A war between China and the US over Taiwan threatens a Third World War in the context of a Russo-Western proxy war in Ukraine but also risks significant nuclear escalation involving most of the landmass in Eurasia and the United States. Russia, China, Pakistan, India, North Korea, and Israel all have nuclear weapons and are in such locations as to threaten potential nuclear conflict cascade across the Eastern Hemisphere. China’s bellicosity towards the US is increasingly clear.
China’s spy balloon forays across the US gathered information on sensitive American military sites. Beijing is making concerted efforts to buy land around US military bases and continues making provocative violations into Taiwan’s airspace.
Such aggressive and overtly governmental moves on the part of Beijing overlook the risks China poses to US companies. According to the FBI, Chinese counterfeiting and theft of US economic secrets and intellectual property amount to a $225-$600 billion annual loss. For perspective, the US defense budget for 2022 amounts to $766 billion, while the GDP for the state of Ohio that same year amounts to $638 billion. By any estimate, the cost of China’s attacks on US businesses is considerable.
Chinese statism in the form of state-owned enterprises places American companies exposed to China, either because they invested there, sell in China’s market, or have supply chains sourced in China, placing US businesses at a major disadvantage. These legal and economic disadvantages negatively affect some of America’s most important industries: health care, cloud computing, quantum computing, and the biotech field.
China’s influence on American healthcare alone is significant, and the US healthcare industry’s exposure to Beijing risks higher consumer costs, shortages, and inefficient care due to supply chain vulnerability. In the event of a full Sino-American war, these disadvantages for US companies will become existential liabilities.
Many American companies are looking to de-risk from China, and India offers an increasingly attractive alternative. Tech companies, in particular, are following the lead of Apple, Hewlett Packard, and Dell Technologies and looking to invest in production in India while reducing their exposure to an increasingly totalitarian Beijing.
At the level of venture capital investment, VC firms are increasingly decoupling their “Asian” approaches to business and separating their focus from India and China into separate operations. Sequoia Capital recently undertook such
decoupling. It must be noted that these are not purely business-driven decisions.
India is an increasingly important US ally as New Delhi and Washington have grown closer since the mid-2000s. With its booming economy and billion-plus-strong population, India is the world’s largest democracy and a vital member of the “QUAD” countries coordinating to limit China’s influence: the US, India, Japan, and Australia.
Unlike Taiwan, India can hold its own against Chinese aggression due to its nuclear weapons capabilities. During the Covid-19 pandemic, India and China even engaged in skirmishes in the Himalayas.
However, while geopolitical risk considerations are driving these changes to de-risk from China, it should still be noted that US companies would have the same or similar supply chain risk exposures, and companies need to be vigilant in preventing bribery and corruption risks in India as in any other locations. Conducting due diligence investigations to screen clients, business partners and any third party vendors will prevent many of these risk exposures.
India’s geopolitical maneuvering will have a greater impact on the trajectory of the 21st century than China's, as its geographic location and size have the potential to block the success of China’s Belt and Road Initiative. Economically, India has incredible potential as an alternative to China by offering capacity, lower operating costs, and a business environment more closely aligned with basic Western norms.
The BJP government under Narendra Modi has made his “Make in India” strategy a hallmark of his tenure in office. India offers American companies more than just a replacement for Chinese manufacturing but also close market access to the Middle East and East Africa. Both regions are focal points of
Indian economic diplomacy.
For US companies that have benefitted from the post-1945 world order under US leadership, an Indian-led economic order that spans South Asia, East Africa, and the Middle East predicated on friendly Indo-American ties offers a path of success in the 21st century. American companies would do well to seize it.
US companies with supply chain risk exposure based on geopolitical events related to China should consider alternatives such as India.
American companies should conduct ongoing due diligence investigations to screen clients and partners in any new locale.
Companies should conduct ongoing GPR intelligence assessments of their business environments. This should include regional, national, and state-level screenings for India to determine potential threats and opportunities.
US companies looking to mitigate risks from exposure to China require replacing market share, market access, and supply chain opportunities that India can offer.
India’s economic reorientation to the Middle East and Africa offers ancillary opportunities for Western companies looking to shift away from China.
