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Economic Survey (2023-24) suggested that Foreign Direct Investment (FDI) from China could be leveraged to benefit from ‘China plus one Strategy’.
China Plus One Strategy
- It refers to practice of international businesses active in China coupling their investments with a second facility, generally in another Asian economy.
- It was driven by disruption due to China’s zero-COVID policy, growing tensions between the US and China, rising labour costs in China, etc.
- Beneficiaries
- Mexico, Vietnam, Taiwan and Korea were direct beneficiaries of US’s trade diversion from China.
- India could capitalize on this strategy by either integrating into China's supply chain or encouraging Chinese FDI, with the latter being more advantageous as:
- Due to the growing trade deficit with China, it is more effective to have Chinese companies investing in India for export than India importing Chinese goods to re-export with little added value.
- Many current beneficiaries have also increased FDI inflow from China.
Concerns Associated with Chinese FDI in India
- Border Dispute: Ongoing military tensions and China’s tendency to exert regional supremacy.
- Security Risks: Chinese FDI could open the door to espionage, supported by its laws like the National Intelligence Law, which mandates cooperation with national intelligence efforts.
- China’s support for Pakistan
India-China Economic Relations
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