February 5, 2015 / 11:40 AM / 3 years ago

Interview: Envoy wants India to do more for Chinese companies

A man walks inside a conference room used for meetings between military commanders of China and India, at the Indian side of the Indo-China border at Bumla, in Arunachal Pradesh, November 11, 2009.Adnan Abidi/Files

NEW DELHI (Reuters) - Some Chinese companies face unusually tough security reviews in India and are further hampered by visa restrictions, Beijing's ambassador said, slowing the pace of investment despite Prime Minister Narendra Modi's promise to roll out the red carpet.

Le Yucheng told Reuters that work had begun on a $5 billion industrial park in western India and a feasibility study on a high speed rail link through the heart of India worth up to $50 billion. Chinese companies lead both projects.

But he cautioned that Chinese firms were struggling through a thicket of bureaucracy, complicated procedures for land acquisition and difficult labour and tax policies that hampered a planned $20 billion push over the next five years, mostly in infrastructure.

Other countries with investment interests in India have voiced similar concerns since Modi took over last May. But in forthright language, Le said it appeared that in some cases Chinese firms had been unfairly singled out.

"We are inspired by Prime Minister Modi's projects (like) 'Make in India', 'Clean India'. We come and we meet a cold face in some ministries. Some Chinese businessmen are very disappointed," Le said in an interview this week.

He cited the example of telecoms group Huawei, which has not received security clearance two years after it began building a facility in the south to service the Indian market. That put it at a disadvantage to non-Chinese firms, according to Le.

In the past, India has temporarily blocked carriers from importing Chinese telecoms equipment over concerns it could compromise communications security, a fear shared by some other countries.

The interior ministry, in charge of approvals, said it had no immediate comment on the Huawei case.

Separately, Huawei announced on Thursday it was spending $170 million on a research and development centre in India, its biggest outside China, despite the unresolved clearance at the manufacturing unit.

"IT'S NOT FAIR"

Le's remarks, his first to foreign media since he took over late last year, came the week after U.S. President Barack Obama visited India promising closer defence and economic ties between the world's largest democracies.

Le, who spoke in English, said that China welcomed warmer ties between India and the United States and that he believed New Delhi would never be part of any campaign against China.

But China was concerned about the lack of an even playing field in India that was slowing investment. For example, India launched a visa-on-arrival system for more than 40 countries last year including the United States, but not China.

"Its not fair, China is the world's second largest economy, enjoys a favourable position internationally, but in India we are put on a par with Afghanistan, with Iran."

Some Chinese firms have had to wait more than three years before they could be registered to do business in India. One took more than a year just to open a bank account.

"We do have considerable advantages in the spheres of capital, technology, cost and construction experience. But we often end up hitting the wall of (the) security review," Le said, calling for equal treatment for Chinese firms.

An official at India's department of industrial policy and promotion drew attention to Foreign Minister Sushma Swaraj's statement during a visit to China this week vowing to make it easier for Chinese companies to operate in India.

Trade between the two most populous nations has soared in the last decade, but remains heavily in China's favour. Greater Chinese investment would help address that, Le said.

"WE'VE COME A LONG WAY"

India and China went to war in 1962 over a border dispute in the Himalayas that lingers on, fuelling distrust. A standoff between troops on a remote plateau overshadowed a visit to New Delhi by Chinese President Xi Jinping last year.

New Delhi has also worried about Chinese military assistance to Pakistan, and in recent years an expanding Chinese role in building ports and roads across South Asia.

China has concerns about Tibetan activists led by their spiritual leader the Dalai Lama, who has lived in India since fleeing the Himalayas after a failed uprising in 1959.

Le said Modi will visit China in May and both countries were working on a series of agreements to cement political and commercial ties. Before that, special representatives from the two countries will meet to tackle the boundary dispute.

The two countries have had 17 rounds of talks since 2003, but are no closer to a settling the 3,500 km border.

They are, however, working on a code of conduct for border control and confidence building measures including a hotline between their army headquarters and extra border meeting points.

"We have a come a long way in our relations. It's not easy, we have achieved a lot, we want to expand our cooperation, we want to enhance cooperation and not vice versa."

Reporting by Sanjeev Miglani; Editing by Mike Collett-White

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