Indian govt blocks all roots of Chinese investment in the much awaited LIC IPO

LIC, IPO, Investment, India, Chinese, China, Investors

The sudden crackdown by Xi Jinping on the behemoths of the Chinese economy has sent shocking waves across the world. The Chinese industrialists are looking abroad to safeguard their interests. As India offers the biggest consumer market after China, it’s no wonder that India is on top of their priority list. But, the Indian government led by Narendra Modi is well aware of these developments and, are making sure that Chinese investment in the Indian market is limited to its minimum possible value.

Chinese companies, a big no in the Indian economic space

According to a report by Reuters, India is set to block all roots of Chinese investment in the much-awaited LIC initial public offering. The conclusion of the Indian government shutting all gates for China in regards to investment in LIC IPO was drawn after their discussions with four senior government officials and a banker. Underlining the fact that Chinese investment in national assets like LIC could pose security risks, one of the government officials said- “With China, after the border clashes it cannot be business as usual. The trust deficit has significantly widened (ed),” When inquired about Chinese getting indirect entry into the IPO, they added that government would keep a check on it and attempt to form a policy which facilitates foreign investors and at the same time protect India’s security interests. 

Source: Business Today

Currently, India does not allow foreign investors in the LIC, but the government is considering allowing foreign institutional investors to buy up to 20 per cent of LIC’s IPO. To block the Chinese investment in the IPO, India has three options:-

India answers with economic damage to China

India has long been looking to stop the inflow of foreign direct investment from Chinese investors as these investors are controlled by the Chinese Communist Party (CCP). The political connections of the Chinese investors with the CCP translate into vital information of Indian interests going directly into the Chinese government’s hands. After the clash in Galwan valley, India tightened its policy stances on China. 

LIC is a state-owned insurance company that occupies 60 per cent of the Indian insurance market. It controls total assets of $500 billion. The strategic disinvestment by the government is expected to usher in more than $12.2 billion to the state coffers. Ten investment banks including Goldman Sachs, Citigroup, and SBI Capital Market, will handle the offering.

The Indian government is strategically disinvesting its shares from various public sector companies to improve their health and developing their efficiency. 

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