Decoding China, The Lessons for a Vulnerable India

The recent exodus of over 300 Chinese engineers from Foxconn’s iPhone 17 units in Tamil Nadu and Karnataka appears to be a calculated move, not just a corporate decision. 

• It reflects an attempt to disrupt India’s growing manufacturing sector and reinforce China’s dominance in Asia’s economic landscape.

A Geo-economic Move

• Technology Withholding: The recall of specialised Chinese engineers from Indian manufacturing units hinders crucial technology transfer. 
  • Their expertise in setting up advanced production lines is essential for India’s goal of building a robust electronics manufacturing base.
• Control over Critical Resources: China leverages its dominance in rare earth production by restricting exports of vital elements like gallium, germanium, and graphite, which are crucial for electric vehicles and high-tech electronics. 
  • It has also curbed exports of other critical minerals.
• Restrictions on Capital Equipment: China informally restricts the export of high-end manufacturing equipment through non-transparent methods such as administrative delays. 
  • This hampers India’s capacity-building efforts by increasing costs and disrupting supply chains.
• Weaponising Overcapacity: China’s substantial industrial overcapacity  is weaponised as a strategic instrument for price suppression and audacious market capture. 
  • Companies like BYD, are producing ultra-cheap electric vehicles, flooding global markets with irresistibly priced goods to stifle nascent competition and solidify China’s global market share.
• These actions collectively aim to limit the transfer of advanced manufacturing technology and know-how, ensuring India remains dependent on Chinese inputs and is prevented from developing a self-reliant, high-value manufacturing base.

The Reality in China

China’s aggressive economic posture is not solely a reflection of geopolitical rivalry; it is an undeniable reflection of profound domestic compulsions. Beijing faces significant internal pressures that drive its relentless pursuit of export revenues:

• Demographic Crisis: China is grappling with an ageing and progressively shrinking populace, a direct consequence of its protracted one-child policy.
• Property Market Instability: The property crisis has led to a palpable erosion of wealth among its citizens, with many real estate developers failing and property rates crashing.
• Overcapacity and Faltering Domestic Consumption: A widening structural imbalance between excessive production capacity and weakening domestic consumption compels China to rely heavily on exports to sustain its economy. 
  • Interest rate reductions on savings accounts have largely failed to ignite internal demand.
• Fiscal Duress: As social welfare and pension liabilities burgeon, the Chinese government faces mounting fiscal pressure. 
  • Any reduction in export revenues would directly impinge upon Beijing’s capacity to fund critical domains like domestic security and military expenditure, potentially precipitating social instability. 
  • China’s vast trade surplus is thus a manifestation of weak internal consumption and persistent industrial overcapacity.

Lessons for India

India must internalise these realities and move beyond the rhetoric of being an alternative to China. The onus is on India to address its foundational weaknesses and build genuine strategic autonomy.

• Recognise Fragile Alliances: The imposition of 50% tariffs by the U.S. on Indian products, even while China receives a 90-day exemption, clearly demonstrates that all international alignments carry fragilities.
  • India cannot rely on Western partners as a permanent crutch.
• Mandate Fundamental Reforms for “Make in India”:
  • Persistent infrastructure gaps and import dependence on key components reduce “Make in India” to mere assembly driven. 
  • Deep reforms are needed to build core capabilities and ensure true self-reliance.
• Prioritise Foundational Development: China views India as mere “peripheral noise”. To truly compete on the global stage, India needs a laser-like focus on its own foundational development.
• Emphasise Execution and Strategic Thinking: India urgently requires better execution, robust infrastructure, cutting-edge technology, and strategic thinking to adapt policies effectively. 

Conclusion

If India genuinely harbours the ambition to “compete” on the global stage, it needs a laser-like focus on its own foundational development. That is what China’s behaviour has taught India: The onus is on us Indians.