As America and China swap roles in their great power rivalry, India should think of how to maximize gains

India should read this sequence of events clearly. The US is increasingly behaving like China once did, using statecraft to sell things. And China is behaving like the US once did, policing commercial flows through ideological and political tests.

US mercantilism is a given, but American commercial dealings have traditionally also been mediated through political ideology. Earlier restrictions on chip exports are one example. But Cold War relations with the Soviet Union are perhaps the most memorable. Trade between the two blocs was heavily restricted, despite the potential for large-scale commerce, peaking at just 1% of total US trade in 1979.

Similarly, China’s historical commercial pushiness across the world is well documented. Since 2000, Beijing has been Africa’s largest trade partner, providing not only goods, but also investments and unconditional aid. Its Belt and Road Initiative (BRI) is another glaring example of a transactional approach. Fudan University estimates that the BRI involves around 150 countries.

But China’s refusal to strike a big commercial deal with the US is the latest in a series of moves that indicate Beijing is changing tack. Not only has it signalled a preference for building sovereign chips, it has established export controls for strategic technologies. Two sets of rules announced in April expand these, including as a retaliatory toolkit against foreign sanctions. Together, they create a head-on conflict between Chinese law and the regime that US multinationals are obligated to follow.

Meanwhile, Trump’s ‘art of the deal’ seems premised largely on high-visibility commercial and trade concessions extended to the US by its partners, rather than on their ideological moorings. Last year’s trade war with Five Eyes allies such as Canada exemplify this departure from the past.

For India, all of this means old assumptions no longer work. China will not release the capital and technology that India needs to deepen manufacturing without a broader commercial accommodation. The US will insist on selling more to India until we have enough leverage for better balanced relations.

New Delhi has liberalized its investment screening regime, which it established after the People’s Bank of China increased its shareholding in HDFC in 2020. The regime controls investments from countries with which India shares land borders. This framework was partially relaxed recently for specific import categories like capital goods.

But Beijing seems unlikely to de-hyphenate politics and commerce or let strategic technologies or investments flow to India in support of ‘China-plus-one’ plans that New Delhi has been keen on. Beijing has also raised a WTO dispute with India over Indian manufacturing incentives for batteries, automobiles and EVs, which it claims discriminate against Chinese imports.

Clearly, India needs a wider strategic conversation with China, within which commercial concerns can be placed.

We must also identify areas where we can credibly open up markets, perhaps by easing a quality control regime aimed mostly at Beijing. The objective should be to offer China a level playing field in commerce, not selective concessions.

Such calibration would make it harder for Beijing to argue that Indian policy is structurally discriminatory, even as New Delhi retains its sovereign right to protect sectors with genuine security risks.

As far as Washington is concerned, India already offers US firms market access across most tech-led growth areas.

A more useful assurance, therefore, is policy stability and transparency in domains that matter to value creation, including intellectual property, digital commerce and emerging technologies. These are high on the US agenda and we lose little by making explicit commitments to protect US investments through the rule of law, avoiding retrospective policy changes and maintaining a predictable operating environment for US firms.

A sharp focus on the domestic economy should help India’s balancing act. Inflation is ticking upwards and jobs remain scarce, which means costs must be kept down and job creation treated as urgent. Commercial flows that help meet these two needs should be framed within the context of India’s geostrategy in a bipolar order. Otherwise, India risks falling between the cracks.

India should use both relationships to advance a market-led industrial strategy: let the US and China compete in our market even as we lower costs, create jobs and build supply-chain and tech capabilities at home.

These are the author’s personal views.

The author is a policy expert at Koan Advisory Group.