HDFC stake a prelude to bigger catch by China

CHINA is three to four times bigger/larger than India in every sphere. It’s indisputably the world’s number two economy and the numero uno aspirant. India, on the other hand, till a few weeks ago, stood at the fifth spot.

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In 2019, China’s $14.1-trillion GDP stood second to the $19.485 trillion of the US. India’s $2.94 trillion was fifth. In the list of the biggest economies by purchasing power (2017), China was the topper, with $23,190 billion; the US second with $19,485 billion and India third with $9,597 billion. In the number of persons with net worth above $1 million category, the US was first, China third, India nowhere in the first 16.

During 2007-17, China’s 8.3 per cent average annual growth rate was the third highest and India’s 7 per cent was the 10th. Percentage of total world exports (goods, services, income) in 2017 placed China third (10.33 per cent), behind the 19-country euro area (16.43 per cent) and the US (12.47 per cent). In 2018, China stood first in the category of traders of goods (exports-imports taken together), while India ranked 16th. In the biggest earners from export of services and income category in 2017, China stands fifth with 5.24 per cent, after the euro area at 18.58 per cent, the US 18.06 per cent, the UK 6.09 per cent, Germany 5.85 per cent, and India 14th (2.13 per cent).

In the balance of payments: current account, China stands fourth largest surplus with $1,95,117 million, behind the euro area’s $4,15,252 million, Germany’s $2,96,172 million and Japan’s $2,01,639. Regrettably, India doesn’t figure in the first 50. Its current account deficit is more than $200 billion owing to an unbridgeable trade imbalance. There was $63-billion deficit in China-India trade in 2017-18 ($53.5-billion deficit in 2018-19), thanks to globalisation and the unbridled entry of China in India’s critical sectors — economics, commerce, trade, banking, industry and communication. And now, we are seeing the opportunistic takeover bid of Indian companies in distress owing to the ‘Chinese virus’.

There, though, still exists a silver lining. India comes within the first 10 countries in the category of official reserves with $470 billion plus. China tops with $3.168 trillion, followed by Japan at $1.27 trillion and the euro area at $8,21,608 million.

So, there we are, in a position which is neither cause for defence nor optimism owing to the latest pandemic. Are we in for a financial debacle and agrarian distress owing to the unprecedented coronavirus afflicting virtually the entire world?

It’s indeed scary, all the more, when news came about the People’s Bank of China’s (PBOC) silent India entry, and now holding one per cent stake (equivalent to Rs 3,500 crore approximately) of the HDFC, the largest private sector bank of India. It should send shivers down the spine of every right-minded Indian (because of Chinese propensity to take over companies and business establishment across the globe). It’s also a gentle reminder to armchair globalised internationalists, left-right-centre ideologues and a battery of ‘scholars extraordinaire’ operating from the ivory towers with disconnect with India’s ground reality.

Technically, though, the one per cent stakeholding by the PBOC of HDFC assets could be brushed aside as ‘hardly a big deal’ in a fancied ‘global village and world-is-one’ scenario, under ‘free market economics and let market decide’ argument, but the writing on the wall is clear. China’s nouveau-imperialist economics could hurt India.

Wads of cash could be spent to buy anything and everything under the sun by Beijing: from prince to press, politician to pleader, overseas police to power-brokering conmen of target countries of the Communist Party of China. In September 2019, Hong Kong Exchanges & Clearing Ltd (Hong Kong Stock Exchange) announced that it offered to buy the London Stock Exchange Group for $36 billion, thereby signalling an unprecedented audacious push to penetrate the western financial mart to extend Beijing’s global footprint.

Understandably, the West was rattled by the (proposed) broad daylight (attempted) coup on the eve of China’s 70th Independence Day. On September 30, 2019, I wrote, “New Delhi highly vulnerable… Anything is possible now.”

Indeed, London Stock Exchange (LSE) bosses then clearly ‘felt ambushed’. To make matter worse, Hong Kong had made a direct appeal to western shareholders within 48 hours after the LSE board formally rejected the bid. How brazen and unethical the Beijing-sponsored Hong Kong action could be! No one expected the Chinese to remain idle during their high-profile 70th aniversary celebrations, which targeted mega projects to attain global status through China’s classic strategy — surprise, deception, mobility — from military to market to money machine.

To understand China’s foray into the Indian banking system, let us see the danger beyond the London Stock Exchange once again. China’s roving ambassadors are eyeing the world stock and banks, for their currency yuan to replace the dollar. Thus, of the top 15, the New York Stock Exchange with listed market capitalisation of $23 trillion is followed by New York’s electronic Nasdaq, with a market capitalisation of $10.85 trillion and Tokyo stock exchange with $4.5 trillion. It is folowed by Shanghai, Hong Kong, Euronext, London, Shenzhen and the Canadian stock exchange and then comes the 10th placed $2.05 trillion Bombay stock exchange and the 11th ranking Mumbai’s National Stock Exchange with $2.03 trillion. Since the HDFC is based in Mumbai, does India see the lurking danger? The yuan pushing the dollar?

Here, I may be questioned for being an alarmist: only thinking of Beijing and not Americans and other non-Chinese. While China is aggressively intrusive owing to its inflexible, hostile political ideology, others aren’t. For China, the HDFC stake is a prelude to a bigger catch. Hence, the Government of India was spot on when it modified the FDI norms. More, though, is required in India’s interests. India is a nation-state of the Westphalian model, not a terrain for a modern-day East India Company wherein foreign traders become rulers.