RPT-BREAKINGVIEWS-India can use US squeeze to demand more from China

By Shritama Bose

MUMBAI, Aug 28 (Reuters Breakingviews) - U.S. President Donald Trump's quest to reorder global trade is having unlikely effects. Indian Prime Minister Narendra Modi will visit the northern Chinese port city of Tianjin next week on his first trip to the People's Republic in seven years. He is in a strong position to demand more from Chinese firms.

Modi will be one of more than 20 world leaders attending a high-profile summit of the Shanghai Cooperation Organisation, which kicks off on August 31. The gathering, which will also include Russian leader Vladimir Putin, is an opportunity for Chinese President Xi Jinping to showcase solidarity of the so-called Global South grappling with Washington's trade salvos. U.S. tariffs of as much as 50% on products from India went into effect on Wednesday.

New Delhi will welcome a thaw in relations with its neighbour, which have been tense since a border skirmish in 2020. That's because India's attempts to become a manufacturing hub have increased its dependence on China: Surging imports from the People's Republic, ranging from pharmaceutical ingredients to solar cells, have doubled the bilateral trade deficit, to just under $100 billion, from five years ago.

That exposes the economy to Beijing's expanding list of export controls. New restrictions in April on rare-earth magnet shipments, for example, halted local car production. Lobbying for easier access to these shipments, alongside fertilisers and construction equipment, will be atop Modi's agenda.

He can go beyond and seek investments from Chinese companies like battery maker Contemporary Amperex Technology 300750.SZ and carmaker Chery, whom Indian tycoons from Gautam Adani to Sajjan Jindal are courting, per a Bloomberg report this month, which cited people familiar with the situation. New Delhi could allow them to build factories in India, and phase in local sourcing requirements, Santosh Pai, partner at Dentons Link Legal, reckons.

In return, India can offer smoother access to its massive consumer market for brands like the $178 billion smartphone maker Xiaomi 1810.HK and electric vehicle giant BYD 002594.SZ, starting with business visas for Chinese nationals. That's a potent factor at a time when domestic consumption in the People's Republic is stalling and the U.S. and Europe are raising trade barriers.

Much could go wrong, to be sure. New Delhi is wary of Beijing's closeness to Pakistan, and also of China's construction of its largest hydroelectric dam along the shared border that will reduce water flows. Moreover, there are signs that Beijing wants to curb technology transfers and equipment exports to its neighbours.

Regardless, the stars have aligned for the world's two most populous nations. Modi can afford to be more ambitious.

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CONTEXT NEWS

Indian Prime Minister Narendra Modi will visit China from August 31 to September 1 to attend a summit of the Shanghai Cooperation Organisation in Tianjin, the South Asian nation's Ministry of External Affairs said on August 22. It will be Modi's first visit to the country in seven years.

Chinese President Xi Jinping will gather more than 20 world leaders at the regional security forum in a show of Global South solidarity in the face of U.S. President Donald Trump's attempts to reorder global trade, Reuters reported on August 26.