Washington should learn a lesson from India’s approach to China

The countdown to the presidential elections begins and, as a result, the incumbent and his administration’s every major decision are dissected and analyzed. Republicans have their ears to the ground, waiting for even a minor slip by the Biden administration.

Fortunately for them, they haven’t had to wait long.

In the initial months of the Biden administration, his staff saved face on embarrassing foreign policy gaucherie. They suggested remarks such as Biden’s position on Taiwan, mixing up Ukraine and Iraq when asked about the Wagner Group’s success and failures in the conflict and his closing remarks of “God save the Queen,” were just gaffes. Over the last six months, the line between minor slips and strategic blunders has blurred. 

The Biden administration has not been able to escape the scrutiny of Republican lawmakers, particularly on China policy.

Besides the controversy surrounding Biden’s son, Hunter Biden, and his alleged nefarious activities with businesses in Ukraine, the criticism is targeted at the administration itself and not personal or family issues. He has come under increased scrutiny for failing to adequately curb Chinese investments in key strategic sectors, failing to prevent Chinese companies from capitalizing on the subsidies offered under policies such as the Inflation Reduction Act and the Bipartisan Infrastructure Bill, and, more recently, taking a more conciliatory approach to China and Chinese businesses, particularly in the last six months. Unlike Biden’s position on Taiwan, these are not slips of the tongue or mere gaffes that the administration can easily back away from.

Of late, the U.S. government under Biden is showing signs of taking a concerted approach to stabilizing relations by reviving talks with the Chinese government. It was recently reported that the Biden administration has set up two working groups to facilitate talks between the U.S. and China.

However, while the U.S. sends representatives to Beijing and extends invitations to the Chinese foreign minister, China continues to violate and threaten American sovereignty. It has sent spy balloons, allegedly set up spy stations in Cuba and police stations around the nation. Malware originating in China threatens America’s infrastructure, and the Chinese state torments family members of dissidents.  

Both Wall Street and big businesses have advocated for engagement with China. And veteran China experts such as Henry Kissinger have continued to act as bridges between the two nations.

As the Biden administration slowly begins to walk back opposition to China to the pre-Trump and pre-COVID-19 era, Republican and Democratic lawmakers who have voiced their concerns over China’s multi-pronged approach and grey-zone tactics have lessons to learn from New Delhi’s approach to China.

In response to China’s repeated encroachments at its borders and the deadly attacks in the Himalayas, India banned more than 200 Chinese mobile applications, including Singapore-based TikTok, citing national security risks. 

It kept several Chinese businesses out by either banning or disqualifying them from applying for government subsidies. The most recent is the Indian government’s decision to reject the Chinese automaker BYD’s bid to set up a $1 billion manufacturing facility in India. This China-specific protectionism is acute in the defense sector, where it recently banned the import of drones made in China. 

Similar to Biden’s supply chain review and targeted subsidies for sectors of national security concern through the Inflation Reduction Act and Bipartisan Infrastructure Law, India has used production-linked incentive schemes to incentivize conglomerates to address vulnerabilities across the value chain. This varies from sector to sector. 

For example, in the semiconductor sector, the Indian government has offered to cover 50 percent of the costs of setting up a factory in the country. In the pharmaceutical sector, it has nudged companies to invest in expanding precursor facilities — a step down in the value chain — to address overreliance on China for that part of the manufacturing process.  

Granted, the U.S. has many more checks and balances when it comes to protecting business and corporate rights than India, which can take swift action. Interestingly, in this case, the enhanced democratic processes are benefitting Chinese companies at the cost of American national security.

While in the U.S., the debate surrounding the banning of TikTok has more or less withered away, TikTok was banned in India as far back as 2020. In the U.S., when challenged by lawmakers, the parent company, Bytedance – the world’s most valuable privately owned company – armed itself with D.C. lobbyists, many of whom were former Biden administration staffers.

The congressional committee that initially had bipartisan scrutiny soon showed signs of partisanship, with progressive members of the Democratic party such as Reps Jamaal Bowman (D-N.Y.) and Alexandria Ocasio-Cortez (D-N.Y.) speaking out in support of the company.

TikTok is not an exception, however. Several Chinese companies in the sectors studied in Biden’s supply chain review have initiated the development of manufacturing facilities in the U.S. Of note, battery makers for electric vehicles such as Gotion and CATL have found support among the ranks of Democrats and Republicans.

That said, India struggles to reduce its import dependence, and it has not totally curbed Chinese investment. Big Indian businesses continue to find partners in mainland China. As a result, it continues to run large trade deficits with China. However, what distinguishes New Delhi’s approach to the U.S. approach or, in particular, that of the Biden administration, is that New Delhi acknowledges how big of a problem it is and, while struggling to wean itself off the dependence with little success, continues to plug the loopholes. 

As the old saying goes, understanding the problem is half the solution. India has more than half the solution. On the other hand, Washington, barring congressional committees such as the Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party, is sleeping at the wheel. 

The Biden administration is set to announce an outbound investment screening mechanism in the coming weeks. It needs to be cognizant of the loopholes in its inbound investment screening mechanisms and address them to avoid similar mistakes with the outbound screening mechanism. 

New Delhi’s approach to curtailing Chinese investment could be used as a template for Washington’s own economic statecraft.

Akhil Ramesh is a senior fellow with the Pacific Forum. He has worked with governments, risk consulting firms and think tanks in the United States and India. Follow him on Twitter: @akhil_oldsoul.