C.with chicks India is not very friendly. In 2020, soldiers from both countries clashed along the disputed border, the worst clashes between the two countries since 1967, before clashing again in 2021 and 2022. Trade between the Asian giants is therefore tense. Tense, but still essential, especially for India. Indian consumers rely on cheap Chinese products, and Indian companies, especially in future industries, rely on cheap Chinese products. India sells to China shellfish, cotton, granite, diamonds, gasoline, and other old economy products, while China sends India memory chips, integrated circuits, and pharmaceutical raw materials. As a result, trade becomes more and more skewed. Of the $117 billion in goods that crossed the two countries in 2022, 87% came from China (see chart).
Indian Prime Minister Narendra Modi wants to reduce this dependence on China. One of his reasons is strategic, relying on capricious enemies for important imports is risky. The other is commercial, with Mr. Modi trying to replicate China’s nationalistic, export-oriented growth model, which means taking some business away from China. In recent months, the government has stepped up its efforts to cut off parts of India’s economy from its neighbors. On August 3, India announced new licensing restrictions on imports of laptops and personal computers, mostly from China. A week later, it was reported that similar measures were being considered for cameras and printers.
Officially, India is open to Chinese business as long as it complies with Indian law. In fact, the Indian government uses many tools to make it difficult or impossible for Chinese companies to live in India. The most blatant of these is the outright ban on Chinese products, often for reasons related to national security. For example, in the aftermath of the 2020 border dispute, the government banned 118 Chinese apps, including almost all of them, including TikTok (short video sensation), WeChat (super app), Shein (fast fashion retailer). Other services that have collected data about users in India. From 2022 to this year, hundreds more apps were banned for similar reasons.Communication equipment manufacturers such as Huawei ZTEhas received similar treatment for fear that their hardware could allow Chinese spies to eavesdrop on the Indian public.
Tariffs are also a popular strategy. In 2018, the government imposed a 20% tax on imported handsets in a bid to reverse the collapse of Indian mobile phone manufacturing at the hands of Chinese rivals. In 2020, it tripled tariffs on toy imports, mostly from China, to 60%, and earlier this year raised them to 70%. Since then, Indian toy imports have fallen by three quarters.
The Indian government sometimes sidesteps official measures such as bans and tariffs in favor of more subtle measures. A common tactic is to introduce bureaucratic friction. Red tape in India makes it easier for authorities to find fault with disadvantaged companies. Tax violations are highly esoteric, nearly impossible to comply with, and often blamed. Two smartphone makers, Xiaomi and BBKMore The electronics company, which owns three popular brands Oppo/OnePlus, Realme and Vivo, is under investigation for allegedly shorting Indian tax officials by a total of $1.1 billion. On August 2, media outlets quoted an unnamed government official saying that Indian government departments BYDA Chinese automaker was under investigation for allegedly undercutting tariffs on parts imported from abroad by $9 million. MG Subsidiary of Motor Co., Ltd. SAIC Motoranother Chinese auto company faces investment restrictions and tax audits.
A complicated licensing system gives Indian authorities more tools to impede Chinese business. India declared in April 2020 that investments from bordering countries must receive special approval. Although the name of the neighboring country was not disclosed, it is clear that the target is China. Since then, less than a quarter of India’s 435 foreign direct investment applications have been approved.according to business today, a local distributor, received only three positive ratings in India’s final financial year, which ended in March. Reports surfaced last month that a joint venture between the two countries was being proposed. BYD Indian industrial company Mega Engineering, which makes electric cars and batteries, was unable to get approval for safety reasons.
Luxshare, a major Chinese maker of devices such as Apple, has yet to open a factory despite signing an agreement with Tamil Nadu in 2021. The reason for the delay is believed to be an implicit blanket ban from the government. Delhi’s central government speaks out on a new facility owned by a Chinese company. Following the excavation earlier this year of potentially large deposits of lithium metal used in batteries, the slow-moving Indian parliament passed a new law in early August to ease the approval process for new lithium mines. Passed. Applications from miners are welcome, but Chinese bidders are expected to be viewed at a disadvantage.
Alongside its blocking efforts, India has pursued policies to push China out of its leadership position in various markets. India’s $33 billion “Production Linked Incentives” (sales, investment and cash payments tied to output) program identifies 14 areas of interest, many of which are currently dominated by Chinese companies.
One example is pharmaceutical raw materials, which Indian pharmaceutical companies have sourced mostly from China for many years. In February, the Indian government began offering stipends worth $2 billion over six years to companies that agreed to manufacture 41 of these substances in the country. Major pharmaceutical companies such as Aurobindo, Biocon, Dr Reddy’s and Strides are participating. Another is electronics. Apple’s iPhone contract manufacturers, including Taiwan’s Foxconn and Pegatron and Indian conglomerate Tata, will also be allowed to buy Chinese parts for assembly in India, provided they work to develop local suppliers. there is A similar arrangement appears to have been proposed to Tesla, which is looking for a new location to build its electric vehicles.
Some Chinese companies have grown weary of navigating all these hurdles and have insisted on exiting. In July 2022, after a two-year effort that included a promise to invest $1 billion in India, Great Wall Motors closed its Indian car manufacturing operations after failing to secure local approval. Some are trying to adapt. Xiaomi has announced that it will localize all production and expand exports from India, which until now has been limited to neighboring countries, to Western markets. Shane will re-enter the Indian market through a joint venture with Reliance, India’s most valuable listed company, renowned for its ability to navigate Indian bureaucracy and politics. ZTE The company is reportedly seeking licensing agreements with domestic manufacturers to manufacture its own network equipment. No taker has been found so far. That may take some time, given India’s growing suspicion of China. ■