On the billboard are India's prime minister Narendra Modi, China's president Xi Jinping and Anandiben Patel, chief minister of the western Indian state of Gujarat, ahead of President Xi's arrival in Ahmedabad on September 16, 2014. Amit Dave/Reuters
On the billboard are India's prime minister Narendra Modi, China's president Xi Jinping and Anandiben Patel, chief minister of the western Indian state of Gujarat, ahead of President Xi's arrival in AShow more

High hopes as China’s Xi meets India’s Modi



NEW DELHI // Chinese president Xi Jinping begins a three-day visit to India on Wednesday, bringing with him hopes of billions of dollars in investments, even as prime minister Narendra Modi continues to woo his Asian neighbours.

Mr Modi returned from a trip to Japan earlier this month, where he convinced prime minister Shinzo Abe's government to pledge to invest $35 billion (Dh128bn) in India over the next five years.

In a speech during that visit, Mr Modi derided countries with an “expansionist” agenda, which many analysts interpreted as a veiled jibe at China’s geopolitical aggression. But no shadow of that remark hangs over the Chinese president’s impending arrival in India.

During Mr Xi’s trip, the two countries are expected to sign deals that will allow China to invest in India’s outdated, struggling railway infrastructure.

“India has a strong, real desire to increase its cooperation with China and other countries to perfect and develop its rail system,” Liu Jianchao, China’s assistant foreign minister, said in a media statement before Mr Xi’s trip. “India is considering building high-speed railways, and China has a positive attitude towards this.”

Breaking with tradition, Mr Xi will start his India visit not in the capital New Delhi but in Ahmedabad, in Mr Modi’s home state of Gujarat. On Wednesday evening, the Chinese president will be the guest of honour at a birthday banquet for Mr Modi, who turns 64.

After the banquet, Mr Jinping will leave for Delhi, where he will remain until Friday, for meetings with other Indian leaders.

The talks between the two leaders mark the first India-China summit since Mr Modi became prime minister in May. Mr Xi is accompanied by a clutch of delegates representing Chinese business and industrial interests.

China was an active investor in Gujarat during Mr Modi’s brief chief ministership of that state, which lasted from 2001 until his elevation to prime minister this year. Mr Modi courted foreign investment and promised a vibrant climate for business even then.

Last year, China’s overseas investment touched $90bn; in contrast, between 2000 and 2014, only $400m of China’s foreign investments were made in India. Similarly, although bilateral trade between the two nations stands at $65bn as of last year, India’s deficit in this relationship is a worrying $31bn. Although China dominates most trade relationships, this imbalance strikes analysts as particularly lopsided.

“The core of the problem is these bilateral imbalances,” said SK Mohanty, an economist who works for a research institute called Research and Informations Systems for Developing Countries, which functions under India’s ministry of external affairs. “It’s true that Indian products are often not competitive in Chinese markets. But China also practices protectionism.

“Until these trade imbalances are corrected, we cannot go forward,” Mr Mohanty said.

Media reports quoting Chinese officials have indicated that Mr Xi may pledge anywhere between $100bn and $300bn in long-term investments on his trip to India.

“We hope that during this visit the Chinese and Indian relationship of the last 50-60 years would see a directional change,” Nirmala Sitharaman, India’s minister for trade, told reporters last week.

Along with a deal that sees Beijing invest in India’s railway, Mr Xi’s delegation is expected to sign an agreement that will permit China to set up two new industrial parks – one in Gujarat and one in neighbouring Maharashtra. These parks will host power-generation facilities and manufacturing units, generating jobs for the local popualtion as well.

A healthy state of economic cooperation may also help settle nerves on either side of the contested stretches of border between India and China.

India has protested recent incursions of Chinese troops onto its soil.

The Indian government reported to its parliament last month that it had registered 334 Chinese incidents of border infringement this year alone. China has always denied pushing into Indian territory.

“Sure, there are unresolved issues including the boundary question,” Syed Akbaruddin, the spokesperson for India’s ministry of external affairs, said in response to a question at a media briefing on Monday.

“Yes, it will be discussed.”

ssubramanian@thenational.ae

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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