“Cooperative Vietnam” v/s “Competitive India”
Undeniably, the outflow of industries will be a blow to the Chinese economy.
However, some Chinese experts believe that the negative impact to China would be far less if these industries relocated to Vietnam rather than India. After all, Vietnam is constrained by a small domestic market, meaning that it could only play a minor role as a processing and transhipment hub in the global electronics industry chain. Thus, China need not feel threatened by the loss of manufacturing to Vietnam, and could still treat it as an extension/spill over of China's economic space, as an expansion of the international influence of China's industrial chain.
But the feeling is quite different when it comes to India. The South Asian giant, which is currently not quite a part of China-centric supply chain/network system but is set to maintain a higher economic growth rate than that of China for the foreseeable future, has an extended demographic dividend, a vast domestic market, an improving electronic industry chain, a more developed software and information industry, and language competencies in line with Europe and the United States.
Unsurprisingly, Chinese experts see India as an imminent challenger to China’s position in the global supply chain and an adversary to be wary of.
Therefore, a popular view in China is that even though Vietnam may be a pain-point in the short term, India, which has ambitions of becoming a manufacturing great power, is a bigger threat to China in the long run. It is within this context that China should strive to “distinguish between friend and foe” (分清敌友) between a cooperative Vietnam and a competitive India.
https://lkyspp.nus.edu.sg/cag/publi...ndia-and-the-contest-for-global-supply-chains
China’s course of action?
As evident from the writings of Chinese scholars,
China’s policy priority at the moment is to prevent the formation of a US-India supply chain collaboration as the engine of fourth wave of industrialization.
To achieve this, the view in Beijing is that China must pull India into the existing China-centred economic circuit (US+West+China) and forge a close China-India supply chain system. By tying India closely to China through economic and trade means, Beijing plans to prevent the ‘US+West+India’ industrial model from ever coming to fruition.
But even as China wants to win over India, it does not want to bear the strategic cost for it, nor offer any tangible benefit to India in return, which in Beijing’s view, would further aid India’s rise.
Instead, it has developed a two-pronged strategy towards India. On the one hand, it contends that at a time when the US is employing various resources to attract India,
Beijing will use the resources at its own disposal to contain India, including the disputed border, the Russia factor, and a highly efficient propaganda machinery to sow discord between India and the US. After all, India, in its pursuit of benefitting from the US and the West, cannot let China-India relations to decline all the way to the point of a large-scale conflict.
Worryingly, the
present Chinese discourse on India is, in fact, very similar to that seen in the run up to the Galwan Valley clash in June 2020. Between late 2019 and early 2020, opinions like ‘India is an opportunist’, ‘India is seeking to replace China’, and ‘China should teach India a lesson’ were all gaining currency in China.
There are echoes of that discourse today, suggesting that there is a possibility of China once again stirring up trouble at the LAC or taking other punitive actions against India in the coming days. The idea is to remind India not to stray too far into the US/Western camp or else face the possibility of military conflict.
On the other hand, China continues to try lure India into a tighter embrace, economically. To compensate for the shrinking space for bilateral trade and economic exchanges due to the conflict over territory,
China has been keen to use various multilateral platforms such as the Asian Infrastructure Investment Bank and the BRICS cooperation mechanism, etc., to nullify India’s decoupling tendencies, to reconstruct the China-India industrial chain and expand the fields of economic and trade cooperation between the two (
including improving the quality of cross-border industrial chain financial services, promoting the signing of the China-India digital trade agreement and letting small and medium-sized enterprises become the main driving force for future bilateral economic cooperation). Most recently, the
14th BRICS Summit Beijing Declaration gave primacy to enhancing cooperation on supply chains, trade and investment flows, the role of MSMEs, and growing the digital economy partnership among the member nations.