A few weeks after signing a 6-point deal with India that promised a “fair, reasonable, and mutually acceptable package solution to the boundary issue” and to take “positive measures to promote this process”, China has bizarrely and inexplicably imposed some kind of sanctions on India that may have escaped the attention of the media as well as the hyper nationalist masses. Foxconn, the Taiwanese company that assembles IPhones in India has stopped rotating Chinese employees in its Karnataka and Tamil Nadu factories and also begun to withdraw Chinese equipment.
Termed by a former Foreign Secretary, Vijay Gokhale, in an article, as industrial “sanctions” the removal of Chinese workers from iPhone factory and similar moves elsewhere endeavour to restrain India from achieving the success it has attained in the manufacture of mobile phones like in the case of production of IPhone.
Whatever maybe the reasons behind their sanctions, they present a real and present danger to India in not just the mobile phone industry, but also in pharma sector where its reliance on some of the bulk drugs from China is almost 100 percent. If the Chinese put a squeeze on bulk drug imports to India, there will be a virtual calamity as cheap medicines like antibiotics will fly off the shelves. Can India afford these sanctions?
Chinese Political Leadership's Hostile Stance
Though media reports provide no reasons for this action, the instructions to pull out the Chinese employees from India seemingly came from the very top. This writer has been hearing the growing hostility towards New Delhi in Beijing for a while - the Chinese political leadership, despite the rapprochements that took place over the border issue, wants no trade with India till it gives guarantees to Beijing that it would withdraw from Quad, which it considers as hostile to its interests. It wants a return to pre-Galwan level. The two armies had a nasty unarmed spat at the snowy Galwan at Ladakh on June, 2020 where Indian army lost 20 of its Jawans. True to its opacity, Chinese casualties were not made public.
As part of its normalisation of ties, China wants restoration of flights between the two countries, ease in issuance of visas and also ending the banning of Chinese apps like TikTok, which is also feeling the heat in the US now.
The flights between the two countries were stopped during the pandemic and never restored.
Sources close to Chinese private sector claim that the Chinese government is upset with India for treating their executives employed in Delhi shabbily. During the height of hostility between the two nations, India’s Enforcement Directorate and other agencies had raided the premises of mobile companies like Xiaomi, Vivo and Oppo. Not just their executives were arrested, but these sources claim that they were roughed up too. Since then the Chinese leadership had been biding its time to get back to them at an opportune time.
Economic Rivalry
Gokhale thinks differently. In his article, he talks about the anxieties that have gripped the Chinese after India successfully used the opportunity provided by Western quest for another country (China+1) which could be a competent outsourcing destination for them. India used its productivity linked incentive scheme (PLI) to entice companies like Foxconn and others to move their manufacturing to India. India managed to earn 17 times more than their expense in PLI to Foxconn. This was worrying for China, these Indian sources claim. The Chinese were keen that Indian companies, instead, should manufacture for their supply chain networks and not for the West.
In other sectors where India relies on Chinese imports, the custom authorities in Beijing and elsewhere are creating hurdles for transfer of equipment to the infrastructure as well as for solar energy sector.
There are also reports that China has reportedly denied the transfer of technology of lithium ion battery that is critical for the Electric vehicle (EV) industry. The number of sectors that are coming under the arc of Chinese sanctions is growing with each passing day.
Sources that watch China-India relations closely claim that Indian government and country’s influential private sector , for long, has been lobbying for increased investment from China. In 2024 economic survey there was a suggestion that India should invite FDI from China. Presently, its less than a billion dollars. Thereafter companies like Adani lobbied for increased Indian visas for skilled Chinese workers to help them meet deadline for their projects, but before visa issue could be relaxed, the Chinese government began to pull out their people.
Indian Prime Minister Narendra Modi has also tried his bit to mollify the angry Chinese President Xi jinping. While he has been careful in not attacking the Chinese for occupying large parcels of Indian land in Ladakh (he said no one entered India), he has been speaking rather warmly about the Chinese leader and they are bound by history. In his first podcast recently, Modi reminisced about the phone call he received in 2014 from the Chinese President Xi Jinping expressing a desire to visit his town as it had played host to a Chinese traveller who also came from his town.
There are also reports that Modi may visit China soon to end the growing mistrust between the two countries and put an end to the creeping sanctions that China is imposing on India. If the Chinese government decides to impose restrictions in the area of bulk drugs, too, we could be facing a kind of crisis that we have not seen recent years. In last few months, though, some business houses have used a PLI to sign deals with large multinationals to reduce country’s dependence on China by 50 percent, but it will take longer for the companies to show results like how Foxconn has done in mobile telephone production.
What is particularly puzzling is that the Indian government officials seem unfazed by the looming disaster. Their belief is that proximity to the US and friendship with Russia will keep China in check. This is short-sighted as proved at the Galwan scrap in June 2020. Informed sources claim that China wanted to test how close India was to US and whether it will come to our rescue when we are attacked by China. US did nothing except supply some satellite coordinates and winter clothing. Cognisant of this understanding, the Chinese want to use their economic muscle to compel India to pull out from Quad, which Beijing considers as a military alliance to surround their country.
It will be interesting to watch how US President Trump who returns to White House responds to the Chinese moves.