On July 8, New Delhi cleared a smartphone joint venture between Dixon Technologies, an Indian firm, and the Indian arm of Vivo, a Chinese one. Dixon will hold 51 percent, Vivo 49. The partnership was first announced in December 2024 – its approval took nearly 19 months. That is a fair measure of the scrutiny Chinese money attracts in India.

The deal captures the dilemma of India’s China+1 ambitions. India wants to reduce its dependence on China, but building the manufacturing capabilities to do so may need more Chinese involvement, not less. Whether Dixon-Vivo merely adds assembly capacity or helps build Indian technology and Indian suppliers remains to be seen.

The tension came up repeatedly in 50 interviews with executives, policymakers and industry experts, conducted in 2025 for research at the East Asian Institute, National University of Singapore, and published in Global Policy.

Few executives talked of China+1 as leaving China. Most described a portfolio: keep China’s scale, add India as a second site. One automotive executive spoke of “two supply chains for the same product — one will come from India, one will come from China.” Another explained why that is hard: “China’s strength is its mature local supply chain, which doesn’t exist yet in Southeast Asia or India.”

India’s electronics boom shows the problem. Smartphone assembly and exports have grown fast, but many of the components, machines and materials still arrive from China. Making more in India does not mean buying less from Chinese suppliers. In the short term, it can mean buying more.

Dependence also brings fragility. In July 2025, Bloomberg reported that Foxconn, the Taiwan-based electronics maker that assembles iPhones for Apple, had asked hundreds of Chinese engineers and technicians to return home, and that more than 300 had already left its Indian iPhone operations. The reasons remain unclear, but the episode showed how much Indian manufacturing leans on skills that sit in China. Some executives we spoke to also worried about sudden interruptions to supply, and about the safety of proprietary designs handed to Chinese vendors. Those are perceptions of risk rather than documented cases of government interference.

India’s caution is understandable. Press Note 3, introduced in April 2020, made investment from countries sharing a land border with India subject to government approval. Two months later, in June 2020, Indian and Chinese troops clashed in the Galwan Valley in the Himalayas, reportedly killing 20 Indian and four Chinese soldiers. India also barred Huawei from its 5G networks and banned hundreds of Chinese apps. 

Yet restrictions have a price. Chinese equity investment into India fell from about $229 million in 2018-19 to $2.67 million in 2024-25. Several interviewees argued that investment screening, together with visa restrictions and political uncertainty, had put off Chinese component and equipment suppliers from setting up in India. One described restricting Chinese investment while carrying on importing Chinese products as “shooting yourself twice over in your foot.”

While that’s probably an overstatement, it does point to a real trade-off: Keeping Chinese capital out does not remove dependence on Chinese production. It may leave Indian manufacturers importing inputs that, in principle, they could make at home.

New Delhi has started to loosen up. In March 2026 the government relaxed parts of its investment-screening rules. Investors from land-border countries with non-controlling beneficial ownership of up to 10 percent can now use the automatic route, subject to conditions. Proposals in specified manufacturing activities, including electronic components and capital goods, are due a decision within 60 days. Direct Chinese investments that need approval are still screened.

The question is what India does with this opening.

First, security-sensitive activities should stay under tight scrutiny, while ordinary manufacturing investment deserves clearer, more predictable rules. Second, Chinese participation should be judged by what it adds to Indian capabilities: engineering skills, supplier development, competitive component production, access to technology and markets. Indian majority ownership, as in Dixon-Vivo, may help, but a 51 percent stake does not guarantee any meaningful transfer of technology. Third, India needs other sources of critical inputs – in Japan, South Korea, Taiwan, Europe and elsewhere. Not everything has to be made at home. The aim is to be less exposed to disruption while building capability where India can actually compete.

The result is managed dependence, and it should not be permanent. Chinese participation can help build India’s manufacturing base, but the test is whether Indian firms end up with more capabilities and more choices than they have now.

Chinese firms have their own reasons to come. India offers a big domestic market and a growing manufacturing base for global customers. As multinationals spread production beyond China, Chinese suppliers must choose: follow their customers to India, or lose business to rivals who do. What suits the firms, though, may not always suit Beijing.

New Delhi can set the terms on which Chinese firms take part in India’s industrial development. Or it can go on depending on the terms on which Beijing lets Chinese goods, technology and expertise flow.