• Why the India and China thaw is temporary? GTRI paper gives Key Imports from China in FY25. What can India Inc. do to reduce imports from China?

DRAFT

The good thing about President Trump’s Tariffs is a subtle yet honest admission on the need to curb imports and make in America again. 

China conquered the U.S. (markets) without firing a missile. In their quest for profits, market capitalization and probably prodded by their government U.S. companies set up manufacturing operations in China and traders began to import items of daily use in a big way. About a year ago, a friend’s son did not get his school trophy due to supply chain issues, meaning lack of supply from China.

Note that India is able to export generics globally because of API imports from China.  

India Inc. should not repeat the U.S. Inc. mistake, who became over-dependent on China.

Having said that, Chinese dominate the market in renewable energy, batteries and electric vehicles. India is dependent on China for Solar cells for electric automobiles and solar power industries. Read  Adani, Ambani quietly hunt for Chinese tech as Trump tariff war reshapes global supply chain

Government of India, to curb such imports in the Electric Vehicles space, must ask companies to give the percentage of components of Chinese origin in each vehicle-everything is not about securing competitive advantage.

Notwithstanding such dependence, Indic Inc. needs to realize that India and China are natural adversaries. All should know that recently China stopped supply of fertilisers, rare-earth minerals and tunnel boring machines to India adversely national interests.

Although, China has promised to resume supplies ahead of their Foreign Minister’s August 2025 visit to India a downturn in relations could happen again. Read six reasons why- 

1. China is an autocracy, India a democracy. If India can deliver results to its citizens, Chinese people will ask why no democracy? India has to fail for the Communist Party of China to prove its autocracy model.

2. China wants India to give up its claim on Akshai Chin, being an integral part of Ladakh, India. The Western Highway that connects Xinkiang with Tibet passes through Akshai Chin and is thus important for China.

3. China wishes to nominate Dalai Lama’s successor. India says this is a spiritual matter, let the Tibetans decide. Read Dalai Lama birthday celebrations and Tibet is at the heart of the India China dispute  

4. China wants control over Tawang in Arunchal Pradesh because it is a major holy site for Tibetan Buddhists, as it was the birthplace of the sixth Dalai Lama. The Chinese see Tawang within India acting as a magnet for all Tibetans. Arunachal provides security to Bhutan on it entire Eastern flank by geographical contiguity. Read Strategic importance of Tawang Note that after having captured Tawang in 1962, China withdrew. Source

5. Chinese support to Pakistan. 

Former High Commissioner to Pakistan, G Parthasarathy wrote in 2016, “PM Nawaz Sharif described his country’s relations with China as: “Sweeter than the sweetest honey”. Pakistan’s ambassador to China gushingly described the Sino-Pakistan relationship as: “Deeper than the ocean, higher than the mountains and stronger than steel.” 

“The China-Pakistan relationship has no parallel, as nowhere has any country transferred nuclear weapons designs, nuclear enrichment and reprocessing capabilities, ballistic missile designs and manufacturing facilities. These details have been described in the book authored by the Washington-based scholar, Andrew Small, titled: “The China-Pakistan Axis: Asia’s New Geopolitics”. Source Brothers in Arms

He also wrote, “China’s overall strategy to contain India lies in its strengthening Pakistan’s conventional, maritime and nuclear weapons capabilities, while acquiring access to naval facilities, across the Indian Ocean.” Source Read China Pak Nexus in Ladakh

Subsequent to ceding the Shaksgam Valley to China in 1963 was built the Karakoram highway in the 1970s which links China’s Xinjiang province with PoK (important for BRI) Source Read Are China&Pakistan Siamese Terror Twins

6. China wants to be the unchallenged and pre-dominant power in Asia. As a civilizational State, India thinks differently. Read China never dominated Asia, culturally or militarily

The geopolitics of the region can change if Gilgit/Baltistan become part of India.

Yet, India must continue talking to China to keep tensions under control. Cooperate and Compete should be our approach.

On its part, the government has realized the risks of such imports and introduced the PLI scheme to support local manufacture for e.g. intermediates required by API manufacturers. 6APA is 6-Amino Penicillin Acid  is used for making Amoxicillin, Ampicillin etc. 7ACDA  is used for manufacture  of  Cephalosporins like Cefexime etc.  Both 6APA & 7ACDA are made from Penicillin-G. Read India to make Penicillin G after 3 decades on PLI push Also read Here  

A Global Trade Research Initiative (GTRI) paper of 20/8/25 gives details of imports from China in FY25. Excerpts –

1. “China now supplies over 70% of India’s needs in several critical areas- including 98% of erythromycin, 97% of silicon wafers, 99% of viscose yarn, and 83.7% of solar cells. Everyday products like flat panel displays (86%) are dominated by Chinese imports.” Note all % rounded off. 

2. In the renewable energy sector, India imported $1.36 billion worth of solar cells and $1.7 billion of solar panels-with Chinese imports making up 83% and 79%. For lithium-ion batteries, vital for EVs and energy storage, India imported $2.26 billion, of which 75% came from China.

3. Even in low-tech segments dependence is shockingly high. For e.g. Viscose yarn imports totalled $337.4 million, with 99% coming from China. LED chips and bulbs ($135.7 million-44%), lamps and fittings ($111.9 million – 76%), and their parts ($125.1 million-78%).”

According to sources in the 2 wheeler industry other products in the Electric Mobility space that might be a victim of Chinese supply chains could be Semiconductors, ⁠Lithium Ion Cells and ⁠Top end Alloy Wheels.

The Ministry of Commerce and External Affairs must make a presentation to top importers of Chinese products / traders to explain the possible long-term downside of such imports and ask what support is needed to help them produce locally. This needs to be attended by representatives from states e.g. Maharashtra, Tamil Nadu, Gujarat and U.P. too.

So, what India Inc. can do?

1. Develop alternate locally made products to replace rare earth magnets esp. in electric vehicles.

Years ago a key supplier of sodium sulphate held my former employer to ransom. It took a few years for the Research and Development team to create a formulation that did not need sodium sulphate.

2. PLI has given production of Active Pharma Ingredients (API) a fillip. We need focus and set a goal of producing atleast 65% of India’s needs locally. 

Government must encourage manufacturers to go for scale and consistently support such companies, including on product research.  

3. At competitive prices, produce locally Viscose Yarn, LED chips and bulbs, Lamps and fittings. If manufacturers need government support they should approach Central government. If only profit is the motive, change approach.

4. Excerpts from GTRI paper – 

a. “Reverse Engineering for Rapid Substitution: The first pillar of the strategy is a nationwide reverse-engineering drive to replace low- and mid-tech imports where India already has the capability.

b. Encourage Deep-Tech Manufacturing: This means going beyond assembly and creating vertically integrated ecosystems for high-tech components such as chips, PCBs, sensors, memory units, and camera modules. Mobilising patient capital — including the recently announced ₹100 billion innovation fund — will be critical to nurturing domestic firms in design and fabrication.”  

5. While India must limit Chinese investment in select areas to 26% and not under the automatic route, India must prepare a list of products for whose manufacture it needs technology. Thereafter, approach governments of countries like Japan, Taiwan and Germany if they have the technology and interest.

6. Can India Inc. set up plants to produce fertilizer from local/eco-friendly sources for e.g. cow dung/plants.

From imports from China, the Ministry of Commerce must remove smartphone components that are used in production of re-exported phones because the imported product is being re-exported. This would a clearer picture internally of actual trade deficit with China. Read India needs to move to the Adjusted Trade Deficit Concept

Foxconn withdrew 300 Chinese engineers from an Iphone manufacturing facility is expected. No one is going to support competition so take it in your stride.  

Maharshi Aurobindo said in 1905: “If we have strength everything else will be added to us easily and naturally. In the absence of strength we are like men in a dream who have hands but cannot seize or strike, who have feet but cannot run.”

This is the sixth in a series of articles post Trump Tariffs. One, explained what is trade deficit? Two, looked at both the trade and geo political issues. What does U.S.A. want? What is President’s Trump’s approach and Implications? 15 IDEAS how India can respond. Three, Look at Trade Deficit Numbers after removing APPLE Iphone exports Four, US Needs Indian Pharma products and India needs US market . Five, Cooperate, Compete, Aatmanirbharta should be India’s MANTRAS in this UNCERTAIN world

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