While large Indian companies are seeking clarity from their Chinese partners on the implications of the regulations announced on Monday, executives fear the measures could delay or disrupt investments in areas such as display and camera module manufacturing, component sub-assembly, lithium-ion cell production and electric vehicle components.
While the regulation may delay projects, it is unlikely to be overly restrictive for India, said Jasbir Singh, chief executive of Amber Enterprises, a leading domestic contract manufacturer. “This comes at a time when bilateral relations between India and China have improved, with India issuing visas and approvals under Press Note 3 also coming through. Therefore, we do not expect a significant impact on India, although there could be delays in high-tech technology transfers and joint ventures with Indian companies as the Chinese government may become more directly involved in approvals,” he explained.
India’s Press Note 3 policy entails investments from countries sharing land borders like China needs a multi-department clearance from the Centre. Pankaj Mohindroo, chairman of India Cellular and Electronics Association (ICEA), said the latest regulation is a continuation of the confrontational techno geopolitics, which have emerged in the last decade. ICEA is a body representing the electronic and mobile phone makers.
“ICEA professes free markets including technology markets. China has demonstrated cost optimised technology development including hi-tech and deep tech at an incredible pace. And this has been done by working and exporting to the entire globe. Restrictions from this giant economy will not serve them and the world well,” he said. The new rules, which will come into effect on July 1, provide China with broader powers to scrutinise and restrict outbound transfers of tech and strategic assets. According to a Reuters report, the regulations establish, for the first time, a comprehensive legal framework enabling China to unwind completed overseas transactions in sensitive sectors. The rules also empower Beijing to prohibit foreign entities from trading with China if their home countries impose restrictions on Chinese investments.
Industry executives said these bottlenecks could undermine India’s efforts to increase local value addition and build self-reliance in electronics and automotive components.
A senior executive in the auto component industry said India faces multiple challenges in developing domestic capabilities in lithium-ion batteries and electric vehicles because it lacks not only critical raw materials but also processing equipment and proprietary technologies. “China has been weaponising technology in this trade war. We have had to stop whatever localisation we were earlier doing and instead purchase semi-finished or finished goods, which they are more than happy to sell,” he said.
For instance, automakers in India have started sourcing motors fitted with rare earth magnets. “Wherever there is technology and it is strategic to them (China), they do not want it to go out of the country,” another auto industry executive said.
Nikhil Narendran, partner at law firm Trilegal, said China’s new regulations will disrupt India’s EV manufacturing, semiconductor equipment imports, and the broader mobile and electronics ecosystems. “Indian companies seeking partnerships or JVs will face a much longer runway for approvals, significantly extending the typical 3-6 month timeline it takes for such approvals. The new rules will likely restrict Chinese experts from travelling to India. This bottleneck in talent flow will actively disrupt day-to-day operations of existing JVs and manufacturing setups in India,” he said.
(With inputs from Writankar Mukherjee)