Paper: GS – II, Subject: International Relations, Topic: India and its neighbourhood, Issue: Implications of China’s economic sabotage moves.
Context:
China is withdrawing Chinese engineers from Foxconn’s India operations. China is also curbing access to rare earths and critical inputs for electronics and auto manufacturing.
Key Highlights:
- China’s Recent Moves:
- Restricted exports of rare earths and critical raw materials.
- Blocked imports of capital equipment, components, and skilled labour for electronics.
Objectives of China:
- Induce Uncertainty: Create uncertainty in global supply chains involving India.
- Send message: India is not a reliable global supply chain partner or “China+1” alternative.
- Undermine India: Undermine India’s economic security and curb its strategic & military strength.
Implications of the move:
- Dependence on China: Electronics sector is heavily reliant on Chinese inputs.
- Price advantage: Chinese equipment/components cheaper than other countries.
- Competitive edge: China has built a competitive edge over 30 years in electronics manufacturing. Indian skills & equipment not easily replicable outside Chinese ecosystem.
- Decoupling Challenge: Though policy push exists but electronics decoupling may take 5–7 years. It requires focused industry–government collaboration.
- High switching costs: It leads to high costs for global value chains (GVCs) and relocation from China becomes unlikely without strong incentives.
Government Initiatives:
Way ahead:
- Reduce strategic vulnerabilities by diversifying supply chains.
- Enhance domestic manufacturing capacity in critical sectors like electronics, EVs, telecom.
- Develop alternative global partnerships (Japan, Taiwan, South Korea, ASEAN, EU).
- Build rare earth processing & refining capabilities in India.
Conclusion:
China’s tactics are part of a long-term economic containment strategy. India must pursue self-reliance in electronics & critical sectors, while integrating strategically into resilient global supply chains.
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