The government has been made aware of the situation by industry and mitigating measures are being considered. But for the near term, this would mean a setback to the large manufacturing operations that have been set up by companies such as Foxconn in the electronics sector and joint ventures in the auto sector, the executives said.
“The Chinese government is stopping capital equipment exports from China which are critical to the manufacturing of various products, especially electronics, EVs and solar panels, etc.,” said an executive on the condition of anonymity. “The solar sector has been suffering for quite a while.”
Protectionist Move
The delay in bringing equipment not only increases costs for the manufacturers here, but also hurts the whole expansion exercise, said another executive. Experts believe that while China is trying to protect its interests amid the geo-political situation and the return of the Donald Trump regime in the US, India is being severely hurt as its booming manufacturing ecosystem depends on Chinese machinery and technical know-how.Over the last few months, the Chinese government has turned its attention to the electronics sector, specifically, stopping large companies such as Foxconn, BYD and Lenovo from exporting capital equipment for setting up or augmenting manufacturing facilities outside China, a third executive said. Foxconn, BYD and Lenovo did not respond to emails seeking comment.China is in a difficult position because as the world gets ready to watch Trump’s tariff regime against Chinese exports, Chinese and Taiwanese companies such as Foxconn, Pegatron and Compal want to partially de-risk from China and set up manufacturing facilities overseas. “This move will stop their expansion plans also within China, in addition to outside China. So, the Chinese government may get considerable opposition from within as well,” said the first executive.
New Strategy Needed
But this latest move by the Chinese government is going to hit Indian interests more as other countries like Vietnam and Mexico have developed a substantial local ecosystem by partnering Chinese players in the last 4-7 years. In India, the ecosystem remains under-developed, say industry players. The government is trying to gear up to support the shift of the ecosystem through a component incentive scheme worth nearly $3 billion. It is likely that the government could also consider special provisions and subsidies under the incentive scheme for capital equipment, say industry executives. “Essentially, the government will have to rethink its strategy for supporting domestic manufacturing which is dependent on the Chinese ecosystem, not just for components and sub-assemblies but to a large extent, for capital equipment,” said the first executive.
