Indian Companies Increasingly Objecting to China's Trade Practices, Observers Say

Indian companies are growing increasingly frustrated with restrictive Chinese market access, leading to a more competitive relationship between India and China and a closer Indian alignment with U.S. policies toward China, a trade expert said. However, although India shares U.S. concerns over China, it disagrees with the U.S.’s approach, preferring to engage with countries such as China and Russia diplomatically rather than impose sanctions on them, the expert said.

Indian companies are losing their market stances in China, which has become increasingly difficult to trade with, said Dhruva Jaishankar, director of the U.S. Initiative at the Observer Research Foundation, speaking during a Nov. 26 panel hosted by the Hudson Institute. While Indian companies are “competitive” in the U.S., Europe, Southeast Asia and the Middle East, they “are not able to compete in the Chinese market,” Jaishankar said. “This is an issue that has been raised repeatedly by Indian industry.”

India is forming a “structurally more competitive relationship” with China, which is causing India to form deeper partnerships with nations that share its concerns, including the U.S., Japan and Australia, Jaishankar said. “I don’t think there is a lot of unhappiness in New Delhi about the Trump administration calling out unfair trade practices on the part of China.”

To address problems with China, India is turning toward diplomacy, as evidenced by recent summits between Indian Prime Minister Narendra Modi and Chinese President Xi Jinping, Jaishankar said. And while India is concerned about the growing China-Russia relationship, India is taking a similar approach to Russia, preferring diplomatic engagement. But that strategy is complicating its relationship with the U.S., Jaishankar said. Jaishankar pointed to India’s decision last year to order S-400 anti-aircraft missile systems from Russia, which are on track to be delivered, according to a Nov. 14 Reuters report. Congress has introduced legislation that would require the Trump administration to sanction Turkey for similar purchases of S-400 missile parts (see 1910100049).

If India follows through with the purchase, U.S. sanctions are a possibility, Jaishankar said. “The view in India is that there are growing concerns about the Russia-China partnership that is emerging, and the way to address that is to actually continue to engage with Russia,” he said. “But it has certainly been complicated by the fact that the U.S. Congress has applied very stringent sanctions on Russia.”

This has also impacted the trade relationship between the U.S. and India, Jaishankar said. Although the two countries differ on how to approach China, Jaishankar said he is hopeful their differences will not significantly hurt their relationship. “There are some differences, but I wouldn’t say they've imperiled the strategic [U.S.-India] partnership,” he said. “But they certainly complicate it, particularly over trade issues.”

Satoru Nagao, a visiting fellow at the Hudson Institute, said Japanese industry is strongly opposed to China’s trade practices and “many Japanese companies” have recently relocated to Southeast Asia. “Japan needs to reduce its economic dependence on Beijing,” Nagao said during the panel, which discussed the ways countries are countering Chinese practices in the Indo-Pacific region. He also said Japanese companies view China as a “threat” and not “trustworthy,” and that they want Japan to more closely align with the U.S. “For Japan,” he said, “strong U.S. policy toward China is welcome.”