1. 200 proposals from China wait for security clearance by MHA

New investment policy is aimed at preventing hostile action amid pandemic

• About 200 investment proposals from China are awaiting security clearance from the Ministry of Home Affairs (MHA) after new rules were notified in April, making prior government approval mandatory for foreign direct investments (FDI) from countries which share a land border with India.
• As FDI is allowed in non-critical sectors through the automatic route, earlier these proposals would have been cleared without the MHA’s nod.
• Prior government approval or security clearance from MHA was required for investments in critical sectors such as defence, media, telecommunication, satellites, private security agencies, civil aviation and mining and any investments from Pakistan and Bangladesh.

Revised in April

• The Department for Promotion of Industry and Internal Trade (DPIIT) notified the new FDI policy on April 18, which said, “…an entity of a country, which shares land border with India or where the beneficial owner of an investment into India is situated in or is a citizen of any such country, can invest only under the Government route.”
• The revised FDI policy, a press statement from DPIIT said, is aimed at “curbing opportunistic takeovers/acquisitions of Indian companies due to the current COVID-19 pandemic.”
• A senior government official told The Hindu that since April, after the new rules were notified, the Ministry has received around 200 applications for vetting.

May pull out

• “However, none of the proposals have been cleared so far. These agreements would have been in the pipeline for months and it is possible that many might withdraw due to the delay or stringent conditions put in place now,” said the official.

LAC stand-off

• India and China have been engaged in a stand-off along the Line of Actual Control (LAC) in eastern Ladakh as there has been a massive build-up of Chinese troops since April-May.
• In a first in more than four decades, 20 Indian soldiers were killed on June 15 in violent clashes with the Chinese troops at Galwan Valley. Several rounds of diplomatic and military-level talks have been held as India has demanded that status quo be restored in the border area.
• On July 10, Chinese Ambassador Sun Weidong issued a video statement, saying “China has been India’s largest trading partner for many years in a row with cumulative investment in India exceeding $8 billion.”
• India shares land borders with Pakistan, Afghanistan, China, Nepal, Bhutan, Bangladesh and Myanmar.
• Investors from countries that are not covered by revised FDI new policy only have to inform the Reserve Bank of India after the completion of a transaction rather than seek prior clearance from the administrative ministry.

Foreign Direct Investment

• FDI is an investment from a party in one country into a business or corporation in another country with the intention of establishing a lasting interest.
• Lasting interest differentiates FDI from foreign portfolio investments, where investors passively hold securities from a foreign country.
• Foreign direct investment can be made by expanding one’s business into a foreign country or by becoming the owner of a company in another country.

FDI in India

FDI is allowed under two modes – either through the automatic route, for which companies don’t need government approval, or through the government route, for which companies need a go-ahead from the centre.

According to the new FDI policy:

• An entity of a country, which shares a land border with India or where the beneficial owner of an investment into India is situated in or is a citizen of any such country, can invest only under the Government route.
• A transfer of ownership in an FDI deal that benefits any country that shares a border with India will also need government approval.
• India shares land borders with Pakistan, Afghanistan, China, Nepal, Bhutan, Bangladesh and Myanmar.
• Investors from countries not covered by the new policy only have to inform the RBI after a transaction rather than asking for prior permission from the relevant government department.

2. The fall of Hong Kong

The National Security Law has turned Hong Kong into a colonial city again, with Beijing calling the shots

• In 1982, when they were discussing Hong Kong’s fate, Deng Xiaoping said to Margaret Thatcher, “Horses will still run, stocks will still sizzle, dancers will still dance.” London’s 99-year lease over most of the colony was to expire 15 years later. Hong Kong Island and part of the Kowloon Peninsula, though, had been ceded to Britain in perpetuity. Deng wanted to bring the whole territory under Chinese control in 1997. His line about horses, stocks, and dancers was meant to convince Thatcher that the city could become part of the People’s Republic of China (PRC) without losing its distinctive features.

Offering an an attractive vision

• Deng died a few months before the Hong Kong handover of July 1, 1997. While he never got to see the territory of the PRC expand, he did live to see two documents drafted that spelled out how the brashly capitalist city was to function as part of a Communist Party-run state.
• First came the 1984 Sino-British Joint Declaration. It explained that a “one country, two systems” structure would take effect in 1997 and last 50 years. Hong Kong would enjoy a “high degree of autonomy” as a Special Administrative Region (SAR) of China. The local “way of life” would continue, while Beijing oversaw defence and diplomacy. Then came the detailed 1990 Basic Law. It seemed to offer Hong Kong’s people an attractive vision of life from 1997 until 2047. They would no longer be colonial subjects, but they would retain appealing parts of the status quo: a more independent judiciary, a freer press, and stronger rights of assembly and speech than mainland cities. An official selected locally would head Hong Kong’s government; over time, residents would even get to choose this Chief Executive.
• The big question was whether Beijing would keep the promises enshrined in these documents. In 1984, Deng was taking China in a liberalising direction, so it was easy to feel hopeful about Hong Kong’s future. A year before the Basic Law was finalised, however, soldiers gunned down civilians in Beijing, crushing 1989’s protest wave and raising doubts about Deng’s trustworthiness.
• Thatcher was among those who did not lose faith — or, at least, did not admit to doing so. A year after 1989’s June 4th Massacre, she said that, while appalled by that event, she was heartened that Deng continued to embrace the economic liberalisation that, she remained sure, would bring political liberalisation. She also said that China’s leaders would surely respect their pledge to allow Hong Kong a high degree of autonomy after 1997. For they’d want the “forum of the world” to consider them people of their word.
• After the 1997 handover, hope persisted that Thatcher was right. Hong Kong’s courts remained fiercely independent. Its newspapers criticised national as well as local policies. A popular satirical television show, “Headliner,” shifted from mocking colonial authorities to mocking representatives of the new order. Democracy was elusive (fewer than 2,000 people got to vote for the Chief Executive, and then just for candidates vetted by Beijing), but it seemed possible that could change.
• One ideal date to appraise Hong Kong’s distinctiveness became June 4. Each year, the local government gave organisers permission to hold a large vigil honouring the victims of 1989’s massacre, while public commemoration of the killing was forbidden across the mainland. In 2020, for the first time, the June 4 commemoration was banned. Officially, approval for the vigil was withheld because of the pandemic. However, COVID-19 was largely under control in early June, religious gatherings were being allowed, and the police were turning a blind eye to big parties at bars. The real key difference this June 4 was Beijing’s announcement in May that, tired of waiting for the local government to pass an anti-sedition law, it was going to impose one. The National Security Law (NSL) makes it possible for not just various actions but also various forms of expression to be treated as proof that someone is subversive.

Undermining Basic Law

• Now that the NSL is in place, it is likely that there will be no more legal June 4 vigils. More broadly, the NSL shatters the “one country, two systems” framework, except insofar as there remains a separate system for making and spending money.
• It now seems that instead of taking Deng’s 1982 statement seriously, it should have been taken literally. Going forward, Hong Kong will remain a place where horses, dancers, and stocks behave in distinctive ways, but little else differentiates it from mainland cities. “The Hong Kong Special Administrative Region shall enact laws on its own [our emphasis] to prohibit any act of treason, secession, sedition, subversion against the Central People’s Government,” Article 23 of the Basic Law states, yet Beijing has usurped the authority to do the enacting. This would provide perfect fodder for a “Headliner” skit — but the show has been cancelled.
• Local courts have continued to dismiss charges against some activists arrested before the NSL went into effect, but in the new order, alleged violators of vaguely defined decrees can be whisked across the border to be tried by courts that virtually never fail to convict those deemed dissidents. The “high degree of autonomy” until 2047 promise has run out more than 25 years early.
• Beijing presents the NSL as responding to the 2019 protests that roiled Hong Kong. Its goal, the official media says, is to restore law and order. Only a small number of radicals advocating independence or bent on destruction will be affected.
• But these assertions fly in the face of recent history. Even before the NSL passed, some local residents were pointing out that many features of the imaginary tightly controlled Hong Kong of 2025 portrayed in the 2015 film Ten Years could be seen in the current city. On July 1, nearly 400 protesters were arrested, 10 of them specifically for breaking the brand new NSL. Hundreds of Hong Kong Twitter users have raced to delete their accounts, fearing that a tweet quoting a now-taboo slogan or song title could lead to them disappearing into a mainland prison. Newspapers are eliminating political cartoons.
• And the law was no sudden response to 2019. It is the most extreme, but just the latest, move that undermines Basic Law guarantees. In 2018, the Kowloon West train station opened with a section controlled by mainland security forces. In 2016, a Hong Kong court was considering whether two members of the local legislature should be disqualified for their behaviour. Beijing stepped in and decided the matter. And so on.
• But “horses still run,” as Deng promised. As the spring racing season ended, The Standard celebrated the conclusion of “an incredible season for the Hong Kong Jockey Club.” If we accept the idea that “one country, two systems” means that Hong Kong is like a mainland city, but with horse racing, that will conform with President Xi Jinping’s vision.
• Perhaps Beijing is no longer concerned with appearing trustworthy in the “forum of the world,” or feels this forum is so eroded as to be irrelevant. Mr. Xi does not seem to feel beholden to protect a true “one country, two systems” framework — the kind in which Hong Kong would enjoy “a high degree of autonomy,” retain “executive, legislative and independent judicial power, including that of final adjudication,” and be nothing like a colony. By contrast, a colonial city is what it is again, or resembles, just with Beijing rather than London calling the shots.

• Basic Law allows Hong Kong to enjoy executive, legislative and independent judicial power, including that of final adjudication, barring matters of defence and foreign affairs.
• Under Article 23 of the Basic Law, Hong Kong has to enact a national security law “to prohibit any act of treason, secession, sedition, subversion against the Central People’s Government, or theft of state secrets, to prohibit foreign political organizations or bodies from conducting political activities in the Region, and to prohibit political organizations or bodies of the Region from establishing ties with foreign political organizations or bodies.”
• Article 23 aims at preserving national security but it will also allow China’s national security organs to formally operate and set up institutions in Hong Kong.
• Basic law makes it clear that only Hong Kong’s Legislative Council (LegCo) can make and repeal laws.
• Beijing wants LegCo to pass the new legislation as soon as possible because it is afraid that if LegCo comes under the control of democrats after elections later in 2020, it will be hard to implement the legislation.
• Democrats are against this law as it curbs the autonomy of Hong Kong as SAR.
• However, Beijing can bypass LegCo if it chooses to and make the national security law applicable to Hong Kong by inserting this legislation in Annex III of the Basic Law.
• Under Article 18 of Basic Law, national laws can be applied in Hong Kong if they are placed in Annex III, and must be confined to defence, foreign affairs and matters outside the limits of autonomy of the region.
• Once listed in Annex III, national laws can be enforced in the city by way of promulgation (automatically being put into effect) or by legislating locally in the SAR.