The near collapse of frameworks for strategic relations with China and the newly protectionist impulse of the ‘Make in India’ initiative has placed new demands on New Delhi’s economic diplomacy with Beijing. While India has for some time been wary of Chinese economic influence and practices, the recent military stand-off in the Ladakh sector of the border has resulted in swift policy decisions and sharp rhetoric on the feasibility of the current state of Chinese presence in the Indian economy. This is evident in India’s refusal to join the China-dominated Regional Comprehensive Economic Partnership (RCEP), the blocking of Chinese apps in India and the intense discussions around decoupling from China-controlled supply chains. Strategic concerns over China’s economic embrace and its tendency to use economic advantages to leverage its political and security objectives have emerged in the last decade. This means that India needs to develop policy and diplomatic processes to constrain negative strategic fallouts without bucking the trend of China’s economic trajectory.
Decoupling from China
China’s deeply embedded global supply chains, its undeniable economic recovery after the shock of COVID-19, its significance for global economic recovery, and its presence in the Indian infrastructure, manufacturing, digital and real estate sectors indicate that decoupling may not be an easy option, despite fears over China’s weaponisation of commercial relations.
China’s success in establishing regional economic institutions and its ability to split the Trans-Atlantic consensus over engagement with it also attests to its continued significance to major economies around the world and the obstacles in diversifying investments and trade away from Chinese supply chains. In this context, India’s complete economic disengagement from China is unrealistic and, given that it only exercises relative marginal economic influence globally, India is unlikely to find many economic partners willing to move comprehensively away from Chinese supply chains despite the signing of the Supply Chain Resilience Initiative (SCRI) with Japan and Australia.
The RCEP, with 15 members aboard including those in the Asia-Pacific who have pledged to create more resilient supply chains, runs against this, at least in the short or medium term. The more recent China–European Union (EU) agreement on investments is also an endorsement of the value of the Chinese market.
Read More at https://www.orfonline.org/expert-speak/china-factor-india-economic-diplomacy/
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