China May Look Towards India to Keep U.S. Markets Within Reach Rather than resisting Chinese involvement outright, Indian firms are increasingly seeing the value in partnerships, be it in the form of joint ventures, component sourcing, or contract manufacturing.

As U.S.-China trade tensions continue to simmer, Chinese firms are increasingly looking south for opportunity. India, long in the shadows of its eastern neighbor's manufacturing dominance, is emerging as a crucial partner in the rerouted global supply chain. What began as a circumstantial shift triggered by tariffs and geopolitical pushback is steadily maturing into a strategic reconfiguration of how goods move, and more importantly, where they're made.

At the center of this transformation is a subtle but powerful trend: Chinese companies, facing escalating U.S. trade barriers, are quietly looking to partner with Indian manufacturers to preserve their access to Western markets. The strategy is pragmatic. Products, ranging from electronics to industrial machinery, now have a greater opportunity of being assembled or value-added in India before heading west, neatly circumventing punitive tariffs on Chinese-origin goods.

Ajay Malik, head of international business, Action Construction Equipment Ltd. (ACE), sees this as more than just opportunism. "The reconfiguration of global trade routes has opened up unprecedented opportunities for Indian exporters, particularly in the high-value construction equipment sector," he says. Malik sees this moment as a validation of India's credibility. "This evolving landscape is not just a short-term gain—it's a long-term play where India is poised to lead the next wave of industrial supply chain realignment."

Indeed, India's rise comes not just from being in the right place at the right time, but from methodically building a case as a serious manufacturing contender. Initiatives like 'Make in India' and incentive-laden policies like PLI (production-linked incentive) schemes have helped sharpen the country's edge. Indian firms are expanding capacity, tightening compliance with U.S. and European regulations, and investing in logistics infrastructure to handle increased export volumes.

Rahul Garg, founder, Moglix & Credlix, describes it as a shift in expectations, not just geography. "With higher tariffs on Chinese goods, U.S. buyers are increasingly looking to diversify their sourcing," he notes. "That's where India comes into the picture. But this isn't just about short-term gains. For Indian exporters, it's really about stepping up in terms of quality, reliability, and the ability to scale."

Still, these new dynamics are complex. Many Indian exporters are treading a delicate line capitalizing on Chinese demand without becoming proxies for trade evasion. Garg explains, "Indian companies are positioning themselves carefully. On one hand, there is interest in absorbing manufacturing value from China. On the other, firms are cautious, ensuring compliance with both geopolitical sensitivities and trade regulations."

U.S. Customs authorities are watching closely. Transshipment without real value addition could trigger enforcement under the origin rules. Indian exporters know this and are responding by deepening their input contributions, improving traceability, and in some cases, setting up exclusive manufacturing zones that meet stringent U.S. norms.

But behind this strategic dance lies a deeper economic truth: India and China are not just competitors—they are, increasingly, reluctant collaborators. Dr. Lola Woetzel, a senior partner at McKinsey, captures this paradox well. "India is coming up in the world… and China knows that. India is a competitor. But the relationship vis-a-vis China should be based on the principles of mutual development and benefit. India should demand China contribute to the Indian economy as its third largest economy."

That competition is nowhere more visible than in the electronics and automotive components sectors. Shrinivas Kulkarni, CFO, Cyient DLM, points out the technical edge China still holds. "China, in fact, is ahead of us in terms of the technology and maturity they have in the manufacturing processes," he admits. "Still, Chinese firms are very much on everyone's radar. The advanced manufacturing Chinese firms bring to the table is hard to ignore."

Rather than resisting Chinese involvement outright, Indian firms are increasingly seeing the value in partnerships, be it in the form of joint ventures, component sourcing, or contract manufacturing. For India, the real prize lies in moving up the value chain, breaking free from low-margin and low-value production.

Still, Kulkarni cautions that India must remain vigilant. "India must implement tighter anti-dumping checks to maintain credibility and ensure sustainable growth. The only viable path is legitimate value addition."

In essence, India isn't just an alternative to China, it's shaping up to be an integrator, a platform that straddles both the East and the West. India's new role as a credible manufacturing base may be less about taking sides, and more about setting the industry standards.