American economist Noah Smith recently wrote a blog about how “China is trying to kneecap Indian manufacturing”, adding to the narrative that China views India as a geopolitical rival and potential economic threat, leading to it blocking investments and technologies from reaching India.
This narrative coincides with the
heated debate in India sparked by the Modi government’s decision to let the US$23 billion Production Linked Incentive scheme lapse. Both Smith’s argument and the policy debate hinge on a single phenomenon: India’s manufacturing sector has been a major disappointment. While the goal was to raise the share of manufacturing in India’s economy to 25 per cent by this year, it unexpectedly declined to 14.3 per cent last year.
Blaming India’s manufacturing failure on China is nonsensical. China was once India’s closest partner, supplying capital, talent, intermediate goods, management expertise and the essential components for industrial growth. As recently as a decade ago, Chinese companies were steadily growing their presence across India. Companies such as
Oppo, Vivo and Xiaomi – essentially the major Chinese mobile phone manufacturers – still maintain significant operations in India.
Few may remember that as late as in October 2019, the joint communique following the second informal summit in Chennai between Chinese President Xi Jinping and Indian Prime Minister Narendra Modi said both sides would explore a “manufacturing partnership”. This unusual initiative was
proposed by Xi, and showed significant political will and policy commitment.
In September 2019, I helped to coordinate the
sixth India-China Strategic Economic Dialogue in New Delhi as part of the Chinese side led by He Lifeng, then head of the National Development and Reform Commission, and accompanied by more than 10 senior officials from departments including hi-tech, industry, infrastructure, environment, agriculture, energy and policy research. Such high-level, implementation-oriented involvement reflected a genuine intent for practical cooperation, not lofty rhetoric.
No other country could contribute more significantly to India’s industrialisation than China. It was China that had the industrial capacity to set up the cutting-edge factories needed and Chinese engineers who knew how to run them. Where India has achieved success, such as with consumer electronics, it was because Chinese workers came to India and showed locals what to do. This isn’t an exaggerated claim from a Chinese perspective. Rather, it reflects the reality on the factory floor.
