NEW DELHI: China wants to fund a big chunk of India's infrastructure development even though previous attempts have been rebuffed by a government nervous about allowing its neighbour to enter critical areas such as telecom or power over security worries.But that hasn't discouraged the Chinese from making a concerted bid that envisages its companies and workers getting deeply involved in upgrading India’s decrepit rail, road and power infrastructure besides telecom.A Chinese working group submitted a five-year trade and economic planning cooperation plan to the Indian government in the first week of February, offering to finance as much as 30 per cent of the $1trillion targeted investment in infrastructure during the 12th Five-Year Plan (2012-17) to the tune of about $300 billion.

That’s the biggest such offer by any one country, exceeding the funds contributed by Japan, which has traditionally financed some of India’s most ambitious projects. The commerce department is likely to hold an inter-ministerial meeting next week to discuss the investment proposal by China to identify sectors of India’s interest, a government official familiar with developments told ET.

China has more than $3.8 trillion in reserves — which keeps rising thanks to trade surpluses with other countries — that it needs to deploy effectively. And, having already invested huge sums in its own infrastructure, Beijing has been looking further afield.It has been deploying funds in developing nations across the globe, including Pakistan, Sri Lanka, Nepal and Africa, gaining influence for itself and business for its companies. India’s massive infrastructure requirement offers several opportunities to China.The economic road map presented to the Indian government has identified key sectors such as railways, roads, telecom, and nuclear and solar power among others for investment.

“China has expressed a strong desire to invest in India’s infrastructure sector,” the official said. “However, it needs to be assessed how to leverage that. We need to identify sectors from where we can gain, such as software or IT, pharma, among others.”

A Chinese interest is particularly high in railways, in particular electrification, high-speed trains, wagons, last-mile connectivity and gauge conversion. It has also identified sewage treatment and tunnel building as areas where it can offer substantial expertise.India however is not keen on allowing Chinese investment in sensitive areas like the northeast and Jammu & Kashmir. The two countries share a turbulent past, having gone to war with each other in 1962 leaving unresolved border issues that flare up occasionally.As the two most populous countries in the world, they also compete for resources globally, with the Chinese more successful at adding to their reserves.The home and defence ministries are wary of Chinse investment for strategic and security reasons, the latest example being 100 per cent FDI in railways that the government aims to allow.Regarding this, the home ministry has already flagged security concerns over Chinese companies investing in sensitive areas such as the northeast and Jammu and Kashmir.“The Chinese have offered to make big investments in India,” a Planning Commission official said. “Since there are nine ministries that have been engaging with China at different levels, the department of commerce wants to strike a common strategy.”China contributed just 0.15 per cent or $313 million of India’s total foreign direct investment (FDI) inflows between April 2000 and December 2013.Japanese investment amounted to $15.3 billion, about 7.3 per cent of the total. The big Japan-funded projects include the ongoing Delhi Mumbai Industrial Corridor and Delhi Metro. The Japanese are also in talks to build a road network in the northeast region.The Japanese government has approved $4.5 billion for non-commercial projects through Japan International Cooperation Agency (JICA) and commercial lending through Japan Bank for International Cooperation (JBIC), which has 26 per cent equity in DMIC. Besides, Japan has recently committed a loan of $2 billion for Delhi metro.While India and China are targeting $100 billion in bilateral trade by 2015, the balance is heavily skewed in favour of the latter. At the end of fiscal 2012-13, China’s trade surplus with India was about $39 billion.China doesn’t see this narrowing in the short to medium term due to the nature of the two economies, with India being services led and China a manufacturing economy.“Allowing Chinese investment into infrastructure sector looks a bit dodgy from the look of it as it will lead to higher import content, likely to worsen the trade deficit between the two countries,” said Biswajit Dhar, director general of Research and Information System, a think tank.“Our strategy should be to let them come with a package, wherein we identify a few parts of the country where they develop the infrastructure and set up manufacturing units there like in case of SEZs (special economic zones).”China is already in talks with the Indian government to set up industrial parks in India in sectors such as agro-processing and manufacturing.India’s Department of Industrial Policy and Promotion, the nodal body for foreign direct investment policy, has identified sites in Uttar Pradesh, Haryana and Andhra Pradesh where Chinese companies could set up such units. The government is hopeful that this will help narrow the trade deficit with China.