China is actively reshaping global supply chains through strategic investments, policy initiatives, and technological advancements. This multifaceted approach aims to enhance its economic resilience, reduce dependency on foreign markets, and establish a more self-reliant industrial ecosystem.
Strategic Overseas Investments
Chinese enterprises are increasingly investing in manufacturing facilities abroad to circumvent trade barriers and secure market access. Notably, countries like Mexico and Vietnam have become attractive destinations due to their trade agreements with developed markets, facilitating smoother entry for Chinese products. Morocco has also emerged as a significant hub for Chinese investment in electric vehicle (EV) and battery manufacturing, leveraging its favorable trade agreements with both the U.S. and the EU.
Industrial Diplomacy
Beijing is guiding the global expansion of its manufacturers by encouraging investments in countries that maintain favorable relations with China, a strategy termed “industrial diplomacy.” This approach not only fosters economic ties but also strengthens geopolitical alliances. For instance, Chinese automakers have been advised to prioritize investments in EU countries that opposed tariffs on Chinese EVs, leading to significant projects in nations like Hungary and Spain.
Technological Controls and Self-Reliance
To maintain its central role in global supply chains, China has implemented export controls on critical technologies, including those related to batteries, EVs, rare earth processing, and lithium extraction. This move ensures that key technological capabilities remain within China, compelling foreign companies to establish operations domestically to access these technologies.
Belt and Road Initiative (BRI)
Launched in 2013, the BRI aims to enhance regional connectivity and stimulate economic growth across Asia, Africa, and Europe through infrastructure development. By 2024, China had built cross-border highways and expressway networks to almost every nearby region, with railway connectivity being a major focus. The initiative also includes the Digital Silk Road, which seeks to improve digital connectivity among participating countries by developing digital infrastructure and technological standards. citeturn0search29
Made in China 2025
This strategic plan, initiated in 2015, aims to transform China from a manufacturer of low-tech goods to a leader in high-tech industries. Despite facing international challenges, by 2024, China had achieved global leadership in sectors such as high-speed rail, graphene, unmanned aerial vehicles, solar panels, and electric vehicles. The initiative underscores China’s commitment to reducing reliance on foreign technology and enhancing its manufacturing capabilities.
Dual Circulation Strategy
Introduced in 2020, the dual circulation strategy focuses on boosting domestic consumption (“internal circulation”) while remaining open to international trade and investment (“external circulation”). This approach aims to make the domestic market less dependent on external fluctuations and shocks while also making China’s economy more indispensable to the outside world.
Resource Security
In response to global trade tensions, China is increasing state support for domestic mineral exploration to achieve resource self-sufficiency. Over the past year, several provinces have announced increased subsidies and expanded access for mineral exploration. This boost aligns with President Xi Jinping’s focus on self-reliance in science and technology amidst escalating US-China tensions.
Attracting Foreign Investment
China is actively courting foreign investment to strengthen its transitioning economy. The country is opening its service sector to foreign capital, targeting sectors like hospitality and property services, while encouraging investment in healthcare to address an aging population. For example, a Singaporean company recently opened a 500-bed hospital in Tianjin, illustrating the new investment landscape.
Global Shipbuilding Dominance
China’s shipbuilding industry, supported by foreign orders, is bolstering its naval capabilities. Chinese shipyards, closely linked with the country’s defense industrial base, have built more tonnage in 2024 than the entire US industry since WWII. This synergy between commercial and military shipbuilding aids China’s naval modernization.
Through these concerted efforts, China is not only securing its position in existing global supply chains but also actively reshaping them to align with its strategic interests, thereby enhancing its global economic influence.
China’s evolving global supply chain strategy has significant implications for its economic and trade relations with India. While China remains India’s largest trading partner, the relationship is marked by competition, strategic caution, and selective economic engagement. Here are some key aspects of China’s policy towards India in the context of reshaping global supply chains:
1. Limited Supply Chain Integration
- Unlike China’s deep supply chain collaborations with Southeast Asian nations, its integration with India remains limited due to geopolitical tensions and India’s push for self-reliance.
- China has avoided relocating major industries to India, preferring countries like Vietnam, Mexico, and Morocco for its supply chain diversification.
2. Controlled Investment and Technology Transfers
- Since 2020, India has tightened FDI regulations for Chinese firms, requiring government approval for investments. As a result, Chinese capital inflow into Indian tech startups and manufacturing has slowed.
- China has not prioritized India as a strategic partner for technology transfers, unlike its approach in Africa and Latin America, where it has aggressively expanded digital and infrastructure investments.
3. Dependence on Chinese Imports
- India remains heavily reliant on China for critical imports, especially in electronics, pharmaceuticals (API ingredients), and machinery.
- Despite India’s efforts to boost local production through the “Make in India” and “PLI (Production Linked Incentive)” schemes, China still dominates supply chains in key sectors.
4. Infrastructure Diplomacy and the Belt & Road Initiative (BRI)
- India has officially stayed out of China’s BRI due to sovereignty concerns over the China-Pakistan Economic Corridor (CPEC).
- While China invests heavily in neighboring South Asian countries (Pakistan, Sri Lanka, Bangladesh, Nepal), India has remained cautious of Beijing’s growing influence in the region.
5. Competition in Manufacturing and Exports
- China sees India as a rising competitor in the manufacturing sector, particularly in electronics, semiconductors, and electric vehicles (EVs).
- To maintain its dominance, China is expanding manufacturing bases in Bangladesh and Vietnam, which have free trade agreements with India, potentially impacting India’s export competitiveness.
6. Selective Economic Engagement
- Despite tensions, China continues to engage India in trade, recognizing the Indian market’s importance for Chinese goods.
- Chinese firms like Xiaomi, Oppo, and Vivo have localized some assembly operations in India to bypass import restrictions, though India is pushing for deeper domestic value addition.
Conclusion
China’s global supply chain restructuring reflects a cautious and strategic approach toward India. While trade remains strong, China is not integrating India into its core supply chain network. Instead, it is diversifying through alternative regional partnerships while carefully managing economic engagement with India to avoid excessive dependence.
References:
- Source: High Capacity – China Is Trying to Reshape Global Supply Chains URL: https://www.high-capacity.com/p/china-is-trying-to-reshape-global
- Source: Financial Times – China raises state funding for strategic minerals amid US trade war URL: https://www.ft.com/content/cace5b0f-e08c-4cb9-aac5-c3117d5a93bc
- Source: Reuters – China seeks foreign capital old and new to bolster changing economy URL: https://www.reuters.com/world/china/foreign-firms-welcome-share-chinas-development-says-foreign-ministry-2025-03-20
- Source: Business Insider – How foreign buyers are fueling China’s shipbuilding juggernaut URL: https://www.businessinsider.com/foreign-buyers-are-fueling-chinas-shipbuilding-juggernaut-research-2025-3
