Vantage | How West's 'de-risking' is hurting China, helping India

In the fast-paced world of international relations, if world leaders were on TikTok, the trending hashtag would undoubtedly be #DeRisk. This geopolitical obsession is centered around one major player – China.

China’s economic contraction Recent data releases have sent shockwaves through global economic circles. According to a Reuters report, China’s manufacturing sector unexpectedly contracted in October, with exports shrinking by 6.4 per cent compared to the previous year. This setback followed China’s worst quarter, spanning July to September, exacerbating the challenges facing the world’s second-largest economy. Foreign investment turns negative In another unprecedented development, foreign direct investment in China experienced its first-ever quarterly deficit, reaching a historic low of $11.8 billion, as reported by the Nikkei Asian Review. This is anticipated to have long-term consequences for Beijing, including a weakening yuan, decreased capital investments, clipped economic growth potential and heightened unemployment, already at a record high of around 20 per cent. China’s troubles are largely attributed to its own policies as investors and companies label it “uninvestible.” Factors such as the anti-espionage law, numerous raids, exit bans and slow regulatory approvals have prompted a significant exodus of foreign investors from Beijing. Foreign investors are diversifying their portfolios away from China, exploring alternatives in various sectors. Electric vehicle batteries to pharmaceutical supplies, industries that once favored China for its low costs and speed are now embracing the “de-risk” strategy, turning their attention to other nations. India’s pharmaceutical boom One noteworthy beneficiary of China’s dwindling appeal is India, particularly in the pharmaceutical sector. Reports indicate that Indian drug manufacturers are reaping the rewards of Beijing’s pharmaceutical walkouts. Western pharma companies, in their quest to de-risk, are increasingly outsourcing drug development to Contract Development and Manufacturing Organisations (CDMOs) in countries like India, which boasts a CDMO industry worth $15.6 billion. With “de-risking” in full swing, Indian CDMOs are experiencing a significant boost with some reporting sales growth between 25 per cent and 30 per cent. Projections indicate that revenues for Indian CDMOs are expected to grow by over 11 per cent annually for the next five years, outpacing China’s projected growth of 9.6 per cent. Global economic shifts The global shift away from China is evident not only in the pharmaceutical sector but also in greenfield investments. Greenfield investments, where parent companies create subsidiaries in different countries, have dropped by $20 billion in China compared to the previous year. In contrast, India has seen a staggering increase of $65 billion, marking a 400 per cent rise between 2021 and 2022. As China grapples with this economic reconfiguration, the leadership, as articulated by Premier Li Qiang, expresses willingness to build closer industrial and supply chain partnerships. “We are willing to work with all countries to build a closer industrial chain and supply chain partnership. We will deepen international cooperation in the industry chain and supply chain with practical actions. We will treat Chinese and foreign enterprises equally so as to provide more convenience and better protection for everyone to invest and do business,” said Premier Li. However, it’s clear that China is not embracing the “China Plus One” strategy and the West is steadfastly walking the talk on slowly but surely decoupling with China. In a geopolitical landscape dominated by economic maneuvering, the consequences of de-risking are reshaping the global economic order. Whether world leaders are on TikTok or not, the hashtag #DeRisk will continue to echo through international relations, leaving an indelible mark on global supply chains and economic dynamics. Views expressed in the above piece are personal and solely that of the author. They do not necessarily reflect Firstpost’s views. Read all the Latest News , Trending News , Cricket News , Bollywood News , India News and Entertainment News here. Follow us on Facebook , Twitter and Instagram .