A pivot to China?

Business Standard, 1 September 2025

The turmoil in the world, from Russia's invasion of Ukraine to Trump's 50% tariffs upon India, demands fresh thinking in India. One element of this is finding the right stance on China. For many years now, the Indian engagement with China has been a frozen conflict. After border violence at Doklam and Galwan, the Indian approach was that economic engagement is conditional on decency at the border. In September 2021, the book Rising to the China challenge: Winning through strategic patience and economic growth by Gautam Bambawale, Vijay Kelkar, R.A. Mashelkar, Ganesh Natarajan, Ajit Ranade, Ajay Shah, was published by Rupa Publications. In essence that book argued:

  1. In the short term, India was too weak to confront China alone, what was needed was a coalition with the great democracies of the world; and
  2. The best foreign policy is to succeed on getting to economic growth, to build an India over a 25 year horizon where the asymmetry vis-a-vis China is less pronounced.

With Trump's tantrums, some in India are ready to rethink the China relationship. Some fantasise of Nixon/Kissinger's pivot to China, as a way of constricting the USSR, and think that India can do similarly with China in order to constrict the US. A greater sense of history, looking back, and a greater strategic sense, looking forward, is required.

A good place to start is to examine the Chinese V-Day military parade. Special guests from Russia, North Korea, Iran and Myanmar underline that strategic alignment. Beijing has two policemen in every corner, Tianenmen square has a military presence, and schools have declared remote operations. This is not the character of healthy liberal democracies who do not perform showy military parades.

In our hearts in India, we are a liberal democracy. Being a liberal democracy matters to people who matter. India should not dilute this strategic position on the globe by cosying up to China, which is not a natural partner.

Donald Trump is indeed a historic low in the US; nobody expected the US to collapse into right wing populism. We generally think that the advanced economies of the world have great institutions, but here we are, the US is now like an emerging market. At the same time, we should not see Trump as a permanent feature of the US. For decades, both parties in the US have supported India's rise, and looking beyond Trump, we can expect a better US, in terms of reapplying for the label of an advanced democracy, and in terms of good relations with India.

Most Chinese firms are obedient parts of the monolithic Chinese state. India is not like that, and the US is not like that. In the weeks after Trump breathed fire, American firms like Apple and Kyndryl announced expansions of their activities in India. The US courts are pushing back against Trump, in a way that could never happen in China. These aspects give stability to the India-US relationship, derisking it from politics, in a way that could never happen with China.

Our conflict with the US is about the 50% tariff. Our conflict with China is about much more than this. It was not so long ago that we saw practical Chinese military support for Pakistan. China's actions on Tibet, Nepal, Bhutan, Bangladesh, Sri Lanka, Burma and Mauritius are all inimical to Indian interests. China preaches multi-polarity in the world but uni-polarity in Asia: their aspiration that India should live in China's shadow is an unpleasant prospect for us.

With American markets shrinking, we in India require to do better on finding new export markets. The natural place to do this is the advanced democracies, ranging from Europe to Canada to Taiwan. The Chinese market is significantly unavailable to Indian exporters, because China is a prime exponent of cheating on the principles of free trade with an array of non-tariff barriers. While 5% of the credit for the slow death of the open global trading system goes to Indian unfairness, 95% of this credit goes to China. There is no ready path for Indian firms to grow exports to China without profound changes in the Chinese system, which is littered with minefields of enonomic nationalism and the lack of rule of law. The Chinese macroeconomy is suffering from a unique problem of overproduction: In many industries where India has a presence, openness to imports from China represents Chinese exports of unemployment.

Chinese economic coercion against India is alive and well. The Chinese state is trying to interfere with India's rise as China+1. They have imposed restrictions on certain exports to India where the global supply chain relies on China. As Gautam Bambawale has emphasised, even if these taps are opened today in a showy deal, we have to be fully conscious that the export bans can come back tomorrow. So there is no choice for Indian firms but to build non-China supply mechanisms. Hence, any quick deal right now does not really solve the problem.

Xi Jinping is not negotiating from a position of strength. This Chinese economy is in distress [EiE Ep16 The China model is broken]. He is in decline at age 72: in an authoritarian system, there are no clear mechanisms to a peaceful succession. His priority is to hold on to power, and not to think strategically for the prosperity of the Chinese people. This intrudes on the extent to which a sensible peace with India can be achieved.

The loss of the US market is a modest sized problem which Indian firms will solve, ideally with immediate policy support in the form of removing trade barriers, indirect tax reform and currency depreciation. The US is better than Trump; they will improve in coming years. India's interests lie with the advanced democracies of the world. It is with the West that we have NRIs, our children studying, incoming foreign capital, the flow of the full knowledge that will make India great, foreign technology from CPUs to Unix to LLMs, global companies operating in India, and our export markets. We should stay this course [EiE Ep92 Rules versus discretion]. There is plenty to do, expanding the Indian engagement with the advanced economies who are not the US, which contain an aggregate market that is twice the size of the US.

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