[volkman10]

Reality dawns: Focusing on FDI from China a better way to boost India's exports to US.

Despite the potential of the "China plus one" strategy, it is unlikely to result in a total shift of trading relations away from China. Countries like Mexico, Vietnam, Taiwan, and Korea, which benefited from the US's trade diversion from China, also saw a rise in Chinese Foreign Direct Investment (FDI). Therefore, completely bypassing China is not feasible.

Opting for Foreign Direct Investment (FDI) as a strategy to leverage the China plus one approach will be more beneficial than depending solely on trade. This is due to China being India's leading import partner and the increasing trade deficit with China.

Despite the ongoing complexities in India-China economic relations, India's unique strengths and government initiatives could still position it as a valuable player in global supply chains.

In short:

India faces two choices: integrate into China's supply chain or promote FDI from China. Focusing on FDI from China seems more promising for boosting India's exports to the US. This approach is advantageous as China is India's top import partner, and the trade deficit with China is growing. As the US and Europe shift their sourcing away from China, it is more effective for Chinese companies to invest in India and export products to these markets. This strategy not only adds value within India but also mitigates risks associated with economic coercion from China.

In conclusion, while India cannot wholly replace China in global manufacturing, it can strategically position itself by leveraging its strengths, improving trade logistics, and attracting foreign investment. Balancing imports from China with increased FDI from Chinese companies will be crucial in ensuring India's continued growth and integration into global value chains.

The survey explained how increased FDI inflows from China can help in increasing India’s global supply chain participation along with a push to exports. At present, FDI from China in any sector needs government approval.

In auto space, imagine the likes of BYD, VW, (China JV) and many more Chinese companies setting up factories with local partnerships catering to both domestic and export markets.


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[trippytragopan]

Economic Survey makes a case for increased Chinese FDI, meanwhile you can boycott Chinese Diwali lights.

[volkman10]

India may want to give China a side hug, like Brazil, Mexico and Turkey.



-India's annual economic survey has recommended that the government consider reopening its doors to foreign direct investment from China. The goal is to reduce the deficit with its second-biggest trading partner and grow manufacturing and exports.

- By the survey's own admission, India has not been an immediate beneficiary of the China plus one strategy deployed by many companies.

-Nations like Mexico, Vietnam, Taiwan and Korea, which were direct beneficiaries of the US's trade diversion from China. Even while these nations increased their share of exports to the US, they also displayed a concomitant rise in Chinese FDI (foreign direct investment). Therefore, the world cannot completely look past China, even as it pursues China plus one.

-While the US may now import more from Mexico than China, the money to make the stuff is still coming from Beijing and Shanghai. Brazil and Turkey have deployed a similar model, too, and India may be tempted to replicate it.

- Final decision will lie with the government and will have many more factors to consider than economists.

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[shortbread]

Makes little sense to me. The China +1 strategy revolves around global companies looking at an additional production base (hence +1) rather than have all it's eggs in the China basket. So in that case, aren't we supposed to invite FDI from these nation's companies looking at alternate production venues rather than FDI from China?

Why would chinese companies look to export from India, when they may as well do it from China itself, Just next door neighbours?

Chinese companies already struggle with excess capacity, debt etc.... so why spend more money to create additional capacity in India?

If anything the belt and road experience has taught the world and especially our western headache, chinese investments create next to nought benefit to the host country.

[mercedised]

Untill we produce technologically skilled labour, Education system is overhauled, the vote bank politics is scrapped, we can only day dream about the manufacturing & technological prowess that PRC possess. Education system which is one of the most important pillars in building a stable economy has been totally cornered by all the Governments till now. You can bring all the infrastructure, build roads, railways, ports, we will not see true progress unless untill the lowest of denominator in the society has, in true terms become educated.

[SmartCat]

Originally Posted by shortbread

Why would chinese companies look to export from India, when they may as well do it from China itself, Just next door neighbours?

Xiaomi & BKC electronics (Oppo/Vivo/Oneplus/Realme etc) are exporting made-in-India smartphones to the world. I guess Chinese businesses too are looking to diversify where they manufacture their products.

Chinese companies already struggle with excess capacity, debt etc.... so why spend more money to create additional capacity in India?

Let's assume India demand for OnePlus smartphone is 500,000 units per year. But if India unit manufactures 1 million units and exports the rest, the cost of production in India will go down because of economies of scale. Ditto with MG Motors or BYD. They might build excess capacity so that cost of production goes down.

If anything the belt and road experience has taught the world and especially our western headache, chinese investments create next to nought benefit to the host country.

China's Belt & Road is not FDI. It is just loans given by China to countries to build infrastructure. From geopolitics point of view, large Chinese FDI actually gives India some leverage. Accepting FDI from China & manufacturing here has low downsides. It is much much better than importing billions of dollars worth of goods from China.

[volkman10]

Economic Survey bats for Chinese investments in India.

India's Economic Survey, tabled in Parliament on Monday, proposes FDI from China as a promising strategy to boost the country's exports. The proposal comes as many Chinese companies, including automobile majors such as BYD, Great Wall and SAIC are finding it difficult to pump in more money to set up or expand their base in India.

India’s automotive market could be lucrative for China, given the country's immense scale and nascent electric vehicle market. India recently surpassed Japan to become the world’s largest passenger vehicle market in the world. Electric vehicle penetration in India is still in the low-single digits and provides a bid opportunity for Chinese players, which specialize in making low-cost vehicles.

The opinion is likely to be controversial, given that China is viewed with both suspicion and envy with most Indians, and Chinese brands have often been subjected to boycott calls on Indian social media.

‘Make in India’ thrust – under which the government of India is trying to get local and foreign firms to set up manufacturing operations in India – will end up making India more dependent on China as most of the equipment used for setting up factories is made in China.
The drive for enhanced manufacturing capacity within India may also make us more dependent on capital goods from China because Chinese capital goods makers have eliminated competition in Europe elsewhere.

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