[By Kuai Ji Mao, contributor of Observer Web]
Recently, Noah Smith, a renowned American economist and internet opinion leader, published an important blog post titled "China is trying to kneecap Indian manufacturing." This article conveys a view that sounds very stimulating: because China regards India as a geopolitical rival and a potential industrial economic threat, it is attempting to block investments, technologies, and talent from flowing into India to weaken its geopolitical potential.
Noah Smith's article "China is trying to kneecap Indian manufacturing" has distorted Sino-Indian relations. Social media screenshot
Obviously, this claim is completely baseless, but it has caused a huge reaction in the West and India in a very short time — because not only does it satisfy the Western narrative of the "China threat," especially fitting the Western defamation of "China's capacity weaponization," but it also satisfies India's government's need to cover up its mistakes and shift responsibilities, equivalent to saying "it's not our inability to develop industries, but China being too bad, always preventing us from developing."
Therefore, once Noah Smith's blog post was released, it spread widely on the English-speaking internet and was forwarded and recommended by many prominent Indian political elites, including former Indian Foreign Secretary and ex-Chinese Ambassador Vijay Gokhale. Moreover, many scholars with certain academic status have cited the phenomena mentioned in the blog post, attempting to incorporate "China's capacity weaponization" into serious academic research. This upside-down narrative not only has strong communicative toxicity but may even become an academically biased prejudice with significant negative impacts. Therefore, as a scholar who has long followed and studied Sino-Indian economic and trade exchanges, I believe it is necessary to clarify this issue thoroughly to set the record straight.
Former Indian Foreign Secretary and ex-Chinese Ambassador Vijay Gokhale cited Smith's article. Social media screenshot
Interestingly, this viewpoint resonates strongly with the intense debate triggered by India's decision to abandon the Production Linked Incentive (PLI) plan worth $23 billion, as both revolve around attempting to explain the same phenomenon: despite Prime Minister Modi's relentless efforts to promote it, India's manufacturing performance has been disappointing — although Modi's government originally aimed to increase the proportion of manufacturing in India's economy to 25% by 2025, this proportion unexpectedly dropped to 14.3% in 2024.
Blaming India's poor manufacturing performance on China is not only absurd but also distorts reality. For a long time, Chinese enterprises have been the largest external assistance for India's industrialization, providing capital, talent, intermediate products, management technology, and almost all the elements required for industrial growth.
Of course, businesses are not charities either; India was once China's largest overseas engineering contracting market and an important source of surplus, creating very可观 profits. A decade ago, Chinese internet companies and consumer electronics companies regarded India as the "next China" and invested significant resources in the Indian market.
After all, there is no country in the world more capable of promoting India's industrialization than China. This conclusion is not self-praise by China but the result derived from the scale, stage of development gap, and industrial economic structure realities between the two countries. However, it seems that the Modi government does not fully recognize this fact, unable to properly position itself, and even expects to replace China by relying on the U.S. "China+1" strategy to occupy a core position in the global industrial chain and supply chain.
After the outbreak of the COVID-19 pandemic in 2020, India became anxious over fears of "foreign investors initiating predatory acquisitions during the pandemic." In April 2020, India issued "Public Notice No. 3 of 2020 (PN3)," stipulating that any investment from neighboring countries requires government approval. Subsequently, after the Galwan Valley conflict in June 2020, the Modi government banned hundreds of mobile applications with Chinese backgrounds under the pretext of "national security" and excluded many Chinese companies from the Indian market. Worse still, Indian tax authorities began arresting Chinese executives in India en masse. All these actions severely damaged the situation of Chinese investments, Chinese enterprises, and Chinese personnel in India.
Take the example of BYD, the Chinese electric vehicle giant. In 2023, BYD proposed an investment of $1 billion to build an electric vehicle factory in India, but this proposal was rejected by the suspicious Modi government. This also pushed BYD to adopt the strategy of "importing only from India" instead of considering establishing a local production base in India.
Under similar policy logic, the Modi government launched the PLI plan with the aim of encouraging localized production for goods India depends most on China for, thereby reducing reliance on China and positioning India as a "China alternative" for the global market. During the pandemic, many Indian diplomats even openly encouraged multinational corporations to "abandon China and invest in India," disregarding the adverse diplomatic impact of such actions, just to align with the U.S. "decoupling" and "unraveling chains" strategies.
Indian Prime Minister Modi wants to make India a global manufacturing hub. Agence France-Presse
Many amateur observers without in-depth research on Sino-Indian issues easily attribute the confrontational stance taken by the Modi government to macro geopolitical factors, but this view is pure speculation. The real problem between China and India lies in India's specific policy choices. To retaliate against China, the Modi government has linked industrial-economic cooperation directly to border affairs, especially using unilateral tough actions to hold hostage China's commercial interests in India and then strike them one by one.
In this case, even if the Chinese government and enterprises sincerely wish to assist India's industrialization, there is no feasible way to do so because India has virtually blocked all channels of cooperation unilaterally. In fact, rather than saying "China is suppressing India's industrialization process," it would be more accurate to say that the Modi government is suppressing India's industrialization process. That is the real situation.
By 2025, Trump's pressure on India regarding tariff issues during his second term began to make India realize the need to improve its trade and investment relations with China. Frankly speaking, restoring bilateral economic relations to their state in 2019 is no easy task. A popular phrase in Chinese society aptly expresses this sentiment: "India makes money in India, spends it in India, and doesn't bring a single cent home." Anyone with a modicum of common sense can see that this suspicion has nothing to do with the Sino-Indian border dispute and is entirely the consequence of the Modi government's mistreatment and suppression of Chinese enterprises.
Over the years, while the Modi government has gone to great lengths, treating Chinese enterprises like thieves, a highly dynamic large-scale manufacturing supply chain network has rapidly expanded from China to Southeast Asia, South Asia, and even the Middle East and Africa — Bangladesh handles garment production, Vietnam handles consumer electronics, Indonesia handles batteries and refined products, Malaysia handles automobiles, chip services, and electronic manufacturing services (EMS), etc. The main reason for Chinese enterprises' large-scale overseas expansion is simple: the Regional Comprehensive Economic Partnership (RCEP)-supported free trade zone, geographical proximity, well-developed transportation networks (freight railways, direct flights), mature supply chains, and numerous Chinese business communities and related services significantly reduce the risks and friction costs of doing business for Chinese enterprises.
Therefore, despite the continuous growth of China's overseas investments, most enterprises still actively avoid India because they cannot obtain foreign direct investment (FDI) approvals from the Indian government, cannot obtain visas to enter India, cannot cope with India's eccentric compliance requirements, and are unwilling to bear the enormous risks associated with repatriating profits. Undoubtedly, Southeast Asia, non-Indian South Asia, and even the Middle East and Africa, rather than India, are the preferred destinations for Chinese enterprises going abroad.
I firmly believe that for countries like China and India, manufacturing is the only correct path to development. At the same time, China is perhaps the only country truly capable of helping India achieve a flourishing manufacturing sector. However, blaming China for the difficulties caused by India's own mistakes and incompetence clearly does not help solve the problem.
In fact, India has already fallen into the "One Belt One Road - 1" situation due to its own foolish policies — Chinese enterprises can go anywhere except India when they go abroad. If this is what the Modi government hopes to see, then its goal has likely been achieved.
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