Logically, the Indian government should make an open-arm invitation to those foreign firms leaving China or downsizing operations there to set up ventures in India by offering highly attractive investment incentives. This will help the country drastically cut down imports from China and raise exports which can be partly linked with cash incentives and lower tax rate offers.

Among the large MNCs to cut down operations in China are world famous names such as Dell Technologies, HP, Intel, Samsung, LG, Sony, Stanley Black & Decker, Puma, Sharp, Google/Alphabet, Blackrock, LinkedIn, Under Armour, Never, Quanta Computer, and Dentons. Apple Inc. has speeded up China exit. Foxconn followed. This has led to systematic desertion of local businesses connected with Apple and Foxconn and massive layoffs in China. Foxconn, which helped employment of over 1,00,000 people, has now shifted its operations to Vietnam.

Samsung Electronics, the supergiant South Korean Chaebol having sales networks in 74 countries and employing over 2,70,000 people, is turning its back on China. Lately, the business conglomerate announced that it would invest $230 billion to build five chip factories across South Korea. The company had shut down its smartphone factories in China, turning the city where it was based into a ghost town. Samsung ceased production at its last Chinese PC plant in August 2022 and moved operations to Vietnam. Motivated by the US Chips and Science Act, which grants billions of dollars to chip manufacturers in the US on the condition they don't expand chip operations in China for the next 10 years, Samsung is focusing on chip manufacturing in the US.

Intel has shifted the manufacturing and assembly of some of its products to Vietnam. The US semiconductor giant is investing $95 billion in Europe for production of chips. It is also setting up two new chip manufacturing facilities in Arizona. Dell doubled down on its anti-China stance by phasing out its use of China-made chips, as well as telling its suppliers to reduce the number of Chinese components they provide. South Korean LG Electronics has relocated the manufacturing of some of its products from China. The company shifted production of refrigerators meant for the American market from China's Zhejiang Province to South Korea.

Barring Apple and Foxconn, few foreign companies abandoning or downsizing operations in China, have hardly cared to look at India for business relocation. It is a matter of big surprise that the Indian government, looking for large investments in the manufacturing sector to vastly improve the local employment opportunities and economic growth, has been playing the role of a silent spectator of the exit of such giant foreign firms from China to relocate elsewhere in Asia or return back to their places of origin. It is even a bigger surprise that India has come in aid of China inviting investments in manufacturing and services operations ignoring its highly odd experience in dealing with questionable practices of existing Chinese companies with regard to fund transfers and illegal stay of Chinese employees after the expiry of visa.

India’s pre-budget Economic Survey has made an amazing suggestion that India can boost exports by attracting FDI from China and integrating into global value chains through 'China plus one' strategy. This is at a time when China itself is facing an increasing problem of exports, barring in those Chinese-funded poor OBOR (one belt, one road) countries. It is ridiculous to expect Chinese companies operating in India to drive India’s exports when they are failing to do so from their own country. The Economic Survey noted that “focusing on FDI from China seems more promising for boosting India's exports to the US, similar to how East Asian economies did in the past.” The survey said: "China is India's top import partner, and the trade deficit with China has been growing. As the US and Europe shift their immediate sourcing away from China, it is more effective to have Chinese companies invest in India and then export the products to these markets rather than importing from China, adding minimal value, and then re-exporting them.”

The Survey fails to recognise the fact that the global export itself is shrinking while India’s imports are rising, mostly from China. The global demand for traditional goods for consumption, particularly in the west, is declining. According to the World Trade Organisation, the volume of global trade slipped 1.2 per cent in 2023 due to lingering effects of high energy prices and inflation globally. Interestingly, India's exports to China in 2023-24 stood only at $16.65 billion, while imports staggered at $101.75 billion, leaving a whopping trade deficit of over $85 billion. In contrast, India had a trade surplus of $36.74 billion with the US in the last financial year. America is one of the few countries with which India has a trade surplus. The massive imports from China are mostly responsible for India’s current situation of growing unemployment and trade deficit. Industrial investments from China will further raise its capital account deficit.

It is time that India offers massive incentives to attract large greenfield investments to create jobs for its people and drastically cut its import dependence. India’s exports are unlikely to show a striking expansion in the near future in the context of the shrinking global trade and its limited export options. The incentives to attract large FDIs could include tax-free operation of new production enterprises for at least five years, tax-free import of capital goods, components and raw materials to such enterprises for a reasonable period. The focus should be on employment generation and import contraction. The government will not be a tax loser. It will generate large revenues from GST on products sold by those new business entities and individual tax income from their employees. (IPA Service)