A government official said the China desk of the Commerce and Industry Ministry has been working on several restrictions on key tech-related items imposed by Chinese Customs, which was hurting Indian manufacturing. The Indian automobile industry had already been finding workarounds due to delays in exports of rare earth magnets from China. It is likely that the Indian side will push for some measure of reciprocity in easing procedural bottlenecks and restrictions on sourcing norms.
A senior executive in the renewable energy sector with sourcing exposure in China told The Indian Express that Beijing’s growing restrictions on the export of critical technologies and raw materials across several sectors have become a high priority for the government ahead of the BRICS Summit.
“China has imposed restrictions on the export of ingot and wafer technology, battery cells and cell technology,” the executive said. “For example, in the transmission sector, exports of High Voltage Direct Current (HVDC) and specialised components are also being restricted.”
HVDCs are critical for long-distance power transmission with reduced transmission losses, and considered essential for integrating renewable energy sources and grid stability.
The executive said these restrictions could undermine India’s efforts to build domestic manufacturing capabilities. “I think it is very critical that the government finds a way to tide over some of these issues because otherwise our entire backward integration, which makes India competitive, will unfortunately be stopped and won’t be successful,” the executive said, adding that most of these restrictions were imposed over the past 12-15 months.
“China’s restrictions on the export of critical technologies and specialised components, including those required for HVDC and advanced transmission systems, underline the strategic vulnerabilities of global supply chains. For India, this is particularly significant as we undertake one of the world’s most ambitious transmission build-outs to support growing electricity demand and renewable energy integration,” said Pratik Agarwal, managing director, Sterlite Electric and Chairman- Serentica Renewables and Resonia.
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However, official trade data showed that China has stepped up imports from India in recent months. India’s exports to China jumped over 28% to $5.55 billion in April-June this financial year as compared to the same period last year. The export jump to China also helped cushion India’s fishery exports hit by US tariffs.
ExplainedThe thaw: FDI to border trade
India-China trade relations have seen a significant thaw in recent times -- from easing of restrictions on foreign direct investments from land-bordering countries, to reopening of India-China border trade via Nathu La, and resumption of direct flights.
Amid signs of easing trade ties, a top Commerce Ministry official was expected to visit Beijing this week. However, the talks were learnt to have been postponed due to border-related talks between India and China. A query emailed to the Commerce Ministry remained unanswered until press time.
The Indian Express reported on Monday that India and China conducted Corps Commander-level talks in Arunachal Pradesh on Sunday.
Trade talks with China
As per the Chinese Embassy in India, Chinese Ambassador to India Xu Feihong met Commerce Secretary Rajesh Agrawal on September 1, and the two sides exchanged views on economic and trade relations and other issues of mutual interest.
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“Minister Guo Ce of the Chinese Embassy, Additional Secretary Darpan Jain of Trade Negotiation-Bilateral Division, and Joint Secretary Kapil Chaudhary of Foreign Trade (North East Asia) Division attended the meeting. Ambassador Xu said that under the strategic guidance of the leaders of both countries, China-India relations have maintained a good momentum of improvement and development with the resumption of direct flights and border trade as well as an increase in people-to-people exchanges,” the Embassy said.
For the first time since India pulled out of the China-led Regional Comprehensive Economic Partnership (RCEP) negotiations in 2019, Commerce and Industry Minister Piyush Goyal also held bilateral talks with his Chinese counterpart Wang Wentao, on the sidelines of the 14th World Trade Organisation (WTO) interministerial conference in Cameroon, in April this year.
Easing of economic ties amid US tariff uncertainties
In March this year, the government relaxed rules for the country’s largest state-run power equipment maker, Bharat Heavy Electricals Limited (BHEL), to procure 21 critical items from China for five years.
In June, the Finance Ministry allowed four Chinese power equipment manufacturing companies with factories in India to participate in government tenders for critical power projects. The four firms — TBEA Energy, Nanjing Electric India, New Northeast Electric India and Taikai Electric (India) — have been exempted from the provisions of the public procurement rules. These rules require entities from countries sharing a land border with India to register with the relevant Indian authority to be eligible to bid in the procurement of goods, services, or works.
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This came after the Ministry of Power had, in January this year, sought an exemption for certain entities with manufacturing units in India for critical power projects from participating in government procurement. The exemption was given after deliberation by the committee of secretaries (CoS), based on the recommendation of the ‘registration committee’ constituted under the Department for Promotion of Industry and Internal Trade (DPIIT) that vets and clears the registration process for applications after restrictions were placed on Chinese entities.
These restrictions were introduced in 2020, in the aftermath of the violent clash between Indian and Chinese troops along the Line of Actual Control. The provisions required Chinese bidders to obtain mandatory political and security clearances from the Ministry of External Affairs and the Ministry of Home Affairs.
The clearances to the power firms came months after the government announced calibrated changes in the Foreign Direct Investment (FDI) policy for investments from Land Bordering Countries (LBCs), or those that share a land border with India. The changes were made six years after the government made prior approval mandatory for Indian entities receiving investments from LBCs in April 2020. The changes, introduced through a document known as Press Note 3 or PN3, were to curb potential takeovers of local companies during the slump in equity valuations around the time of Covid-19.
