China's Hold on Exports and Supply Chains Key Challenge

China's dominance of exports because of its manufacturing over-capacity and control of critical supply chains for energy transition are significant challenges for India, the Economic Survey 2024-25 released on Friday noted.

- Rezaul H Laskar

NEW DELHI:

Beijing's role as a "manufacturing colossus", especially in the context of India's limitations in producing critical goods at the scale and quality required for infrastructure needs, is significant for the country's efforts to ramp up production of renewable energy, according to the survey.

India is currently engaged in the delicate task of normalising its relationship with China after a more than four-year-long military standoff on the Line of Actual Control (LAC) that took ties to their lowest point in six decades. Bilateral trade is currently worth close to $120 billion, with the balance totally skewed in China's favour. Beijing has pushed for the revival of trade and investment ties suspended during the face-off, while New Delhi has taken a more cautious position.

The weak demand within China and absence of any significant policy stimulus to boost domestic consumption has meant that the country's excess capacity has spilled over to external markets. "Chinese exports are thriving. China's trade surplus in 2024 was nearly one trillion US dollars," the survey said.

Referring to China's pronounced dominance of supply chains and services in renewables, the survey said: "The single-source concentration risk in several product areas exposes India to potential supply chain disruptions, price fluctuations and currency risks. India's task is cut out."

China's rise as a manufacturing powerhouse and its impact on aspirations of other nations, and the supply of minerals, materials, machinery and equipment needed for energy transition pose challenges, the survey emphasised. Besides, the need for critical minerals has risen with the share of renewables in energy consumption around the world, and China dominates the production or processing of these materials, it pointed out. "Dependence on China-made goods to achieve [the energy] transition enhances the complexity of the challenge for India," the survey said.