India Reboots China Strategy

Good Morning. India just made two quiet moves that hint at a thaw with China: it approved a joint venture with Chinese electronics firm Longcheer and lifted tourist visa restrictions. After years of strained ties, why the shift now? And what does it signal for business amid US pressure? Today’s The Take unpacks this unexpected but strategic opening.

In other news, TCS to cut 12,000 jobs, VinFast enters India’s EV race, and Rs 2.2 lakh crore wiped off top firms’ market value last week.

THE TAKE 

India Warms To China, Uncertainty Still Looms

At 7 feet 6 inches, Yao Ming is one of the tallest and most famous basketball players in the world. He played for the Houston Rockets from 2002 to 2011 and was an eight-time National Basketball Association (NBA) star.

And he is Chinese.

A well-known China affairs researcher remarked the other day that China is like Yao Ming—it looks like a giant and can be intimidating, but is actually gentle and soft-spoken, unlike many basketball players, particularly in the United States.

Of course, prod the giant too hard and the response might not be so gentle—that was the researcher’s point.

Not everyone would agree with this characterisation, of course, but it echoes sentiments I have heard before.

India’s Moves To Engage With China

Last week, India made several moves demonstrating a fresh desire to embrace the gentle giant.

The government approved a joint venture between Delhi-based Dixon Technologies and Chinese electronics company Shanghai Longcheer Technology.

The partnership will create a new entity in India, with Dixon holding a 74% stake and Longcheer owning 26% through its Singapore arm.

The new venture will manufacture a range of electronic devices, including smartphones, tablets, smartwatches and automotive electronics. It will be called Dixtel Infocomm once all formal agreements are signed.

Longcheer supplies brands like Samsung, Vivo, Xiaomi and Oppo, and the joint venture will evidently boost domestic electronics manufacturing.

Last week also saw the lifting of restrictions on Chinese nationals applying for tourist visas to India—another thaw in India–China relations, which had deteriorated sharply following the border clashes in 2020.

There have been other steps announced between India and China in recent weeks in terms of mutual exchanges, but we will, of course, have to see how and where that goes.

The Longcheer joint venture is an interesting development because it suggests that China is now comfortable with its electronics majors partnering with Indian companies to manufacture products, which may primarily serve the domestic market but could also be exported.

A Shift From Tension To Trade

This did not appear to be the case even a few weeks ago, after Foxconn pulled out engineers working at its iPhone factories in India, slowing down Apple’s efforts to build alternative manufacturing bases.

More than 300 Chinese workers had left, and mostly support staff from Taiwan remained in India. Bloomberg reported that this had affected training of local staff and the operation of some machinery.

The same report said that earlier this year, China had verbally encouraged regulatory agencies and local governments to curb technology transfers and equipment exports to India in an effort to prevent companies from shifting manufacturing elsewhere.

The joint venture between Dixon and Longcheer—which would arguably require blessings from both sides—and the lifting of tourist visa restrictions suggest that relations are better this week.

Which, of course, is the point.

The highly unpredictable nature of geopolitics over the past year has made doing business more challenging.

Indian businesses have been actively lobbying the government to ease off on China for several months now.

Some of that effort may have contributed to the thaw we are seeing.

Will it last? That might be the hope, but there is no guarantee, especially since there is no clear starting point to return to.

Its not just China. The United States (US) evidently wants India firmly in its corner against China, or else face the consequences. The US position on India’s recent border conflict with Pakistan is illustrative.

Geopolitics Keeps Business On Edge

Meanwhile, the August 1 deadline set unilaterally by the United States for signing tariff deals is fast approaching. Progress has been made, by all accounts, but it is not clear how close we are to a functioning agreement.

Which once again highlights the point that a business deal struck today in seemingly good times could unravel—or be forced to unravel— quite literally tomorrow.

It’s no surprise that businesses across the world want governments to be more accommodative.

Whether they will succeed, or to what extent, remains to be seen. It appears some individual businesses with stronger lobbying power are cutting side deals, even in America.

That is not a healthy sign.

Back to China—there is still some distance to cover. Direct flights between India and China are yet to resume, for instance.

And TikTok continues to be banned.

Not sure anyone is complaining about that, though.

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CORE NUMBER

Rs 2.2 lakh crore

That’s how much the combined market capitalisation of six of India’s top-10 most valued companies eroded last week, according to Mint.

🔎 The broader context:

• Reliance Industries: Lost Rs 1,14,688 crore in value.

• Infosys & TCS: Fell by Rs 29,475 crore and Rs 20,080 crore, respectively.

• HUL, Bajaj Finance: Each saw declines of over Rs 17,000 crore.

• Sensex: Dropped 294.64 points (0.36%).

📉 What’s driving the decline:

• Foreign fund outflows and trade deal uncertainty.

• Reliance stock drag offset bank-led gains.

• Volatility persists despite strong bank earnings (HDFC, ICICI).

FROM THE PERIPHERY

TCS to Cut 12,000 Jobs. Tata Consultancy Services (TCS), India’s largest software firm by market cap, will cut 2% of its global workforce—around 12,000 jobs—in FY26.

Backdrop: The layoffs will largely impact middle and senior management across geographies. TCS told Moneycontrol that skill mismatches and ineffective redeployments as the reason for the cuts. The move is expected affect employees across all domains and countries it has offices in.

Implications: The move comes amid rising attrition (13.8% in last 12 months) and margin pressure, with Q1FY26 operating margins slipping to 24.5%. Just weeks ago, TCS had said wage hikes for its 6 lakh workforce were a key priority.

VinFast Drives Into India. Vietnamese electric vehicle (EV) maker VinFast has opened its first showroom in Surat and begun pre-bookings for its premium VF6 and VF7 models. The VF7 model, expected to retail near Rs 35 lakh, will compete with the Tesla Model Y in India’s premium EV market.

How We Got Here: VinFast plans to assemble its cars at a plant in Thoothukudi, Tamil Nadu, and launch 35 dealerships across 27 cities by year-end. Unlike Tesla, which recently opened a showroom in Mumbai without local production, VinFast is building a local manufacturing presence.

What’s Next: The company has tied up with RoadGrid, myTVS, and Global Assure for charging and after-sales support, and partnered with BatX Energies to build a battery recycling ecosystem. VinFast says it doesn’t see Tesla or BYD as competitors, but its pricing suggests otherwise.

Cap on Drug Price Hikes. The National Pharmaceutical Pricing Authority (NPPA) has directed drugmakers to strictly comply with rules that cap annual price hikes of non-scheduled medicines at 10%, Mint reported.

Backdrop: Non-scheduled drugs—those not under direct price control—make up nearly 75% of India’s pharma market. Popular brands like Foracort and Dexorange fall in this category.

Implications: Companies must now align prices of similar brands and report all changes to the NPPA database. Any violation will trigger penalties under the Drugs Price Control Order (DPCO), 2013. The move aims to curb profiteering and keep essential treatments affordable for Indian consumers.

Auto Dealers Flag Rate Lag. In a letter to Reserve Bank of India’s (RBI) Governor Sanjay Malhotra, the Federation of Automobile Dealers Associations (FADA) urged the central bank to address alleged delays by private banks in passing on repo rate cuts to auto loan borrowers, PTI reported.

Backdrop: Following the June 6 repo rate cut from 6% to 5.5%, FADA said public banks transmitted benefits quickly, while private banks lagged. It sought 100% uniform transmission and transparency in cost-of-funds disclosures.

Implications: FADA also called for Micro, Small, and Medium Enterprise (MSME) lending parity for auto dealers, risk-weight recalibration, and Credit Guarantee Fund Trust access to boost credit flow and dealer liquidity.

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