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Date of Event:
Jul 4, 2025
India's rise as a manufacturing powerhouse making China nervous as geoeconomic advantage shifts
Story by FP News Desk• 21h•
3 min read
China appears to be getting nervous about India's rising stature as a manufacturing hub.
As India increasingly attracts global supply chains and manufacturing investment, tensions with China are mounting, with signs that Beijing may be responding with quiet but targeted disruptions to India’s industrial ambitions.
From electronics to toys, India's growing manufacturing base is drawing international interest, including from companies seeking to reduce their reliance on China. At the same time, Indian authorities and industry insiders report signs of economic pushback from Beijing: from delays in shipping machinery to the sudden withdrawal of skilled Chinese workers.
India gains from supply chain realignment
India has emerged as a key beneficiary of global efforts to diversify production lines away from China. Several international toy manufacturers, including Italy’s Dream Plast, Microplast and Incas, shifted part of their operations to India last year. The result has been a sharp increase in Indian toy exports.The Indian government’s $2 billion Production-Linked Incentive (PLI) scheme has also played a major role in luring global players. Earlier this year, Taiwanese electronics giant Asus began assembly operations in Manesar in partnership with VVDN Technologies. HP joined hands with India’s Dixon Technologies to produce laptops and personal computers locally.
Following the United States’ decision in April to impose additional tariffs on Chinese imports, even Chinese companies began seeking out Indian suppliers to fulfil American orders. At the Canton Fair in Guangzhou, Indian exporters reported being approached by Chinese firms offering commission-based deals to re-route their products through India.
Machinery delays and worker pullouts
As India’s industrial profile has risen, so too have signs of discomfort in Beijing. Indian government officials and companies have pointed to apparent Chinese efforts to slow down the delivery of crucial equipment needed for electronics manufacturing.In January, India’s Secretary of Electronics and Information Technology, S Krishnan, said the government had received feedback from manufacturers, including Apple supplier Foxconn, about delays in the shipment of capital equipment from China. According to industry sources, the machinery had been held up at Chinese ports for several months without formal explanation.
While no official restrictions have been announced by China, Krishnan acknowledged the possibility that these holdups could be the result of informal directives from Chinese authorities.
Further complicating matters, Foxconn repatriated several hundred Chinese engineers and technicians from its iPhone assembly units in southern India. Though Foxconn and Apple notified Indian officials, the move came without a clear explanation. The timing, officials said, suggested that it may have been more than a routine operational adjustment.
Rare earths and regulatory squeeze
In April, China introduced tighter export controls on rare earth magnets, materials essential for electric vehicles and electronics. The new rules require exporters to obtain government licences and provide detailed end-use certificates before shipments are approved.India, which imported 460 tons of rare earth magnets in the previous financial year, almost all from China, had planned to increase imports to 700 tons this year. The restrictions are likely to significantly impact India's auto sector, which is dependent on these components for electric mobility and other high-tech applications.
While the export curbs were officially described as part of China’s broader response to US trade measures, analysts believe India is among the countries likely to be caught in the crossfire.
Silent sanctions and the race for talent
Most recently, Beijing has reportedly instructed local governments and regulatory agencies to quietly discourage the outflow of advanced technology and technical talent to countries like India and Vietnam. According to Bloomberg News, the policy has not been publicly announced, but has been interpreted in Indian policy circles as a form of “silent sanction”.These measures appear designed to restrict the mobility of both tools and talent essential for complex manufacturing-- sectors in which India is beginning to position itself as a competitor.
As global manufacturers diversify and India gains momentum, Beijing’s unease is becoming harder to ignore. The geoeconomic advantage, long held by China, may be slowly shifting across the Himalayas.
