China’s weaponisation of supply chains poses threat to India’s manufacturing ambitions

Should India struggle to diversify its supply base, seeking alternatives in countries such as Australia, Japan, or the US, China may leverage this vulnerability.

Ongoing Chinese export curbs targeting India reveal a deliberate strategy of weaponising supply chains to hinder India’s rise as a global manufacturing power, especially in electronics, and electric vehicles (EVs).

By leveraging its dominance over critical inputs and components, and skilled personnel, Beijing seeks to disrupt India’s progress and maintain its own lead. These export curbs have taken the form of informal, non-transparent trade restrictions that directly disrupt India’s ability to source critical inputs and skilled personnel.

Nevertheless, these challenges could turn out to be beneficial for India by catalysing efforts to diversify supply chains, boost domestic capacity, and build stronger international partnerships—transforming present obstacles into opportunities, and in turn, strengthening India’s high-tech manufacturing ecosystem.

Informal Trade Barriers as Supply Chain Weapons

China is quietly escalating informal trade measures that threaten the very foundation of India’s manufacturing growth story—particularly in electronics and EVs. These include:

* Blocking shipments of rare earth magnets, high-precision equipment and specialised components at origin or through procedural delays at Chinese ports.

* Instructing skilled technical workers—especially engineers supporting Indian and Taiwanese manufacturing plants (e.g. Foxconn)—to return to China, disrupting equipment setup and production timelines.

* Withholding export licences and approvals via opaque, unofficial instructions, rendering it virtually impossible for affected Indian companies or the Indian government to mount a formal challenge.

Together, these tactics signal a calculated effort to weaponise supply chains to stall India’s emerging industrial capabilities.

Chinese Motives

China’s informal export curbs against India represent more than simple protectionism—they are a strategic weaponisation of trade policy aimed at leveraging critical resources to undermine rival economies like India. Industry body India Cellular and Electronics Association (ICEA) warns that these unofficial measures are designed to severely disrupt India’s supply chains and jeopardise its goal of reaching a $32 billion in smartphone export in the current fiscal.

Amid intensifying China-US trade and technology tensions, China may also be using India as a proxy to signal the consequences of economic decoupling. By prioritising rare earth exports to the US (e.g. 353 metric tons of magnets in June 2025, up 660% from May) while restricting supplies to India, China could be signalling its ability to selectively wield its dominance in critical minerals to reward allies and punish perceived adversaries

Additionally, these export controls serve as a calculated test of India’s economic resilience. Should India struggle to diversify its supply base, seeking alternatives in countries such as Australia, Japan, or the US, China may leverage this vulnerability to coerce India into softening its stance on sensitive issues, particularly Chinese investments and improved market access for Chinese businesses in India.

The opaque and bureaucratic nature of Chinese restrictions—characterised by non-transparent delays, withheld export licenses, and verbal instructions—allows Beijing to maintain plausible deniability while exerting substantial economic influence. Moreover, by requiring detailed end-user disclosures for exports (such as Foxconn’s filings related to dysprosium used in AirPods production), China gains valuable intelligence on India’s manufacturing priorities and supply chain gaps, sharpening its ability to craft future trade and geopolitical strategies. That will help reinforce its long-term commercial and geopolitical advantages.

Understanding these layered motives is crucial for Indian policymakers to devise a multifaceted response that not only mitigates immediate disruptions but also neutralises long-term strategic vulnerabilities. India’s response strategy must therefore balance short-term diplomatic and economic engagement with broader efforts to diversify, innovate, and build resilience.

India’s Options

In the near term, to ease tensions with China, India should pursue a policy of engagement rather than confrontation by clearing pending Chinese FDI proposals, except those posing genuine security risks. It also makes sense to encourage Chinese firms—independently or through joint ventures—to set up manufacturing units in India to produce parts and components for mobile phones and EVs, leveraging their unmatched industry expertise.

Another option is for India to take the matter to the World Trade Organisation (WTO) Dispute Settlement Body. However, this is unlikely to bring much relief due to the non-functionality of the WTO’s Appellate Body and weakened adherence to global trade rules, especially under recent US administrations.

Moreover, India must proactively build and deepen partnerships with alternative suppliers of rare earths, electronic components, and battery metals in countries such as Australia, Vietnam, the US, Japan, and members of the European Union. Accelerating negotiations and securing long-term contracts will help ensure stable, diversified access to these vital inputs. Platforms like the Quad, G20, and the Indo-Pacific Economic Framework can also be leveraged to develop collective resilience in global supply chains.

Furthermore, long-term resilience calls for developing indigenous capacity to mine, process, and recycle rare earths and other critical materials to reduce dependency on one country, and in India’s case a geopolitical adversary. Promoting private sector participation through tax breaks and fast-tracked regulatory clearances—and when necessary, public-private partnerships—can catalyse this effort. With over 4 million tonnes of e-waste generated annually, recycling, in particular, presents vast untapped potential to sustainably supply critical materials at substantially low cost and help minimise reliance on imports.

Complementing these measures, Indian companies should be encouraged to invest abroad in mining, processing, and electronic component manufacturing ventures. Such international ventures can secure supply chains and mitigate geopolitical risks tied to dependence on any single nation.

To conclude, while China’s informal export curbs present a complex challenge to India’s ambitions in high-tech manufacturing, they also offer an impetus for India to accelerate its supply chain diversification, deepen strategic partnerships, and build indigenous capabilities. By adopting a balanced strategy of engagement, resilience-building, and international collaboration, India can not only withstand these pressures but emerge stronger, more self-reliant, and better positioned to lead in the global technology landscape.