How China's export curbs are hurting Indian manufacturing growth

China's export restrictions on critical equipment have disrupted India's manufacturing sector, affecting industries like electronics, solar panels, and EVs, and delaying growth plans

India’s manufacturing sector is facing significant challenges, particularly industries reliant on Chinese imports, such as electronics, solar panels, and electric vehicles (EVs). Chinese authorities have nearly stopped exporting critical equipment essential for production, reportedly to hinder the growth of global companies like Foxconn, BYD, and Lenovo in India, according to a report by The Economic Times.

 

The shortage of advanced machinery, crucial for expanding production, is causing delays and setbacks. Companies like Foxconn, which are heavily involved in large-scale electronics and auto manufacturing, are particularly affected. The solar panel industry, already grappling with supply issues, has seen its difficulties deepen.

 

Industry experts claim the Chinese government has halted capital equipment exports, making it harder for companies to expand their manufacturing capacity, increase operational costs, and meet growing demand.

 

Global trade tensions escalate

China’s export restrictions are seen as a response to shifting global trade dynamics, including heightened tensions with the US and the European Union.

 

Trump vows tariffs on China

On November 30, President-elect Donald Trump warned of imposing a 100% tariff on nine nations in the BRICS group—Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Iran, and the UAE—if they pursue a rival currency to the US dollar as the global reserve currency.

 

Trump also announced plans for a 25 per cent tariff on goods from Canada and Mexico, citing concerns over drug trafficking and illegal immigration, and a 10 per cent tariff on Chinese imports, effective February 20. 

 

EU tariffs on Chinese EVs

The European Commission has imposed tariffs of up to 35.3 per cent on Chinese state-owned automotive giant SAIC Motor and its subsidiaries. The move, criticised by China, has led to a formal complaint with the World Trade Organization (WTO).

 

The EU now views China as an “economic competitor” and “systemic rival,” indicating a significant shift in relations between the two economic powers. 

 

India’s ‘China Plus One’ approach

While India recently relaxed restrictions on Chinese investments following the 2020 Galwan border skirmish, the latest export controls could undermine these efforts. Indian manufacturing sectors heavily dependent on Chinese machinery face setbacks.

 

To mitigate the impact, the Indian government is encouraging a “China Plus One” approach, where companies diversify their production bases. World Bank President Ajay Banga has recommended that India capitalise on this strategy, which has already attracted foreign investment.

 

For instance, the production-linked incentive (PLI) scheme has significantly boosted the smartphone sector. Companies like Apple, Foxconn, Tata Electronics, and Pegatron have expanded their local iPhone production, showcasing the potential of India as a manufacturing hub.