China's Geopolitical Strategies and Challenges
China's actions are systematically subverting the global order, primarily through a state-led economic model. This model includes:
- Extensive industrial subsidies leading to global overcapacity.
- Non-tariff barriers and state-sponsored intellectual property theft.
- Forced technology transfers.
In the security domain, China disregards international laws, notably rejecting the 2016 Permanent Court of Arbitration ruling on the South China Sea. It destabilizes regions through military coercion against Taiwan and economically supports Russia's invasion of Ukraine.
US Tariff Policy under Trump Administration
The Trump administration responded with high tariffs on China, aiming to alter its behavior. This approach is likened to a geopolitical "game of chicken," where both parties risk a collision but are pressured to find a resolution.
China's Economic Challenges
China faces significant economic vulnerabilities:
- Collapse of the over-leveraged property sector, leading to a solvency crisis for developers and local governments.
- Banking system stress due to exposure to property developers.
- Record-high youth unemployment and crushed private-sector confidence due to economic nationalism.
- Chronic overcapacity in industries like steel and solar panels.
These issues draw comparisons to the USSR's collapse in the 1980s. China's exports to advanced economies, including $427 billion to the US, highlight the conflict between national pride and the pragmatic need to stabilize its economy.
US Economic Challenges
The US faces its issues with tariffs:
- Supply chain disruptions and increased input costs for manufacturers.
- Inflationary pressures and a weakened dollar (dollar/euro exchange rate dropped by about 11% in 2025).
Both China and the US are pressured to resolve these conflicts to focus on domestic issues.
Opportunities for India
This geopolitical volatility offers strategic opportunities for India:
Trade Agreements
- India should conclude a comprehensive trade and investment agreement with the US to stabilize relations and unlock complementarities.
- Address barriers like complex rules of origin, restrictions on services and capital flows, and data localization rules.
Position as "China +1"
- Commit to domestic structural reforms, regulatory overhaul, and deepening tax reforms.
- Tackle issues like slow judicial enforcement and restrictive labor and land laws.
Global Integration
- Accelerate integration with advanced economies through comprehensive FTAs with the EU, UK, Japan, and Taiwan.
- Use FTAs as vehicles for institutional improvements and global competitiveness.
Globalization of Indian Firms
- Firms should globalize by engaging with foreign capital, technology, and skilled personnel.
- Focus on genuine competitiveness over state patronage.
The strategic focus should be on partnering with high-trust liberal democracies to minimize geopolitical and regulatory risks.