‘Dragon-Elephant Tango’ is Chinese trick of deception, India must not buy it

In June this year, the Galwan Valley clash would complete its fifth anniversary, a time marked by serious tension between two nuclear powers and two of the oldest and largest civilisations in the world. Since then relations between India and China have witnessed some degree of normalcy with the resolution of the military standoff as well as a meeting between Prime Minister Narendra Modi and Chinese President Xi Jinping on the sidelines of the BRICS summit in Russia last year.

Recently in a podcast with Lex Fridman, PM Modi even alluded to the absence of conflict between the two countries historically and noted how dialogue and not discord is a better way forward. This warmth has been duly reciprocated from the Chinese side as well, with China’s ambassador to India, Xu Fiehong, discussing the possibility of a Dragon-Elephant tango in a piece written for an Indian national daily last week. The sense of optimism that both countries are showing for their bilateral relationship seems very encouraging, and yet caution seems to be the only logical choice.

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In his latest piece, Ambassador Xu has discussed the possibility of helping India get access to the vast Chinese markets for its products. He has also promised India a chance to rise up the value chain ladder by benefiting from China’s high-quality development. While noting India’s strengths in IT, software and biomedicine and China’s own strengths in the fields of electronic manufacturing, infrastructure construction and new energy, he outlines that both countries can produce a win-win solution by connecting their energies.

While all these sweet talks seem attractive on the surface, their hollowness becomes evident as soon as one observes how carefully and strategically China is trying to arrest India’s growth as a manufacturing hub.

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In the decade between 2004 and 2014, China had promoted a similar model of shared development with India, where it often projected India as the service centre of the world and reserved the status of manufacturing facility of the world for itself. This was the same time when the then Prime Minister Manmohan Singh endorsed a similar liberal conception of India-China relations built on mutual interdependencies.

As good as it sounded in theory, the practical side never turned out to be in India’s national interest. Today we have a massive trade deficit with China powered by our own failure to create an indigenous manufacturing capability. Some experts often say that India can still survive without building a stable manufacturing base and it must direct its energies to the services sector instead, but this is nothing more than wishful thinking. Countries cannot outsource their production needs to other countries, and that too to a country which has a track record of blocking supply chains over geopolitical tensions.

In the last decade, especially after the 2020 Galwan Valley clash, India under PM Modi has given special attention to its own manufacturing sector. Firstly, the country has launched a ‘Make in India’ initiative to encourage domestic as well as foreign manufacturers to set up their factories in India. Another key move is the Production-Linked Incentive scheme where the Modi government is incentivising manufacturers to produce more and export more with India as the base. These initiatives have produced some remarkable successes, including an increase in the investment inflows in the country, with many big global players choosing to make it in India.

Key among this is the electronics sector, particularly mobile manufacturing, where giants like Apple and Samsung have set up their factories in the country. However, the early achievements of India in its endeavour to become a credible manufacturing hub have not gone down well with China at all.

In public, Chinese ambassador Xu Fiehong may profess support for India’s Make in India initiative, but in the typical deceptive style that Chinese statecraft is so famous for, China is leaving no stone unturned in sabotaging India’s manufacturing story.

Keeping India Out

Due to its vast labour force, huge demographic dividend and availability of a large market, India has become a favourable destination for many global companies. India has also benefitted from the China+1 strategy of these companies who are looking to divest risk from China in view of geopolitical uncertainties. China obviously has not taken kindly to these developments. As per media reports, it is actively blocking the supply of critical equipment to India as well as prohibiting its workers from visiting the country.

In January, Foxconn, which has set up a manufacturing facility in Southern India, had to bring in Taiwanese workers instead, as China had suspended workers deployment to India, and the existing Chinese workers in the country were also asked to return. Not just this, China has also been holding up shipments carrying specialised machinery to India that again has a disruptive effect on the iPhone supply assembly line in the country. The solar equipment sector also has a similar story of Chinese non-cooperation to tell, with industry experts disclosing how China is secretly blocking India’s access to important intermediate components.

Tunnel Boring Machines (TBMs) are another item of Chinese import where India is facing troubles with China taking extraordinarily high time in giving customs clearances. India is a key buyer of German TBMs manufactured by Herrenknecht in China, but last year there were several reports of them being held up in the country, with even the Commerce and Industries Minister Piyush Goyal complaining about it.

A common thread that emerges from all these instances is China’s active role in sabotaging the Make in India story by using delay and denial tactics towards India. Even critical minerals have become a casualty of this behaviour as India is forced to import some of them by rerouting the shipments via Dubai. While China is restricting key imports to make India suffer, it is also stitching together an exclusive production network to retain its manufacturing prowess over the world.

Beijing’s ‘Industrial Diplomacy’

After becoming the global manufacturing powerhouse and laying down an extensive network of infrastructure through the Belt & Road Initiative, China has now embarked on another mission, and this time it is creating its own network of production hubs by investing in geopolitically favourable countries. If at one time China was obsessed with forging economic relationships with the West to get access to key technology, currently it is making greenfield investments in the Global South countries to retain its stronghold over manufacturing.

While inward Foreign Direct Investments in China are at an all-time low, an analysis by bloggers Kyle Chan and Noah Smith reveals that China is building its own supply chains by constructing factories in connector countries such as Mexico, Vietnam and Morocco to benefit from the trading agreements that these countries have with large markets. This will not only help it circumvent anti-China tariffs by selling products manufactured by Chinese companies in these countries as a base but also provide it with significant geopolitical leverage.

Now although China may be building manufacturing plants in other countries, it has still restricted the export of key technology such as those for EVs, batteries, rare earth minerals processing and lithium extraction to them. This means China may be promoting more globalisation in the world, but this is without any willingness to lose its control over the strategic aspect of manufacturing. Thus, the Chinese scheme so far seems to be to keep the high-value, high-end manufacturing within its firm grasp, use low-cost manufacturing as a carrot with poorly industrialised and China-friendly countries and keep India in its place as nothing but a services sector sweatshop. However, this is definitely not the future that India wants for itself.

India’s Options

Despite all the conciliatory noise between India and China in the last few weeks, history is testament to the fact that mercantilist China considers manufacturing as war by other means. It is a classic case of Sun Tzu’s dictum in action where he emphasises outsmarting and outmanoeuvring the enemy even without going to the battlefield at all.

Ironically, while China has always been a firm believer in this, India has many a time ended up hurting its own interests by buying the Chinese fiction of joint development or shared prosperity. This time also a desperate China, which still has a lot to gain from the vast Indian market, is showing fake support for India’s quest for manufacturing. But the truth is that China has left no chance to sabotage India’s moves to build its manufacturing strength.

In such a scenario, what should India do? Well, the ship to act friendly with China and get Chinese investments and technology in return has already sailed. Even if India had practised this model to climb up the ladder of manufacturing, China would have stonewalled access to key technologies, meaning India would always remain a second fiddle to the country. Under PM Modi, India has undertaken some necessary steps to restrict China’s predatory access to the domestic market. In addition to anti-dumping duties, the government is also backing the manufacturers in replacing Chinese products not just for India but also for the entire world.

India’s best option right now is to set its own house in order so that it can benefit from the China+1 strategy instead. The country has once again started to ink trade agreements which cannot only provide it access to wider markets but can also help in entrenching the country in global supply chains. India’s focus on forging deeper partnerships with many industrialised countries can go a long way in providing investments and technology that India badly needs but China would never provide.

Unlike other countries that are willing to play the game as per the Chinese rule book, India has shown a streak of independence which China is not liking even one bit. If India was one of the first countries to call out BRI as a shady debt-trap scheme, then it has also not left any chance to expose China’s predatory model of manufacturing. The seriousness with which India now presents a credible threat to China is leading Beijing to strike back with vengeance. But as they say, all is fair in love and war, and this time India must not blink.

The author is a New Delhi-based commentator on geopolitics and foreign policy. She holds a PhD from the Department of International Relations, South Asian University. She tweets @TrulyMonica. The views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect Firstpost’s views.