Amid US President Donald Trump's mounting tariff attack on Beijing, Chinese firms seem to be increasingly prioritising access to the Indian market by abiding by local conditions for expansion. As of now, Chinese exports to the US face a "reciprocal" tariff of 245 per cent -- while India, along with everyone else, is exempted for 90 days.
India has taken a number of steps to win over Trump, including vowing to buy more defence and energy products. India is also on track to sign a trade deal with the US, with the aim of achieving $500 billion in bilateral trade by 2030. With the world's biggest manufacturer hamstrung in the world's biggest market, India could emerge as an attractive alternative-- and Chinese manufacturers seem to understand that.
China Eyes Indian Market
The trade ties between New Delhi and Beijing have been cold since the 2020 border violence. However, persuaded by escalating US tariffs, Chinese giants like Shanghai Highly Group and Haier are reportedly agreeing to retain just a minority stake in joint ventures, something they weren't keen on.
According to a report by Economic Times, Shanghai Highly, one of the largest compressor manufacturers in China, has restarted dialogue with Tata-owned Voltas for a manufacturing joint venture. Initially designed as a 60:40 joint venture, with Voltas holding the minority stake, the plan was abandoned by the Indian side last year due to the lack of government approvals.
The Chinese firm is now agreeable to a minority stake, the ET report said, quoting people in the know of the developments.
Moreover, Shanghai Highly has also formed a technical collaboration--with no equity clause-- with manufacturer PG Electroplast to make AC compressors, under which it agreed to share the technology. Under the agreement, PG is setting up the plant near Pune for ₹350 crore.
Another dragon major, Haier, which holds the third largest stake in the Indian electronics market by sales, has also reportedly agreed to give up its majority stake in the local operations.
Haier had been wanting to offload a minority stake of up to 26 per cent to a strategic partner, as the government's crackdown on foreign direct investment (FDI) from China has emerged as a hurdle for it to expand its business in India. Per the norms, any FDI from an entity in a country sharing its land border with India needs government approval.
The stake sale process was delayed, but now Haier has restated talks with several Indian companies and private equity funds to sell up to 51-55 per cent, industry executives told ET.
Can India Emerge As A Winner In the Trade War
With Trump's tariffs set to make products from China much costlier in the US, Chinese firms don't want to hit a wall in India as well. Experts say Chinese businesses are now more willing to accede to New Delhi's terms to continue their business in India-- a big market with a scope for exports under the tariff regime.
"There is a complete change in attitude of the Chinese companies, who are now extremely comfortable to own minority ownership in an Indian joint venture or form technical alliance," Rajesh Agarwal, director at Bhagwati Products, a telecom and electronics contract manufacturer, told ET.
Another advantage of shifting production to India is the government's recently announced production-linked incentive scheme for electronic components, which will make production cost-neutral as compared to China.
Meanwhile, the Indian government appears to seize the moment and is reportedly considering the possibility of permitting Chinese electronics firms to invest in the country on a selective basis and may clear joint ventures with them, if they have minority ownership or bring in a new technology required to grow local production.
