5 reasons why China is so scared of India
Though India lags far behind China in several fields, the communist country is getting wary of India’s gains in foreign direct investment (FDI), technology and manufacturing. India’s closer military ties with the U.S. is another major concern of China. China has realised that India holds great potential and if it is able to tap it effectively, India could emerge as a major threat to China.
Below are a few reasons why China is scared of India:
1. Foreign direct investment ::
On Monday, President Xi Jinping vowed to open up China like never before. China faces dwindling foreign exchange reserves when India is agressively pushing itself as a destination for foreign investment.
Premier Li Keqiang has annnounced that foreign firms would be treated the same as domestic firms when it comes to licences applications, standard setting, government procurement and would enjoy same preferential policies under Made in China 2025 initiative. China is scared it might lose FDI race to India.
In 2015, India was for the first time the leading country ($63 billion) in the world for FDI, overtaking China (USD 56.6 billion) and the US ($59.6 billion). This has set the alarm bells ringing in the Chinese establishment.
2. Manufacturing ::
China is also scared of India overtaking it in manufacturing in the long term as labour costs in China are rising. Global Times, a Chinese establishment newspaper, wrote recently in an article headlined ‘China should pay more attention to India’s increasing manufacturing competitiveness’: “Although India is still in its initial stage of developing export-oriented manufacturing industries, the country has great potential to emerge as a regional hub for labour-intensive industries. One recent analysis showed China’s manufacturing hourly wage in 2016 was roughly five times that in India.”
The trigger for the article was India’s exports to China increasing 42% in January this year. Though China has a big edge over India in bilateral trade, it wants to see if the rise in Indian exports is a flash in the pan or a trend.
3. Talent ::
US-based software firm CA Technologies disbanded its almost 300-person research and development team in China while setting up a team in India with some 2,000 scientific and technical professionals over the past few years.
This is one instance that signals India having a better pool of technological talent. The Chinese state media has agreed that India has better technological talent than China. Recently, Global Times wrote, “Over the past few years, China witnessed an unprecedented boom in tech jobs as the country became an attractive destination for foreign research and development centres.
However, now some high-tech firms are turning their attention from China to India due to the latter’s relatively low labour costs. Attracting high-tech talent from India could be one of China’s options for maintaining its innovation ability.” India, with a sufficient young talent pool, is becoming increasingly attractive, the Global Times said.
4. Technology ::
When India launched 104 satellites, breaking the Russian record of 37 satellites being placed in orbit at one go, the Chinese media made light of this achievement. But a few days later, it corrected its stand and said China could learn from India in space technology.
What India is doing in the space sector can be the envy of China. It is developing low-cost technology which finds takers in the west. India has already overtaken China in space technology, which is increasingly important due to its various civil and military applications. India’s low-cost and stunningly successful Mangalyaan mission last year had raised an alarm in China because China’s own Mars misison had failed in 2009 and it has yet to launch another mission. China’s worry goes beyond space sector. India’s low-cost innovation in space technology can unlock its vast technological potential in other sectors too.
5. Indo-US military ties ::
Last year, India and the U.S. signed the Logistics Exchange Memorandum of Agreement (LEMOA), a militray pact that facilitates the provision of logistical support, supplies and services between the US and Indian militaries on a reimbursable basis and provides a framework to govern them.
Though the Chinese media downplayed the deal, it has beocme a big bother for China. The deal means that the U.S. can now dominate not only the Indian Ocean but also has easy access to South China Sea as the U.S. warships can dock and get repaired at Indian ports. This will dent China’s attempt to ring-fence India by dominating Indian Ocean.