Decoding China, the lessons for a vulnerable India

The Hindu

17 hours ago

The exodus of over 300 Chinese engineers from Foxconn's pivotal iPhone 17 manufacturing facilities in Tamil Nadu and Karnataka — a recent move ostensibly executed under corporate directive — is far more than an administrative recalibration. It is a meticulously calibrated stratagem, designed to arrest India's burgeoning manufacturing ambitions and to perpetuate a 'unipolar Asia' under Beijing's overarching economic hegemony.
A geo-economic move
This calculated withdrawal is not simply a logistical reshuffling. It is a subtle, yet potent, geo-economic manoeuvre by a rival apprehensive of a rising India. The recall of these highly specialised technicians, possessed of invaluable expertise in establishing sophisticated production lines, optimising operational efficiencies, and troubleshooting the labyrinthine complexities of modern manufacturing, represents a deliberate impediment to the crucial transfer of technology. Such knowledge is the bedrock upon which India seeks to construct its edifice of advanced electronics manufacturing, and its withholding strikes at the very heart of India's aspirational ascent.
In addition, China has leveraged its dominance in rare earth production and processing by restricting exports of rare earths (which include elements such as gallium, germanium, graphite), and rare earth magnets, which are crucial for electric vehicles and electronics, to India. China has also imposed curbs on the export of other critical minerals that are vital for various high-tech industries. There have also been informal trade restrictions on the export of capital equipment from China to India, including high-end manufacturing equipment for electronics assembly and other sectors, heavy-duty boring machines and solar equipment, severely impacting India's ability to set up and expand its own manufacturing facilities.
The broader implication of these actions, particularly the recall of engineers and restrictions on specialised equipment, is a deliberate attempt to limit the transfer of advanced manufacturing technology and know-how to India. This aims to keep India dependent on Chinese inputs and prevent it from developing a truly self-reliant high-value manufacturing base. Crucially, many of these restrictions are not formalised bans but are implemented through verbal instructions and administrative delays. This makes them harder to directly challenge but equally effective in disrupting supply chains, increasing costs, and creating uncertainty for Indian manufacturers.
In essence, China's strategy is multi-pronged, leveraging its control over crucial raw materials, manufacturing equipment, and even human capital to impede India's manufacturing ascent, especially in the high-stakes electronics and emerging technology sectors. These actions, when viewed through the prism of Beijing's anxieties concerning India's emergence as a potentially formidable manufacturing competitor in an era of 'friend-shoring' by the West, align perfectly with its broader strategic calculus. China's economic success is increasingly predicated upon maintaining robust export revenues.
Consequently, any nation daring to challenge its pre-eminence in global manufacturing, particularly in high-value sectors such as electronics, is inevitably perceived not merely as a competitor but also as an existential threat. The withdrawal of these engineers, therefore, constitutes a potent stratagem to disrupt India's trajectory and safeguard China's long-entrenched export market share and economic primacy in the region and beyond. India's ambition to transform itself into a globally competitive manufacturing hub is seen in Beijing as a direct challenge to China's long-term stability.
The reality in China
Consider the demographic exigencies currently confronting China: an ageing and progressively shrinking populace, an unfortunate legacy of the protracted one-child policy, coupled with a palpable erosion of wealth occasioned by an enduring property crisis — even as local satraps exceed production targets in their zeal to impress Beijing. This widening structural imbalance between an excessive production capacity and faltering domestic consumption increasingly compels China to lean heavily on export revenues to underwrite its fiscal outlays and maintain a semblance of economic progress. As its social welfare and pension liabilities burgeon exponentially, the Chinese government finds itself under mounting fiscal duress. Any reduction of export revenues would directly impinge upon Beijing's capacity to fund critical domains such as domestic security and military expenditure, potentially precipitating an undesirable degree of social instability.
China's formidable trade surplus, now on the cusp of a trillion dollars, is not solely a testament to its industrial prowess but also a stark manifestation of weak internal consumption and persistent industrial overcapacity. The People's Bank of China's repeated interest rate reductions on savings accounts have largely failed to ignite internal demand. This chronic overcapacity, therefore, constrains Chinese enterprises to aggressively depress prices and inundate international markets in a desperate bid to remain solvent — a strategy that has, perhaps ironically, severely eroded profitability across a plethora of sectors. As a result, China's determined endeavours to stymie competition are not merely a reflection of simple geopolitical rivalry. Rather, they are an undeniable reflection of profound domestic compulsions. Should India, by dint of astute policy and diligent execution, succeed in getting its house in order and convincingly demonstrate the potential to compete comprehensively in the global manufacturing landscape, Beijing is highly likely to escalate its countermeasures. These could range from the insidious pressures of economic coercion to outright military posturing, all in a relentless quest to safeguard its core economic interests and, by extension, its internal stability.
However, the news of the U.S. raising India's tariffs to 50%, even while China enjoys a 90-day exemption from punitive tariffs despite buying more Russian oil and gas than India does, makes India less of a threat to China. While India has been seen as a key partner in western efforts to diversify supply chains away from China, the imposition of the new U.S. tariffs serves as a reminder that all alignments carry their own fragilities, and underscores the need for India to build true strategic autonomy. The Indian Prime Minister's forthcoming visit to Beijing comes against this complex backdrop.
An appraisal of India's strengths, shadows
China's industrial pre-eminence is not fortuitous or trivial; it is a systemic dominance that spans critical and emerging sectors, from the esoteric realms of Artificial Intelligence and quantum computing to the cutting-edge frontiers of 6G telecommunications and electric vehicles. We need to understand that China does not merely export goods; it orchestrates and largely controls global supply chains in these advanced technologies. Even its overcapacity, otherwise a sign of economic infirmity, is being deftly weaponised as a strategic instrument for price suppression and audacious market capture. The aggressive pricing strategies employed by behemoths such as BYD in the electric vehicle segment are a quintessential illustration: by flooding global markets with irresistibly priced goods, China effectively stifles nascent competition and inexorably solidifies its global market share. This is economic statecraft in action.
In stark contrast, India's manufacturing ecosystem, despite its vibrant aspirations, remains undeniably nascent. The cherished dream of transforming into a global 'manufacturing hub' frequently founders upon a litany of formidable hurdles, including persistent infrastructure lacunae and the pervasive sclerosis of bureaucratic red tape. We remain regrettably reliant on imports for a pantheon of crucial components — ranging from sophisticated chips and engines to semiconductors and sensors — even for the foundational 'screwdriver technology' indispensable for basic assembly. This profound reliance on external sources underscores the considerable ground India must traverse to genuinely metamorphose into a self-sufficient manufacturing powerhouse. 'Make in India' still needs help from outside India.
From Beijing's vantage point, China has nothing to worry about yet; its actions against India are an effort to neutralise potential 'noise' within its immediate periphery while it assiduously scales up its economic and political corridors with key strategic partners across the sprawling geographies of Pakistan,the Association of Southeast Asian Nations (ASEAN), Africa, and Latin America. India's narrative of offering an alternative to the Chinese behemoth falters on our own dependence. 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.
Shashi Tharoor is a former Under-Secretary General of the United Nations, a fourth-term Member of Parliament (Congress), Lok Sabha, for Thiruvananthapuram, Chairman of the Parliamentary Standing Committee on External Affairs, and the Sahitya Akademi Award-winning author of 27 books, including 'Pax Indica: India and the World of the 21st Century' (2012)