Rajiv Bajaj, chairman of Bajaj Auto, sounded the alarm last week: if China were to restrict exports of rare earths—crucial for the magnets in electric vehicles (EVs)—India’s nascent EV industry could grind to a halt. His anxiety is not unwarranted. As geopolitical tensions rise and trade wars simmer, headlines like these expose uncomfortable truths: the world remains deeply dependent on Chinese supply dominance and India is no exception.
In domain after domain—artificial intelligence (AI), robotics, green energy and defence—China’s ascendancy is no longer a prediction but a reality. Its stronghold is not accidental; it is the result of sustained State ambition, disciplined execution and an unparalleled mobilisation of resources.
This has strategic ramifications, particularly in South Asia. During a brief flare-up between India and Pakistan earlier this year, independent analysts suggested Chinese-supplied military technology may have given Islamabad a temporary edge. More than 80% of Pakistan’s defence imports now come from China. While New Delhi and Islamabad traded blows and narratives, the real winner sat silently to the north—its influence perhaps subtly reconfiguring the region’s balance of power.
Last week, India was celebrating its ascent to the position of the world’s fourth-largest economy, overtaking Japan. But such pointless milestones belie deeper imbalances. Trade with China, for instance, remains embarrassingly one-sided. Indian exports to China fell by nearly 14.5% in FY24-25, to US$14.25bn (billion). In contrast, Chinese exports to India rose by 11.5%, reaching US$101.7bn. That China is India’s largest trading partner—and simultaneously a strategic adversary—is a paradox New Delhi will increasingly have to reckon with.
For years, China was viewed as a cheap manufacturing hub. No longer. When Xi Jinping assumed power in 2012, he made no secret of his intention to move China up the value chain. The ‘Made in China 2025’ blueprint, launched in 2015, prioritised a few strategic sectors, from aerospace and semiconductors to clean energy and biotech. While many dismissed it as aspirational, China quietly got to work.
The results are now visible—and formidable. In many cutting-edge sectors, China is not catching up but leading. It produces the majority of the world’s EVs, solar panels, wind turbines and drones. It controls 60% of rare earth processing and supplies 40% of the world’s bulk drugs. It is home to the world’s largest high-speed rail network and installs more industrial robots annually than the rest of the world combined.
According to the UN Industrial Development Organisation, by 2030 China may account for 45% of global manufacturing—up from 30% today and just 6% in 2000. Even areas of relative weakness are being aggressively addressed. Semiconductor fabrication remains a challenge, but Huawei is reportedly developing an indigenous chip supply chain to circumvent Western restrictions, according to the Financial Times.
In AI, Chinese firms are narrowing the gap. Earlier this year, Chinese start-up DeepSeek launched an AI model rivalling OpenAI’s—at a fraction of the price, while its other tech giants followed suit.
Without pausing for breath, Beijing is also laying the groundwork for future supremacy. In March, it announced a US$138bn venture capital (VC) fund to invest in frontier technologies such as quantum computing and robotics. Research and development spending continues to climb. The Belt and Road Initiative has expanded China’s influence across south and central Asia, including in India’s immediate neighbourhood.
This matters hugely for India. As China’s technological and economic dominance grows, New Delhi will face increasing dilemmas. Dependence on Chinese imports weakens domestic industry. The risk of technological lock-in grows as China sets standards in areas such as 5G and AI.
Politically, China's leverage expands—both through economic ties with India's neighbours and its military posturing along the line of actual control. China’s soft power is growing too. Online, China is winning a subtle propaganda war, projecting itself as a beacon of social order and techno-competence, in stark contrast to the political dysfunction and decaying infrastructure of the West. When the 2025 Democracy Perception Index canvassed more than 110,000 respondents across 100 countries, China turned out to be more popular than the US.
What, then, is India to do? The blueprint for economic transformation is no secret. Japan pioneered it. South Korea, Taiwan and Singapore (and partly Thailand and Malaysia) copied it. China supersized it.
India has the ingredients: a vast and youthful population, a vibrant entrepreneurial class and a solid (if unevenly distributed) educational base. What it lacks is serious intent and goal orientation. It would be too much to expect China’s laser-like focus on long-term goals and rapid execution from India’s netas and babus.
One place to start would be an unflinching crackdown on corruption—something Xi Jinping made a centrepiece of his policies. While such campaigns do not guarantee prosperity, they would signal intent that Indian leadership is, at last, serious about nation-building. Continuing along the same path is not an option.
To use Donald Trump’s pet expression: China has all the cards now.
(This article first appeared in Business Standard newspaper)
Comments
abhay1955
2 days ago
Very good analysis. Huge population, communist government do not seem to be barriers in its progress. China is achieving many goals without marketing any God or religion.
Agree totally. Corruption and delays despite digitalisation of records and data. Babus do not care or understand the delays and decay that the whole society undergoes due to corruption. The only advantaged class is the business families that enjoy monopoly.
The article is spot-on on how China has transformed itself into THE indispensable cog of the world's industrial machine. This is obviously frightening for India, as our principal geopolitical adversary is one we are extremely dependent on for critical inputs into our economy.
There are no ready answers for how we could wean ourselves off such dependence beyond the standard answers - educate our people, encourage investment and savings over consumption, invest in R&D, maintain a business-friendly environment, make it easy for entrepreneurs to build and succeed, etc. However, these measures take decades to bear fruit, and our problems are more immediate.
That said, I would point out that fighting corruption won't solve our problems. China's ascendance is the result not of Xi Jinping's rule in the last decade, but of the work put in by China's leaders and people in the 30-40 yrs prior, during which time China was as corrupt as any other developing nation. We SHOULD indeed fight corruption, but it is not at the root of our problems, which are related to our low investments in human and physical infrastructure, our socialist legacy and an overbearing state that makes running businesses a nightmare.
As an example of what I mean, consider Tamilnadu. The state government, and every arm of it, from the top to the bottom, is irredeemably corrupt. You cannot get a single government service without paying money for it. Despite that, the state is surging ahead economically, because it has a long track record of investing in education going back 5-6 decades, and even before independence. The same is true for Karnataka, AP & Telengana. Kerala is the exception, as it is highly educated and corrupt like its neighbours; however, it is not business-friendly (unlike TN, AP, KA and Telengana) and winds up becoming more an exporter of its human capital rather than get the benefit of it locally.
Corruption has had only a one way trajectory in India- Upwards! I truly wish that the powers that be really had the will to eradicate it! It's the common man who suffers the most due to corruption at every level! And bang goes your ease of living and doing business!
The rigid and degrading caste system, superstiousness, regionalism, uneducated masses. Majority of the people not knowing the difference between Independance Day and Republic Day. Not making the people aware of the principles of Indian Constitution. Are a few example why we are still struggling with the real ground root realities and difficulties in speeding up the developments.
The rigid and degrading caste system, superstiousness, regionalism, uneducated masses. Majority of the people not knowing the difference between Independance Day and Republic Day. Not making the people aware of the principles of Indian Constitution. Are a few example why we are still struggling with the real ground root realities and difficulties in speeding up the developments.
The problem is that India never engaged with China's complaints starting with Nehru.
China said that it did not accept the McMahon Line as it was arbitrarily drawn by the British without consulting China. Chou En Lai offered negotiation where in return for quitting its claims in Arunachal Pradesh, India would cede some territory in north Ladakh, so that China's road to the west would not be threatened.
Nehru dismissed the offer, India-China war happened and since then no Indian govt has been able to sort out this mess.
Modi/BJP's popularity gives it an opportunity to address this issue and improve relations with the neighboring giant.
But Modi/BJP are focused on making India a mirror image of Pakistan. They don't want to tackle existing problems within India like poor health, poor education of the lower 40% of the population, let alone address these other big issues.
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There are no ready answers for how we could wean ourselves off such dependence beyond the standard answers - educate our people, encourage investment and savings over consumption, invest in R&D, maintain a business-friendly environment, make it easy for entrepreneurs to build and succeed, etc. However, these measures take decades to bear fruit, and our problems are more immediate.
That said, I would point out that fighting corruption won't solve our problems. China's ascendance is the result not of Xi Jinping's rule in the last decade, but of the work put in by China's leaders and people in the 30-40 yrs prior, during which time China was as corrupt as any other developing nation. We SHOULD indeed fight corruption, but it is not at the root of our problems, which are related to our low investments in human and physical infrastructure, our socialist legacy and an overbearing state that makes running businesses a nightmare.
As an example of what I mean, consider Tamilnadu. The state government, and every arm of it, from the top to the bottom, is irredeemably corrupt. You cannot get a single government service without paying money for it. Despite that, the state is surging ahead economically, because it has a long track record of investing in education going back 5-6 decades, and even before independence. The same is true for Karnataka, AP & Telengana. Kerala is the exception, as it is highly educated and corrupt like its neighbours; however, it is not business-friendly (unlike TN, AP, KA and Telengana) and winds up becoming more an exporter of its human capital rather than get the benefit of it locally.
India wins hands down.
There is no religion in China. Hence, all the gods are with India.
India is unbeatable.
The problem is that India never engaged with China's complaints starting with Nehru.
China said that it did not accept the McMahon Line as it was arbitrarily drawn by the British without consulting China. Chou En Lai offered negotiation where in return for quitting its claims in Arunachal Pradesh, India would cede some territory in north Ladakh, so that China's road to the west would not be threatened.
Nehru dismissed the offer, India-China war happened and since then no Indian govt has been able to sort out this mess.
Modi/BJP's popularity gives it an opportunity to address this issue and improve relations with the neighboring giant.
But Modi/BJP are focused on making India a mirror image of Pakistan. They don't want to tackle existing problems within India like poor health, poor education of the lower 40% of the population, let alone address these other big issues.