Even Automobiles Have an Absolute Advantage: How Should China Position Itself in Global Trade?
In April 2024, SAIC Motor’s subsidiary in India, MG Motor, agreed to a capital increase and equity expansion with the JSW Group, transferring 51% of its shares for 3.5 billion yuan. The previous investment of 3.2 billion yuan has already been recovered. The 51% equity sold includes 8% shares without investment rights, belonging solely to dealers and employees. With SAIC holding 49%, they still retain control, disputing rumors of being forced to sell shares at a low price. In 2023, MG India’s sales reached 56,000 units with revenue equivalent to approximately 5 billion yuan. Despite the exaggerated public speculation of a 10 billion dollar valuation, the 1.5 billion dollar valuation was reasonable. Although SAIC’s investment in India was financially successful with control intact, India’s desire to capture Chinese investments in sectors like automobiles and mobile phones is something to be cautious about.
India cannot develop its electric vehicle industry without China’s definitive supply chain advantages, and is well-aware of this fact. The Chinese government has significant influence over automotive companies, leaving India with no favorable cracks in this negotiation.
Mobile Brand Market Share in India in 2023
Meanwhile, Chinese mobile phone companies have invested in India for a longer time, creating a more complex situation. They currently hold over 70% of the Indian market share, and new entrants keep increasing. By 2023, eight of the top ten mobile brands in India were Chinese (with Poco being a sub-brand of Xiaomi, and Infinix and Tecno as sub-brands of Transsion). Brands like Motorola, Honor, and Nothing, although not in the top ten, also show considerable growth. By 2024, Vivo reached the top spot in India with a 19% market share, followed by Xiaomi at 17%, Samsung at 16%, Oppo at 12%, and Realme at 11%.
Chinese mobile companies have achieved remarkable success by capturing significant shares in both India and China’s populous markets. From India’s perspective, it’s hard to digest that Chinese brands dominate local market shares, which seems to challenge their national ambitions. Considering financial returns, India’s market is worthwhile for mobile companies’ expansion. Technically, Chinese companies have helped India establish a competent mobile supply chain, giving India the confidence to seek more industries, and dream of replacing China in trade wars by aligning with the US.
The strategic significance of industries like automobiles and mobile phones is enormous, and the Indian market holds significant potential. Chinese companies need to enter the market and capture substantial shares while preventing hostile and ambitious opponents from becoming strong competitors. This task cannot be approached with a weak mentality but requires a strong mindset, comprehensive evaluation, and coordination to devise trade strategies with India. China holds enormous industrial advantages, making India’s development dependent on trade with us, unlike our lack of rigid demand for Indian products. The trade surplus we earn is merely icing on the cake; with this foundation, success in negotiations with India is assured.
Erdogan Witnesses BYD’s Signing of Investment Agreement in Turkey
Apart from India, Chinese automotive companies have global investment intentions. Leading car companies like BYD, Chery, and Geely are establishing factories or have investment plans in countries like Thailand, Turkey, Italy, and Spain. A lack of boldness might lead to a mere vehicle sales approach, but this is not the norm for global car companies. Countries with sufficient purchasing power and manufacturing conditions will naturally require automakers to establish a local presence, which is a legitimate demand.
If Chinese automakers aspire to enter the top five or top ten globally, they must, like global car companies, venture into various countries through wholly-owned, joint ventures, and partnerships to capture market shares. At this point, worldwide acknowledgment of China’s prowess in manufacturing, foreign trade, and automotive sectors negates the need or possibility of continuing to demand development under a “weaker” identity within the WTO framework.
We will, of course, continue to champion free trade confidently while denouncing the protectionist actions of the West. However, in trade practices, we must understand the “weaker” mindset of our counterparts, negotiate mutually acceptable trade conditions, and penetrate markets they wish to protect.
We need to affirm the weaker status of our counterparts in negotiations, public promotion, and trade interactions. We cannot accept the attitude of imposing sanctions and threats from a supposedly stronger position, demanding compliance from China. This must be firmly opposed, ensuring our counterparts correctly understand who holds the strength. Even the US has begun recognizing China’s manufacturing might, and other countries will follow suit. However, addressing the toughest challenges posed by the US and India is crucial, with no room for illusions or courtesy in the confrontation.
If others acknowledge they are not as strong as China and need China’s consideration, this aligns with the WTO principles and free trade principles. Every nation has its context, and total openness to free trade may not be feasible, necessitating trade negotiations. China has now opened all manufacturing sectors without any investment restrictions, an attitude only the strongest can assume, setting “reciprocal openness” as the starting point in negotiations.
The WTO’s principle of non-discriminatory reciprocity is being overturned by China’s uniquely supreme and ultra-strong status. Regardless of the agreements reached among weaker parties, China must negotiate individually. This is the fate of being a dominant power, but it comes with benefits.
Understanding the other party’s mindset and requirements is essential. Both the Chinese government and enterprises need to adapt to the new global scenario and establish a strong mindset. China must redefine its position in global trade. Important trading partners and competitors must reevaluate their understanding of China and establish the right perspective.
Whether perceiving China as a fearsome opponent or an ordinary country to be subdued is an incorrect mindset. China is the king of global manufacturing and the backbone of the global economy. For a country to develop well, it must engage in meaningful discussions with China, clearly express its demands, and also understand China’s requirements. If mutual entry into China’s manufacturing market is desired, it is perfectly acceptable, and there should be no issue if apprehensions persist. Through negotiations, acceptable methods can be identified, allowing Chinese manufacturing companies to contribute to local economic prosperity in various ways like exports, wholly-owned setups, and joint ventures, while ensuring their security.
Editor: Zhongxiaowen
