Reevaluating Economic Relations with China
Middle powers globally are reconsidering their economic ties with China. Recent diplomatic engagements involving leaders from Canada, the UK, and France with President Xi Jinping highlight efforts to reset these relationships. The European Community faces challenges balancing market openness to Chinese goods and the necessity of Chinese companies in its supply chain.
India's Strategy on Chinese Investment
- Press Note 3: Issued in 2020, this note imposed strict restrictions on inbound investment from countries sharing land borders with India. Though some restrictions have relaxed, the ad hoc nature of relaxations calls for a comprehensive strategy review.
- Exceptions were made in mobile manufacturing, notably for Apple Inc., whose plans to manufacture in India required the presence of its Chinese contractors.
- The current approach may benefit large companies that can lobby for exemptions, to the detriment of smaller, dynamic enterprises, which are crucial for economic dynamism and workforce support.
Challenges and Considerations
- Ruling out Chinese Investment: The main concern is capital entangled with the Chinese state. This also raises questions about including Taiwan and Hong Kong in restrictions and distinguishing between Chinese and non-Chinese companies.
- Difficulties arise in identifying whether European subsidiaries of Chinese companies pose less risk.
Need for a Strategic Economic Security Plan
- India lacks a coherent economic security strategy, unlike nations like Australia and Japan.
- New Delhi must identify strategic sectors vulnerable to hostile actors, moving beyond the narrow focus on "land neighbours."
- There is an urgent need for a comprehensive negative list for investments to safeguard economic security.
