Commerce ministries around the world are, according to Donald Trump, lining up to plead their case with the United States. Are we among them? Apparently we are not. A headline from the weekend quoted commerce minister Piyush Goyal saying: “We don’t negotiate at gunpoint.” This is the right way of looking at it, and I agree with it. Sovereign nations should insist that they be treated as equals and not vassals. China has retaliated firmly in a way that only Canada has so far, but in the absence of clarity from the Americans on what their endgame is, waiting is also appropriate.
There was something else, somewhat related to this, that Goyal said which got him into trouble. He said Indian new businesses were focussed on trade (dukandari was the word he used) rather than innovation. He compared the situation here to that in China, where start-ups were doing robotics and advanced manufacturing and artificial intelligence. Goyal received pushback from entrepreneurs who pointed to many fledgling firms in India doing the sort of work he said they should be doing.
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The history of business in India will show that the mercantile communities primarily were traders and bankers till the 20th century. It was in 1919 that the Birlas came into manufacturing, and before that it was a few Gujaratis including Parsis — Tata Steel came up around 1910.
This historical association with trading rather than manufactured goods and its extension to things like delivery apps was likely what Goyal was referring to, and again I agree with his broad point. The question is: what would it take for India’s startups to look more like China’s? It is right to ask that question to businesses. It is equally right to ask it to the government.
How did China get to where it has? An analysis from last year framed the reality in this way: “China is now the world’s sole manufacturing superpower. Its production exceeds that of the nine next largest manufacturers combined.” A lot of this is down to what the government did, through industrial policy and statecraft.
It established relations with mineral-rich nations in Africa and Latin America, and it set up ports and railway lines in many of these nations. Its public sector companies, owned by the government, built commercial ships and commercial airplanes to not be dependent on anyone else. China managed to convince all its neighbours, including those it had fought wars with and those it has ongoing disputes with, to not let these issues get in the way of trading. China’s largest trading partner is not the United States or even the European Union, but the Association of South East Asian Nations, many of whom China has serious disputes with.
Against the US’ military alliances like the North Atlantic Treaty Organisation and the AUKUS and Quad and so on, China set up a development alliance strategy through the Belt and Road Initiative. Along with Western criticism of this initiative, we should also examine what the nations participating in it say and think of China.
Now consider that the whole world has been worrying about climate change for decades, but the Chinese government was the only one to build an industrial strategy to both tackle the problem and take advantage of it. Having concluded that its automobile sector could not compete against the experience of and patents held by Japanese and German firms in internal combustion engines, China decided to focus on electric cars. It produced 5 lakh new energy vehicles in 2016, 10 lakh in 2018 and last year it produced 1 crore. It exported 58 lakh cars last year.
A similar story is to be found in solar panels, where again China’s government looked into the future and saw opportunity. Today it produces more than 80 per cent of the solar cells used around the world and two-thirds of the planet’s electric vehicle batteries. The world’s supply chains from mining to refining to manufacturing and assembly run through China. It is dominant to the point of monopoly in entire sectors, and particularly those sectors which will be even more important in the future.
It is true that its entrepreneurs have done remarkable things, as we have seen most recently with Deep Seek. And it is also the case that Chinese entrepreneurs’ success in things generally seen to be America’s domain, such as social media and retail can be seen in the popularity in America of TikTok, Shein and Temu.
But it is the Chinese government that organised the strategy and industrial policy that produced these wins. It is the opposite of what is generally understood to be liberalisation, which is that the State largely does not intervene in the economy. The Chinese government’s interventions are precisely the reason why the country is where it is and why its entrepreneurs have been able to shine. This is the reason US stock and bond markets react violently to the impact of tariffs on only one nation in this war Trump has started and that is China. China has the confidence to stand up to the US because it knows that what it has built through planning and work is difficult to replicate. And it has the comprehension that the world will depend on it no matter the decoupling fantasies of the people currently governing America.
