In today’s Finshots, we tell you why the Indian government is easing visa procedures for the Chinese.

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The Story

A few months ago, the Indian government did something baffling. It simplified and even sped up visa approvals for Chinese folks travelling to India.

And we know what you’re thinking. India’s relationship with China has never been a bed of roses. The two countries have always competed with each other to claim territories along the borders. The situation worsened in 2020 when border clashes between Indian and Chinese troops killed soldiers from both sides. And ever since, India has not just slapped trade and non trade barriers on China, but has also been cautious about its ties with other neighbouring countries.

Then why the heck has it made it easier for the Chinese to travel to India, you ask?

Well, first things first. The Indian government is expediting visa approvals of just a few selected Chinese individuals. So not all Chinese travellers have this privilege. And to understand why India has made things easy for these selected few, we’ll have to give you some context.

Until nearly a decade ago, global companies sourced most of their supplies from China. Stuff like toys, apparel, electronic goods, you name it, all of it came from China. Thanks to the country’s low labour and production costs which crowned it the factory of the world. Investors sniffed this opportunity and flocked to China too.

But such heavy reliance also meant that most Western companies and investors were overexposing their businesses and money to China. It was like putting all their eggs in one basket. And that was a risky affair.

That’s why they came up with a global business strategy to de-risk. They called it the China-plus-one strategy. Simply put, large economies like Japan and the US began to look for opportunities in other countries so that they could diversify their businesses and supply chains away from China.

But this spirit wasn’t strong enough until two events panned out.

One, the US started off a trade war against China, blaming it for unfair trade practices like intellectual property theft. And that quickly escalated into a fight for dominance in semiconductor chip technology between the countries.

Two, China’s Zero-COVID policy. During the pandemic, China extended lockdowns throughout the country even when other countries had opened up for business. And no sooner had this disrupted supply chains across the world, than the global economies and investors began scouting for serious opportunities outside China.

Countries like Vietnam, Malaysia, Bangladesh and Taiwan began to emerge as alternatives.

And that was music to India’s ears. It wanted a piece of this pie too.

So in 2020, it rolled out a strategy called the PLI (Production Linked Incentive) scheme. The idea was simple. The Indian government would encourage local manufacturing and generate employment by incentivising companies to make in India. To put things into perspective, they’d receive financial incentives based on the incremental sales they made from products manufactured in India. These companies could make anything in house, spanning from textiles, food, mobiles, electronics, pharmaceuticals, medical devices, renewable energy, railway and auto components and even drones.

This simple trick could also reduce India’s dependence on imports from China, attract global companies to set up factories here and also bring in foreign investments.

But not so fast. Because here’s the catch.

India wants to reduce its dependence on China, no doubt. But it can't do that completely even if it wants to simply because China is home to nearly a third of the world’s manufacturing. That’s as much as America, Japan and Germany’s manufacturing capabilities combined. And it enjoys that status not only because of low costs and cheap labour but also because it’s one of the few countries rich in a wide array of raw materials and natural resources. Stuff like coal, iron ore and other rare earth metals that are key to high tech manufacturing and industries, the dragon has it all.

India on the flip side, is just starting off as a manufacturing hub by either adding value to or assembling components it imports from China. And this means that China’s technicians and engineers will also have to be a huge part of India's manufacturing growth story.

Yup! Many Indian manufacturers and even MNCs (multinational corporations) that set up shop in India to shift their machinery, research and development from China need Chinese expertise for installation, testing, expansion and repair work. But the courtesy of our sour trade ties meant that it was hard for them to get visas, let alone travel to India.

Just look at what happened to the Bengaluru Metro’s Communications Based Train Control (CBTC) or first driverless train. It was supposed to be up and running by November 2023. But work visa delays for 65 of Chinese technical staff from the CRRC (China Railway Rolling Stock Corporation), the train's manufacturer, meant that it pushed back the much-anticipated trial run. The end result was that this derailed the Bengaluru Metro’s Yellow Line deadlines. In fact, it’s still not ready.

And you can imagine how instances like these can stall India's growth plans.

So the government had a brainwave. It said “Hey, let’s set up a standard operating procedure (SOP) to streamline visa approvals. That way the Chinese technicians whose expertise is required by folks covered under the PLI scheme can easily travel to India.”

It began prioritising visa applications that came from PLI units for Chinese technicians and engineers and made sure that the approvals came in quickly.

And it doesn’t want to stop there. A couple of days ago the government announced that it was working on a similar protocol to simplify visa procedures for Chinese employees of companies who weren’t lucky enough to get approvals under the PLI scheme.

So yeah, that’s exactly why India is giving specific Chinese visas a push.

But could improving India's industrial capabilities come at the cost of security threats? Well, we hope not. Until then…

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