China's vilification campaign against Indian businesses

In recent years, a growing disparagement campaign against Indian businesses operating in China has raised concerns, reflecting underlying tensions between the two Asian giants. With geopolitical hostilities deepening post the Galwan Valley clash in 2020, the economic relationship — which once showcased immense potential — has been caught in a downward spiral. The rise of this anti-India sentiment on Chinese social media is a reflection of the strained bilateral ties, with implications that are both economic and geopolitical.

China, with its authoritarian grip over information, has seen the rise of nationalistic fervour on platforms like Weibo, WeChat, and Douyin (TikTok’s Chinese version). Since the India-China border clashes, Chinese state-backed and nationalist social media accounts have increasingly denigrated Indian businesses, painting them as obstacles to China’s interests.

Prominent Indian companies such as Tata Motors, Infosys and Mahindra have not only faced verbal abuse but also dealt with orchestrated online smear campaigns questioning the quality of their products and the loyalty of their employees in China. These campaigns reflect a broader narrative pushed by state-controlled media outlets, wherein India is portrayed as an antagonist on the global stage, particularly in light of India's strengthening ties with the US, Japan, and Australia under the Quad alliance.

With China remaining India's largest trading partner in 2023 and bilateral trade worth approximately $135 billion, trade between the two nations still thrives. But the rise of negative sentiment can have long-term detrimental effects. Indian enterprises — from the IT sector to automotive — face increasing challenges in accessing the Chinese market due to state-sponsored campaigns, regulatory hurdles and rising xenophobia fuelled by social media rhetoric.

Despite the growing hostility, India's dependency on Chinese imports remains significant. In 2023, Indian imports from China stood at $97.5 billion, primarily driven by machinery, chemicals, and smartphones. While Indian businesses attempt to penetrate the Chinese market, several sectors have been affected by this campaign driven by maliciousness. The technology sector, wherein Indian IT firms such as Infosys and TCS have long-standing relationships with Chinese firms, has seen a decline in business engagements due to both public opinion and governmental regulations that favour local competitors. As per Indian commerce ministry, Indian imports from China stand at $97.5 billion, Indian exports to China exceed $17.5 billion, whereas the deficit is $80 billion.

Indian products have dropped by over 45 per cent on Chinese platforms like Weibo between 2021 and 2023, indicating a diminishing appetite for Indian goods among Chinese consumers. Moreover, Indian companies have reported a decline up to 30 per cent in sales in certain regions of China, where anti-India sentiments are particularly strong. This impact is compounded by regulatory barriers such as increased customs scrutiny, non-tariff barriers and longer approval times for Indian goods entering the Chinese market. Sectors such as pharmaceuticals and automotive have been hit the hardest, with Mahindra reporting a 20 per cent decline in sales across Chinese provinces between 2022 and 2023.

China's negative actions and India's responses:

The slander campaign is part of a broader pattern of China's antagonistic behaviour towards India. After the Galwan clash, China resorted to a series of economic actions aimed at undermining Indian interests, including banning Indian apps. In 2020, following the border tensions, India banned 59 Chinese apps, including popular platforms such as TikTok and WeChat on the grounds of data security. China retaliated by increasing scrutiny on Indian firms. India faced customs and regulatory hurdles as exports met delays at Chinese ports because the authorities subjected Indian products to stringent inspections, leading to losses for Indian businesses. China also imposed restrictions on Indian investments, especially in strategic sectors like technology, pharmaceuticals and manufacturing. Indian firms looking to invest or expand in China have found it increasingly difficult to navigate the opaque regulatory framework.

India has not remained passive in response. The Indian Government has taken a two-pronged approach — economic retaliation and diplomatic engagement. Atmanirbhar Bharat initiative: India has been ramping up its efforts to reduce its dependency on Chinese imports through its self-reliance campaign. This has led to a reduction in Chinese investments in Indian technology and infrastructure sectors. Investment restrictions: India has increased scrutiny of Chinese investments, particularly in sectors of national security, resulting in the rejection of several large-scale Chinese projects. Diplomatic engagement: Despite tensions, India has maintained diplomatic channels open, urging China to create a more conducive environment for bilateral trade. However, border tensions continue to overshadow efforts to rebuild trust.

The factors responsible for the online flak are not merely a result of isolated online nationalism, but also a part of China’s broader strategy to pressure India economically and politically.

Geopolitical rivalry: The escalating military tensions, especially along the Line of Actual Control (LAC), have intensified nationalism within China, which has translated into anti-Indian rhetoric on social media platforms.

Quad Alliance: India’s growing involvement with the Quad, alongside the United States, Japan, and Australia, is viewed by China as a containment strategy aimed at limiting its regional dominance. This has further exacerbated the negative sentiment towards Indian businesses, with Chinese influencers often portraying India as aligning with Western imperialism.

Domestic economic considerations: With its own economic growth slowing down, China has been actively promoting domestic champions and sidelining foreign competition. Indian firms, despite their relatively small footprint in the Chinese market, have become easy targets in this narrative as China seeks to protect its own industries from external influence.

Implications for bilateral ties:

The long-term consequences of this vilification campaign could be far-reaching. Economic engagement between India and China — despite their differences — remains crucial for both nations' growth trajectories. China’s rapid industrial expansion depends heavily on the raw materials and intermediate goods from India, while India needs Chinese technology for its growing manufacturing base.

The continued anti-Indian businesses campaign could lead to a serious fallout in the future. Indian firms may scale back investments in China, leading to reduced economic engagement. This could hurt China's ambitions of maintaining its position as the world’s factory. Both nations may seek to diversify their supply chains to avoid over-reliance on one another, which could disrupt global supply chains. Economic tensions would inevitably spill over into the diplomatic arena, making future negotiations on contentious issues like border disputes even more challenging.

The way forward: Strategic recommendations

To address the vilification campaign and foster economic cooperation, India and China must adopt a forward-looking strategy that prioritises stability and mutual benefit.

Building trust through diplomacy: Both nations must engage in consistent diplomatic dialogue to address misunderstandings and curb nationalism-driven narratives. Creating a joint economic council can help navigate regulatory hurdles and improve business environments for both Indian and Chinese firms.

Balanced trade agreements: India and China should negotiate bilateral trade agreements that ensure balanced trade flows, focusing on reducing India’s trade deficit with China. A fair trade framework would reduce reliance on unilateral actions and instead foster collaboration.

Leveraging multilateral platforms: India and China are key players in BRICS, the Shanghai Cooperation Organisation (SCO) and G20. Strengthening cooperation within these platforms can allow both countries to build shared interests, reducing geopolitical rivalries that fuel social media campaigns.

Counteracting negative narratives: Both countries need to engage in positive public diplomacy to counter negative narratives. India should leverage its soft power to highlight the contributions of Indian businesses to China’s economy, while China should ensure its social media platforms are not weaponised against foreign companies.

Analysts opine that the smear campaign against Indian businesses in China is a symptom of the broader geopolitical tensions that characterise the relationship between the two nations. While economic ties have remained robust, the negative narratives, coupled with regulatory hurdles, threaten to derail long-term cooperation. Through strategic diplomacy, balanced trade frameworks and positive engagement, India and China can chart a course that ensures the continued growth of their economic partnership, while mitigating the risks of hostility.

(The author is a political and strategic affairs analyst)