Risks and rewards of the return of Chinese firms to India

THE return of the Chinese mobile and technology company Vivo as the title sponsor of India's mega-dollar Indian Premier League (IPL) cricket tournament shows that the two countries' relationship is once again as close as "lips and teeth", to borrow a phrase from former Chinese prime minister Zhou Enlai in October 1954.

After the Sino-Indian militaries clashed along their common Himalayan border in June 2020, the IPL had replaced Vivo as its title sponsor with an Indian fantasy sports platform, Dream 11. Earlier, Vivo Mobile India, a subsidiary of Guangdong-headquartered Vivo Communication Technology Co, had bagged the title sponsorship rights for the period from 2017 to 2022 for some US$341 million, further extending their association since 2015.

Using the "lips and teeth" metaphor to describe China's close relations with North Korea after Beijing decided to intervene in the Korean War, then-premier Zhou had stated that if the North Korean "lip" was gone, China (the "teeth") would feel cold. And when the "lip" of Indian cricket was gone last year, Chinese business did feel the chill.

But now, their commercial relations are improving after the military forces of both countries recently began withdrawing their troops from the border where they had clashed and remained in eyeball-to-eyeball confrontation.

ESPNcricinfo showed that Vivo has returned as IPL's title sponsor for the 2021 tournament after its deal with the national cricket authority, the Board of Control for Cricket in India (BCCI), was suspended for the 2020 edition following the border conflict. The Chinese mobile phone manufacturer had stated that both parties "have mutually decided to pause their partnership for the 2020 season of the Indian Premier League".

Cricket is a symbol of the broader Sino-Indian economic relationship. As tensions dissipated, a new Indian government coordination committee has begun approving Chinese foreign direct investment (FDI) proposals from a nine-month long cold storage. The committee - comprising officials from the ministries of home, foreign, commerce & industry, and the government policy research unit NITI Aayog - has begun clearing small Chinese projects stuck in the bottleneck, on the understanding that larger projects would be studied later after the bilateral relationship is carefully assessed.

It had been reported that about 150 Chinese foreign investment proposals worth over US$2 billion are pending, which include those routed by Japanese and US companies through Hong Kong. It is understood that "non-sensitive" projects would get faster approval, such as those in sectors such as automobiles, electronics, chemicals and textiles, and the "sensitive" proposals such as data generation and finance may take longer to approve.

Chinese investors matter to the Indian ecosystem. They have become significant players in India's startups, after having invested US$6 billion over the last two years. But after the border clashes which left troops dead on both sides, India's leading startups such as the food app Zomato, online supermarket BigBasket and Dream11 have been trying to limit their exposure to Chinese investors.

The worsening of Sino-Indian relations last year had an impact on Indian startups. Alibaba's sister company Ant Group, which holds a 25 per cent share in Zomato, had planned to invest US$150 million in January 2020, but Zomato has so far received only US$50 million. Other Indian startups had started shifting away from Chinese investors and begun returning to US and European investors who had for long been their main sources of funds before the Chinese capital made its entry a few years ago.

Despite these realignments, India is looking at clearing some important Chinese investment proposals. One of them is a project by China's Great Wall Motor and General Motors, which made a joint proposal last year seeking approval for the Chinese automaker to purchase the US company's car plant in India for about US$250 million to US$300 million.

FORGING BACK RELATIONSHIPS

Great Wall promises to do big things in India, such as its plan to invest US$1 billion in India over the next few years, as part of its global strategy which involves selling petrol-fuelled cars in India and bringing in electric vehicles. If the bilateral relationship stays warm, Chinese companies will be back in strength doing business as usual in India.

The return of Vivo to Indian cricket is a really big development because cricket is where the heart of India beats, and a Chinese company has played a dynamic role in sponsoring it. The IPL is a major tournament of global standards, with television viewership reaching an impressive 31.57 million last year during the pandemic. It is not surprising that the spectacle has been labelled "pandemic proof". As more people stay home to watch the show amid continued curbs on outside gatherings, TV viewership can only grow.

The most-watched sport in India has been an image booster for title sponsor Vivo. It makes perfect sense for Vivo to use the popularity of the tournament as a way of boosting its corporate image and selling more mobile devices in the country.

Both sides are major gainers. On the one hand, the runaway success of Vivo's association with cricket will have a positive effect not only on Vivo's own sales, but also on the operations of other Chinese companies operating in the country. On the other hand, the IPL will also gain because not many other companies can match the kind of investments that Vivo has made.

But there is always a risk of backfiring. If border tensions flare up again, there is sure to be another call for boycotting Chinese products, and both Vivo and the IPL may face financial and image loss. The large role of geopolitics in business was properly demonstrated the last time when Vivo's sponsorship was suspended.

The next round of a Sino-Indian conflict may force another suspension. For now, both Vivo and the IPL are taking a calculated risk of entering an uncertain future. They seem to be betting on the larger Sino-Indian friendship triumphing over border tensions.

In all, the return of Vivo as the title sponsor of the IPL 2021 - which is expected to be played in eight Indian cities between April and June this year - signals a broader trend that augurs well for Chinese investments to flourish in India.

It goes without saying that the Sino-Indian business relationship is riding a wave of uncertainty, quite similar to the uncertainties and vagaries of the game of cricket itself.

• The writer is editor-in-chief of the Rising Asia Journal