While I have gradually reconciled. Since the blockade, trade relations between India and China have been affected by the 2020 border clashes.New Delhi’s business community’s push for cross-border goods and specialized manpower, and its ambitions to become a manufacturing hub, have played a major role in the progressive transformation.
Softness also helps China. With its economy slowing, domestic consumption falling, and regions such as the European Union and the United States pushing protectionist tariffs against the country, Beijing’s trade ties with India — which has a large domestic market — have been strained. becomes more important for
Relations between the two countries are still far from the pre-2020 reality. While there are signs of a thaw in relations between the two countries, India has signaled that it will not back down from some of the aggressive non-tariff barriers it has put in place to block the flow of Chinese-made goods into the country. Government officials indicated that this strategy may not change.
Meanwhile, India’s exports to China have stagnated while imports have increased. Last month, External Affairs Minister S Jaishankar had said that Indian goods do not have the same market access in China as Chinese products do in India. While Chinese imports crossed $100 billion in FY24, India’s exports barely crossed $16 billion last fiscal and remained at that level for a long time.
A working paper by the Economic Advisory Council to the Prime Minister (EAC-PM) states that exporters face a number of non-tariff barriers in China, which hamper Indian exports, particularly agricultural and pharmaceutical products. Market access is limited.
While China actively seeks to stem the loss of investment due to its domestic housing crisis, Western multinationals are risking their supply chains by seeking alternative locations under the ‘China Plus One’ policy. With the goal of detente, economists within the government also acknowledged that decoupling from China is not easy for India or the rest of the world and that India faces a choice between Chinese investment and Chinese imports.
A senior government official said the opening to China could be gradual, mainly to make it easier for mainland companies to invest in New Delhi with domestic partners.
“Joint ventures between Chinese and Indian companies, where the former is a minority shareholder, is something the government would be very open to,” the official said.
The Economic Survey 2023-24 also called on India to encourage investment from China, while discouraging imports of manufactured goods, where there is little scope for local value addition.
“Where we see China, or any other country, dumping goods into India, which hurts our domestic industry, then, we raise duties, impose anti-dumping duties, and protect our industry. introduce safeguard duties. But wherever we need their goods, we facilitate them,” another senior government official said, when asked what could change the trade relationship between the two countries. .
Some of India’s recent persuasions have pointed to a middle ground that New Delhi would be comfortable with in terms of Chinese investment. Earlier this year, Chinese state-owned SAIC Motors, which owned a controlling stake in MG Motors, divested the company and sold it to an Indian group of investors led by the JSW Group which now collectively owns 51 percent of the automaker.
Chinese apparel maker Shen, which was banned by New Delhi in 2020, is said to be making a second foray into the country after licensing its brand to Reliance Retail. The operations of this venture will be managed by Reliance.
But much of the change has come from lobbying by businesses in the country, who believe that any Chinese alternative in certain sectors is either too expensive, or of poor quality. It extends not only to raw materials and equipment but also to human resources. India has gradually relaxed its stance on issuing visas for certain sectors after imposing strict visa restrictions on Chinese nationals in the wake of the border crisis. This was because businesses complained that they were struggling to operate or maintain equipment without the help of China’s technicians.
While the electronics sector remains a key issue for India, where it has ambitions to become a major manufacturing hub, there is also recognition that these dreams will be difficult to achieve without China’s materials or manpower. . And the winds of change are blowing in this space as well.
An inter-ministerial panel earlier this year cleared a joint venture between Bhagwati Products (Micromax) and Huacan Technology in which the Chinese company would own a minority stake. Some of Apple’s China-headquartered suppliers have also started operations in India. And most importantly, India is heavily dependent on China for imports of components that are required to assemble the electronics manufactured in the country.
“The near-term strategy is to allow Chinese suppliers and companies to set up shop in the country, but in partnership with an Indian partner. We would like the Chinese company not to be the majority shareholder in the entity, but these decisions will be done on a case-by-case basis,” said an official.
Thus, some sectors, which are considered insensitive, may be opened to Chinese investment first. However, restrictions on Chinese investment in the telecom space are not expected to change anytime soon.
With India prioritizing investments from Beijing that could help its domestic manufacturing ambitions, some past decisions — chief among them the banning of short-form video app TikTok — are unlikely to be reversed soon. Will come up for review anytime. said the official.
While India cannot do without Chinese imports in some sectors, it has taken an aggressive stance in some others. In an effort to limit imports from China, India has sharply increased anti-dumping duties on Chinese products and also increased quality control orders, which prohibit the import and sale of goods in the country without Bureau of Indian Standards certification. is effectively stopped.
India has stepped up anti-subsidy measures against China with more than 30 anti-dumping investigations in 2024 alone – the highest number against any single country. Products being tested include industrial items such as plastic processing machines, vacuum insulated flasks, welded stainless steel pipes and tubes, soft ferrite cores, and industrial laser machines.
Industries seeking multiple extensions of anti-dumping duties have argued that China is not a market economy and uses predatory methods to eliminate competition, thereby harming Indian businesses.
New Delhi is increasing its presence in the Indian Ocean to limit Chinese influence in the region. As part of its strategy, a trade agreement with the Maldives is in the works. A commerce ministry official said geopolitics has increasingly started to influence India’s trade strategy, citing talks on a free trade agreement (FTA) with the Maldives, which could take precedence over others. is
“The FTA with Maldives does not make much economic sense for India, as Maldives is not a big market, but India will sign an agreement because of the geopolitical importance of Maldives,” the official said.