Unlocking China’s Strategy: What India Can Learn from Weaponized Interdependence

In recent weeks, reports have surfaced about Chinese companies restricting exports of crucial machinery and advanced goods to India. This has thrown a wrench into the gears for Indian manufacturers in electronics, solar panels, and electric vehicles, who now face serious supply shortages. India’s journey toward a stronger manufacturing base, especially in electronics, is at risk just when it seemed to be gaining momentum.

India has a per capita income of about $2,900, placing it in the lower-middle-income category. To climb the economic ladder, it needs a robust manufacturing sector. China dominates many manufacturing areas, making it tough for India to build its own production networks without strong trade ties to China. If these export restrictions from China continue, India may face one of its biggest economic challenges since the sanctions following its nuclear tests in 1998.

This situation arises against the backdrop of a recent diplomatic thaw between the two nations. In 2020, a conflict erupted between Indian and Chinese forces along the disputed Ladakh border. Since then, tensions have simmered, and the territories remain heavily militarized. Although India has implemented investment screening laws targeting Chinese companies, these measures have been more symbolic than effective. The relationship has deteriorated, but the recent warming in ties raises questions about China’s sudden move to restrict exports.

There are a few reasons why China might act this way now:

• **Dependency:** China could be leveraging India’s reliance on its capital goods. In today’s global economy, having access to essential networks is crucial. India needs Chinese supplies for its manufacturing, and China might be using this dependence to its advantage.
• **Perceived Threat:** China may see India’s growing manufacturing sector as a potential threat. With India seeing success in electronics exports, China might want to slow down that growth by restricting access to necessary machinery.
• **Geopolitical Strategy:** The changing global dynamics, especially with the U.S., might influence China’s behavior. If China views India as an ally of the U.S., it may opt to take action to counter this alliance.

The impact of these restrictions cannot be ignored. India cannot fully industrialize without access to high-tech machinery, and China appears to recognize this critical dependency. Faced with this challenge, India has three main options:

• **Seek Alternatives:** India can look for other sources of machinery, but this may be costly or impractical in the short term.
• **Reassess Alliances:** India could signal a more neutral position between China and the U.S., but this might complicate its existing ties with the U.S.
• **Shift Closer to China:** India could move closer to China to facilitate faster industrialization, but this would risk its relationship with the U.S., which is a vital market for Indian IT services.

It’s unlikely that India will fully commit to any of these options. Instead, a balanced approach appears more probable, featuring temporary measures and diversification strategies. As India continues its industrial journey, it will face increasingly complex economic challenges, requiring skilled statecraft to navigate successfully.

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Economy,South Asia,China,India,China-India economic cooperation,China-India trade,Chinese export restrictions on India,Chinese exports to India,India Economy,India industrialization,Weaponized interdependence