Opinion The private sector is driving China’s global dominance

One of the important points emphasised by Xi at the symposium was for the companies to embrace patriotism. This was further underscored by Premier Li Qiang in his Work Report at the annual session of the National People’s Congress in March, calling upon the companies to refine their corporate systems and assert their distinctive Chinese identity. This vote of confidence from the Chinese leadership is an acknowledgement of the rising importance of the country’s private capital, and their role in not only driving domestic development but also providing wind to China’s global sails. An apt illustration is the unveiling of two open-source models by the Chinese Artificial Intelligence company, DeepSeek, challenging the dominance of American rivals such as OpenAI, Meta and Google (DeepSeek’s CEO Liang Wenfeng was also at the symposium).

Chinese outbound investment is now increasingly driven by the expansion of private companies with global ambitions, whose focus has shifted towards emerging markets rather than high-income economies. They are also involved in diverse internationalisation efforts across value chain segments, such as establishing local manufacturing, sales, and service operations. According to China’s General Administration of Customs, Chinese private enterprises contributed to foreign trade with transactions totalling 24.33 trillion yuan (about US$3.4 trillion) in 2024.

Chinese private companies, with their sleek and sophisticated products, have been able to connect with global consumers and are pivotal entities in building an ‘industrial diplomacy’ – to borrow the phrase from sociologist Kyle Chan – to reshape global production networks and make them centred around Beijing. This is visible in a range of modern sectors and industries, that are qualitatively superior and critical in a technologically interconnected world, such as Electric Vehicles, consumer electronics and digital gadgets, lithium batteries, and solar panels. Chinese private companies form vital nodes in global supply chains in these industries, and their inextricability is used by Beijing for competitive advantage. Through these companies, China has remained attentive to building backward and forward industrial linkages – making components and specialised machinery, along with developing skilled personnel with the technical know-how – and holistically dominates the wider ecosystem while also guarding against the sharing of technology. The ability of Chinese smartphone companies to endure and build a loyal consumer base in a country like India (given the hostile geopolitical equation) is a testament to their adaptive capabilities.

The attractiveness of Chinese investments, especially in the developing world, places Beijing in an advantageous position. This is well visible in its competition with India, whose manufacturing sector’s scale and development trajectory bears potential similarities to that of the Chinese experience. In recent months, China has weaponised its strategic leverage in supply chains – by curbing its specialised machinery and limiting the mobility of its citizens who are engineers and technical staff working at supplier facilities – to slow down India’s industrial production, especially in electronics. While India is making strenuous efforts to become a viable destination for foreign manufacturing corporations, its ambitions are also intertwined with dependence on China for nuts and bolts.

While aware of its entanglement, India has begun taking key steps in the medium-to-longer term with an emphasis on creating indigenous electronics suppliers and achieving self-sufficiency in manufacturing components. It is difficult to discount China and its private companies. However, the tariff wars initiated by the Trump administration, primarily targeting China – who have retaliated in kind – have provided avenues for Chinese manufactured goods to get diverted into India and raised apprehensions of dumping. The resultant impact on India’s domestic industries, in turn, hurts the country’s manufacturing ambitions. India’s Economic Survey 2023-24 had identified the need to address this vulnerability but also simultaneously collaborate with Chinese investment and technology to boost domestic manufacturing capabilities.

In effect, to plug India into the global supply chain, it was inevitable to be plugged into China’s supply chain. While New Delhi has taken steps to engage with all domestic stakeholders in responding to rising global trade tensions, it will have to walk a tightrope by engaging with both Washington DC and Beijing, given the complexities in the economic and trade ecosystem.

In this context, this is more than an opportune moment for the Indian government and the private sector to actively collaborate, build capacity as well as resources, and fund research and development. The role of the private sector is critical for India to gain a position of strength in global manufacturing.

Anand P Krishnan is a Fellow at the Centre of Excellence for Himalayan Studies, Shiv Nadar Institution of Eminence, Delhi NCR