Choking China+1? Chinese govt actions against Apple, Foxconn won't deliver

The Chinese government has introduced barriers to the Taiwanese company Foxconn shifting globalised manufacturing to India. This reflects China’s weakness, not strength. At a tactical level, it delays a greater movement of high-skill activities from China to India. But at a strategic level, it increases the incentives for global firms to do less in China. 

Two things are simultaneously true: World-class manufacturing requires deep knowledge, and that knowledge is available in many locations beyond China. The best organisations in India need to redouble their efforts at obtaining frontiers knowledge from abroad. 

Let’s look at imports of goods into the United States (US) while recognising that the cost of transportation from India is a bit higher than taking things across the Pacific. At its peak, the import of goods into the US from China was 15 times higher than from India. This was in 2007-09. From that point onwards, the ratio has steadily moved in India’s favour. There was a period of slow gain for India from 2009 to 2018. From 2018, when the West initiated the “Third Globalisation”, the gain for India accelerated. In March and April 2025, the import of goods from China into the US was only five times higher than from India.

Recognising that this was a time of peak disruption of imports from China, owing to the impending “Liberation Day”, let’s go a bit further back in time and we see China’s sales of goods in the US as being about five times India’s. 

The Chinese elite has traditionally had a lofty disdain for India. You could argue that being five times bigger is a vast degree of superiority. But times are tough in China. Xi Jinping came to power in 2012. He has concentrated power, embarked on nationalistic policies, and brought about immense economic and political turmoil. In this context, there are voices in China looking at India with concern, who think “we’ve gone from 15 times in 2009 to five times in 2025. This is not going well”. Such a sense of weakness would help trigger the recent moves against Foxconn. The Chinese state has coerced Chinese citizens, and shipments of specialised equipment, in ways that interfere with the objectives of Apple and Foxconn to manufacture more in India. 

Chinese economic statecraft faces two classes of problems. The first problem is that China’s foreign policy is one of strategic autonomy. China has good relations with Russia, North Korea, and Iran, but the degree of coordination among these four countries is low. On its own, China is not an important part of the world economy. This is in contrast with what the West was able to do by wielding the tools of economic statecraft, before the Trump second term, where the West consisted of essentially all the rich countries of the world and added up to 65 per cent of world gross domestic product. Even today, the West ex-US is a formidable force in the world economy, in a way that China is not. 

The second problem that China faces is the lack of intellectual leadership. The one genuinely scarce thing in the world is exotic high-end knowledge. The most complex fabrications in the world — the ASML EUV lithography machine, the F-35 Lightning II fighter, the computations inside Google — contain unique knowledge that has only a few sources, and it is meaningfully possible to choke off access to these for a hostile power. Economic statecraft by China does not work because there is little sign of such an intellectual edge there. When China imposes constraints, for others it’s merely a matter of spending more and obtaining things from other sources. In the short run, this is more expensive, but many non-Chinese firms worldwide tend to jump into these opportunities and drive down the price. 

What are the lessons for policy makers? This analysis of the Chinese actions reflects the standard knowledge in the field of public policy, of the tension between the tactical and the strategic picture. In the short run, male pride revels in waving a big stick, and taking strong measures. And in the short run, these measures will indeed hamper the plans of Apple and Foxconn in India. But in the long run, they will have the exact opposite effect. Apple, Foxconn and a thousand other important firms will now think that China is a more dangerous locale which cannot be trusted. This would amplify their desire to reduce their activities in China. 

There is an entire package of knowledge in the field of public policy which works better: This includes avoiding short-term wins, establishing fair rules, respecting private persons and foreigners, living by the rule of law, understanding rules vs discretion, and de-emphasising the machismo. The China model broke when the tenuous connection into this intellectual package, which was established by Deng Xiao Ping, was lost. 

What are the lessons for Indian private persons? There are those who consider manufacturing to be a trivial low-skill subject, a problem of merely mobilising obedient workers into shifts. This view is not a fair description in the modern world. Globalised manufacturing in the modern world is a high-wire act. It requires constructing complex firms. 

Most Indian firms have quite a journey in front of them — in order to learn how to operate at the global frontier. As with Foxconn bringing knowledge into India, most Indian firms will be well served by doing more with foreign-technology sources, foreign consultants and advisors, and foreign employees. In the modern world, some strange government might throw a spanner in the works of the ladder of quality for the Indian firm. Hence, it is efficient for Indian firms to engage in precautionary investment, where productivity-upgrade purchases are made before they can be a chokepoint. Another dimension for firms to consider is the choice of country: It is efficient to emphasise dealings with countries where such risks are lower.

The author is a researcher at the XKDR Forum