Chinese Firms Adapt to Indian Market Amid Trade Tensions

In a significant shift, Chinese companies Shanghai Highly Group and Haier are increasingly willing to comply with Indian regulations to expand their business operations. This change comes in response to the ongoing trade war with the United States, which has imposed heavy tariffs on Chinese imports. Both companies are now open to minority ownership in joint ventures, a departure from their previous stance, as they seek to maintain a foothold in the Indian market.

Shift in Ownership Strategy

Historically resistant to minority stakes, Chinese firms are now recognizing the importance of the Indian market, especially in light of potential exclusions from the U.S. market. Following border conflicts in 2020, India had imposed restrictions on Chinese investments, but the current climate has prompted a reevaluation. Shanghai Highly, a leading manufacturer of compressors, has resumed discussions with Voltas, a Tata-owned company, about a manufacturing partnership, now accepting a minority position. Similarly, Haier, which ranks third in Indian electronics sales, is considering divesting majority control of its local operations to comply with Indian regulations.

Rajesh Agarwal, director at Bhagwati Products, noted a marked change in the attitude of Chinese companies. “They are now extremely comfortable with minority ownership in Indian joint ventures or forming technical alliances,” he stated. The shift is driven by the need to retain business in India, which presents significant export opportunities under the current tariff regime. Additionally, the Production-Linked Incentive (PLI) scheme in India is seen as a way to neutralize production costs compared to China.

Haier’s Strategic Moves

Haier initially aimed to sell up to a 26% stake to a strategic partner due to government restrictions on Chinese foreign direct investment (FDI). However, the sale process, initiated in October, has faced delays. Currently, Haier is in negotiations with Indian companies and private equity funds to sell a controlling stake of 51-55%. This move reflects the company’s adaptability in navigating the complexities of the Indian market while complying with local regulations.

The Indian government has indicated a willingness to approve joint ventures with Chinese firms under specific conditions, including minority Chinese ownership and Indian-dominated boards. This regulatory framework encourages contributions to local production through value addition and technology transfer, making it more appealing for Chinese companies to invest in India.

Technical Collaborations and Future Prospects

Shanghai Highly is also exploring technical partnerships, offering its production expertise and technology transfer capabilities. Their previous joint venture proposal with Voltas, which sought 60% Chinese ownership, was rejected under Press Note 3 regulations. Recently, the company established a technical collaboration with PG Electroplast for manufacturing air conditioning compressors, focusing on technology sharing without equity participation. PG Electroplast is set to invest Rs 350 crore in a facility near Pune, with an annual production capacity of 5 million units.

As the U.S. continues to escalate its trade war with China, imposing tariffs as high as 245% on various imports, the global trade landscape is shifting. India is emerging as a key beneficiary of this dynamic, attracting foreign investments due to its low exposure to U.S. trade and favorable manufacturing incentives. The “Make in India” campaign, which includes $26 billion in subsidies, further enhances India’s appeal as a manufacturing hub.

India’s Growing Manufacturing Landscape

Despite facing challenges such as a skilled labor shortage and reliance on Chinese inputs, India is increasingly viewed as a stable and attractive option for companies looking to diversify their production. The response from global funds has been positive, with $25 billion invested in Indian markets in 2025 alone. Companies like Apple have significantly ramped up their production in India, with a 60% increase in iPhone manufacturing, now producing one in five iPhones locally. India’s tariff-free status for iPhones shields it from U.S. tech tariffs, while tax breaks and improved infrastructure position the country as a viable alternative to China for manufacturing.

As Chinese firms adapt to the evolving landscape, their willingness to embrace minority ownership and technical collaborations signals a new era of business relations between China and India, potentially reshaping the future of manufacturing in the region.

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