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Not Possible to Fully Block Chinese Companies, Say Officials

India-ChinaNEW DELHI – Despite the uproar against Chinese products amid the face off between India and China in Ladakh, government officials say it is not possible to fully block the chinese companies due to the substantial investments from the neighboring counrty in India.

“While some measures can be taken, several Chinese investments are quite substantive. It is not possible to fully block them. A worrisome factor is that these Chinese companies have linkages of some sort with the Chinese military,” one government official was quoted by The Hindu as saying.
On June 29, the government banned 59 Chinese apps citing national security; another 47 were also put on the proscribed list later.

In June 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.

Article 7 of the law states, “Any organisation or citizen shall support, assist and cooperate with the state intelligence work in accordance with the law… The state protects individuals and organisations that support, assist and cooperate with national intelligence work.”

The law has direct security implications for all overseas Foreign Direct Investment (FDI) from China, a second official said.

Intelligence assessments have flagged some large Chinese companies with major presence in India having direct or indirect links with the PLA. This includes Xindia Steels Limited, China Electronics Technology Group Corporation (CETC), Huawei, Alibaba and Tencent.

For instance, Xindia Steels Limited is considered one of the largest joint ventures (JV) between India and China and has commissioned a 0.8 mtpa iron ore pelletisation facility in Koppal district of Karnataka at a cost of over ₹250 crore. Its main investor is Xinxing Cathay International Group Co. Ltd. which, as per its website, is “reorganized, reconstructed and unhooked from previous production department and subordinate enterprises and institutions of the General Logistics Department of the PLA”.

Similarly, Huawei, which has generated global concern over its 5G services, was founded by Ren Zhengfei, a former deputy director of the PLA’s engineering corps in 1987. Huawei is quite popular in India and a government decision on its bid for 5G services in India is expected shortly.

Multi-million funding

CETC had in 2018 announced a $46 million investment in a 200 MW photo-voltaic manufacturing facility in Andhra Pradesh. Officials pointed out that CETC is China’s leading military electronics manufacturer and also makes Hikvision CCTV cameras.

Several CETC research institutes and subsidiaries have been added to the U.S. government’s entity list, restricting exports to them on national security grounds, officials pointed out.

CETC has been implicated by the U.S. Department of Justice in at least three cases of illegal exports and many CETC employees have also been convicted for military espionage, the second official stated.

CETC also provides technology used for human rights abuses in Xinjiang, where around one million are held in re-education camps, assessments noted.

Similarly, SAIC Motor Corporation Limited, the parent company of MG Motors, which sells MG Hector in India has also raised concerns. One of the subsidiaries of SAIC is Nanjing Automobile, which was previously a vehicle servicing unit of PLA, the official added.

Another aspect that has raised red flags is Chinese investments in Indian technology start ups. 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.

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