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Maharashtra stalls Great Wall Motor's investment plan after China border clash

MUMBAI/NEW DELHI (Reuters) - Maharashtra has stalled a proposal by China’s Great Wall Motor to invest nearly $500 million, days after a deadly border clash between the two nations, potentially delaying the company’s plan to tap one of the world’s biggest car markets.

Mumbai's financial district skyline is pictured, after air pollution level started to drop during a nationwide lockdown to slow the spreading of the coronavirus disease (COVID-19), India, April 24, 2020. REUTERS/Hemanshi Kamani/Files

The state government of Maharashtra, home to the financial capital of Mumbai, said on Monday it had put on hold three investment proposals from Chinese firms worth 50 billion rupees ($658 million) in total, including Great Wall’s.

The initial agreements are not cancelled, but further action is awaited, said Maharashtra’s industries minister Subhash Desai, days after his government signed them.

This is the latest setback for Chinese companies that are facing calls for boycott after 20 Indian soldiers were killed in clashes at a disputed border site, in a major escalation of a weeks-long standoff between the two nuclear-armed Asian giants.

“In the current environment, we will wait for the federal government to announce a clear policy regarding these projects,” Desai said in a statement.

Great Wall, which has plans to invest a total of $1 billion in India, did not immediately respond to requests for comment.

One of the biggest sellers of SUVs in China, Great Wall made its debut in India at the country’s biennial auto show in February, amid much fanfare.

Great Wall said in January it had agreed to buy U.S. automaker General Motors’ car plant in Talegaon in Maharashtra state, and the deal was expected to be completed by the second half of 2020.

Signing the agreement with Maharashtra government was an official announcement of its investment in the plant, Great Wall said a press statement last week, describing the move as “a major milestone in its Indian journey”.

“This is a big setback for sentiment and can make India an unpredictable investment destination,” said a person who works closely with Chinese companies.

($1 = 76.0386 Indian rupees)

Reporting by Rajendra Jadhav in Mumbai and Aditi Shah in New Delhi; Editing by Louise Heavens and Mark Potter