FDI flows into Indian debt as well as equity have shown an increase as uncertainties continue to revolve around the Chinese tech sector according to reports. The recent crackdowns on Chinese tech companies and anti-monopoly regulations under Xi Jinping have triggered investors to re-assess the rationale and the risk of investing in China.
As per reports, Chinese companies like Tencent, Alibaba, Kuaishou Technology and Meituan have witnessed more than $1 trillion wipeouts combined. The Hang Seng Tech Index members have seen $1.5 trillion of value evaporate.
The Chinese policy shift has crippled industries such as technology, property, online private tuition and video gaming. Chinese have declared cryptocurrencies illegal and have put heavy restrictions on data collection and use with anti-monopoly legislation to curb the growth of tech companies.
According to data compiled by Bloomberg, Mainland investors have become net sellers of Tencent since June. Li Weiqing, a Shenzhen-based fund manager at JH Investment Management Co. had stated that he sold his internet firms holdings in the fourth quarter last year and planned to observe things from the distance.
Reportedly, Chinese stock market investors have been swapping big tech names for “small giants” and luxury brands for mass-market companies under the new plan for the economy initiated by Xi Jinping. Ronald Chan, Hong Kong-based Asia head of equities at Manulife Investment Management said that Chinese policymakers “are talking about how to go from a pear-shaped type of economy, which is bottom-heavy, top-light, into an olive shape”.
Reportedly, Chinese Food delivery platform Meituan was slapped with a fine of $1 billion for anticompetitive behaviour. Ride-hailing company DiDi Chuxing also faced restrictions from accepting new users. The Chinese financial company, Ant Group had to deal with regulations regarding payment and personal finance. Founder of TikTok, Zhang Yiming took early retirement amid mounting pressure.
The crackdown on the Chinese internet companies and tech sector have caused a drastic need for investors to find new markets. According to Bloomberg, investments in Indian start-ups climbed from $1.6 billion in June to around $8 billion in July. The Venture Capital deals in India exceeded the value of those in China for the first time after 2013.
Tiger Global Management, a New York-based equity firm that previously held investments of around $8.6 billion in public in addition to 36 private Chinese companies had started investing in India after facing heavy losses in China.
Analysts at Credit Suisse wrote “India’s corporate landscape is undergoing a radical change due to a remarkable confluence of changes in the funding, regulatory and business environment in the country over the past two decades. An unprecedented pace of new-company formation and innovation in a variety of sectors has meant a surge in the number of highly-valued, as-yet unlisted companies”.
Besides, Japan’s SoftBank Group which had recently announced the suspension of further investments in China is expected to invest $4 billion in India by the end of 2021, marking one of its biggest investments in India.
