India reportedly plans to continue its restrictive policy against Chinese investments as local manufacturers are hoping to leverage technological expertise from China to build a local supply chain. Taiwan also emerges as a choice for India as it looks to reduce its reliance on China.
According to The Economic Times, India-based electronics and automobile industry executives seeking joint ventures (JVs) with China-based firms said the government may approve such partnerships only if the Indian partner holds a majority stake. Officials from the Department for Promotion of Industry and Internal Trade (DPIIT) are assisting in setting up these JVs, which have faced delays, as Chinese companies were cautious about technology sharing without clarity on their equity participation.
An unnamed source told the Economic Times that Chinese companies are increasingly hesitant to share technology even under a licensing agreement unless there is a roadmap for them to have equity participation in the JV.
The rumor surfaced amidst the Indian government's efforts to limit Chinese involvement in investments and even senior executive roles within their subsidiaries following the tense border clash between China and India in 2020. Recently, Hisense, a China-based electronics and TV manufacturer, appointed Pankaj Rana, an Indian, as CEO to oversee its local operations.
Over the past months, an increasing number of China-based firms formed JVs or enhanced their ties with India-based partners. In early June, China-based HKC formed a JV with Dixon Technologies, which is reportedly in talks with China-based Transsion Holdings to acquire most of the latter's Indian manufacturing business. In April, Dixon signed an agreement with China-based Longcheer for smartphone manufacturing.
China is still crucial for India
Mihir Sharma, an economist and columnist for Bloomberg, pointed out that despite India's expectations of being a preferred destination for suppliers diversifying away from China, the country experienced its lowest FDI levels last year since before the 2008 financial crisis. He noted that apart from notable investments by Apple's suppliers, India's attractiveness to multinational companies has been limited.
Sharma emphasized that for countries to reduce dependence on China in the long term, it is crucial to engage with China in the medium term.
According to Business Standard, an unnamed senior executive from a leading Indian mobile phone company said that Chinese companies could accelerate the establishment of a local supply chain in India due to their economies of scale and advanced technology. The report emphasized that developing indigenous players would require considerable time, and without involvement from Chinese firms, establishing a domestic supply chain would be expensive.
Furthermore, Business Standard reported that India's efforts to restrict Chinese companies have benefited Vietnam under the China Plus 1 strategy. Companies seeking to diversify amidst increasing tensions between China and the United States increasingly turn to Vietnam, attracted by its receptive business environment.
India woos Taiwanese investments
In the meantime, India is looking to attract Taiwanese investments as it spends about US$10 billion to build a local semiconductor supply chain.
The Telegraph reported that New Delhi aims to demonstrate its ability to offset Chinese influence in South Asia by strengthening ties with Taiwan, particularly regarding semiconductors, which India sees as crucial for its industrial development.
According to The Telegraph, Gray Sergeant, an Indo-Pacific expert at the Council on Geostrategy, said there's considerable concern among Indians about the potential leverage China might wield, adding that, like many countries, they're interested in accessing Taiwan's semiconductor capabilities.
Source: DPIIT, May 2024
