 per cent stake in private lender ICICI Bank by investing Rs 15 crore in its Rs 15,000 crore qualified institutional placement.
A few months before that, the Chinese central bank had raised its stake in HDFC to over 1 per cent, raising much hue and cry in India.
HDFC and ICICI Bank are just two of the Indian bluechips that PBOC has put money in. There also are quite a few others. It holds 0.32 per cent stake in Asian Paints and Ambuja Cements respectively, which it further raised to 0.33 per cent in Asian Paints in the June quarter.
At the end of March 2020, the Chinese central bank held shares worth Rs 4,418 crore in HDFC, Asian Paints and Ambuja Cements.
These investments may appear not too big, but one should not forget that “it is part of China’s strategy,” CAIT’s Bhartia warns.
It must be noted here that the central bank of one country holding assets in another is nothing out of the ordinary. According to a Bloomberg report, global central banks hold nearly $1 trillion of equity assets globally. Central banks also had Rs 67,090 crore worth of assets under management (AUM) in Indian equities in June 2020, compared with Rs 64,600 crore a year ago, according to the NSDL.