Speaking on ET Now, market expert Ajay Bagga offered a clear-eyed assessment: the opening is necessary, but the guardrails are non-negotiable.
ETMarkets.comThe supply chain reality
Despite India’s headline-grabbing claim of exporting $23 billion worth of smartphones globally, Bagga points to a less flattering figure beneath the surface. Over 70% of components still originate from China, meaning India’s real value addition hovers at just 25–28%. The government’s core ambition — manufacturing intermediates and components domestically — is precisely why a controlled engagement with Chinese capital has moved back onto the table.
“We just shut down the doors on China after the 2020 Galwan clash,” Bagga noted. “Now we are re-examining it.” China remains one of the largest sources of FDI globally, and with a $20 trillion economy dwarfing India’s $4.5 trillion, the strategic calculus has shifted.
“Once they become dominant in an area — the biggest factory, the biggest employer in that district — the political issues can come in. Every Chinese factory has a CCP member.”
The Africa warning
Bagga’s most pointed caution draws from Africa, where China moved with remarkable speed and depth. Today, Chinese interests control roughly 40% of the continent’s mines and an estimated 50% of its agrarian land across multiple nations — deals that locked in resource dependency before host governments fully understood the terms. Latin American nations like Chile and Peru followed a similar arc, with minerals and agricultural supply chains gradually shifting under Chinese influence.
The Kathmandu airport example is instructive: built with Chinese labour, Chinese engineers, Chinese suppliers, and Chinese execution. Nepal’s role was largely nominal. Bagga’s warning is direct — India must enforce robust value-addition norms, mandatory technology transfer requirements, and hard sectoral exclusions from the very outset.
Where China must be kept out
Bagga draws clear red lines. Telecom infrastructure, the digital economy, e-commerce platforms, and fintech must remain off-limits — or at minimum subject to the same restrictions applied to Western players. The power grid and financial system require particular vigilance. While Chinese banks already operate quietly in India, their exposure to the domestic public remains minimal and, in Bagga’s view, should stay that way.
The Vietnam blueprint
The most actionable model, according to Bagga, is Vietnam’s. Rather than giving Chinese investors a privileged lane, Hanoi brought in Singapore, South Korean, and Japanese capital simultaneously — creating competitive equilibrium and capping the Chinese share at a defined ceiling. India’s Commerce Ministry, Bagga argues, needs live dashboards tracking Chinese investment concentration by sector and geography, triggering automatic reviews before dominance takes hold.With NITI Aayog, DPIIT, and METI all reported to be in active consultation with industry stakeholders, further policy relaxation appears likely — but the pace and conditions will define whether India captures the supply chain opportunity or simply imports a new form of dependency. For investors, the current EMS and clean energy rally may be the opening act of a much longer rerating — provided the government writes the rules before the capital writes its own.