China’s heavy machines are a risk to India

China's near-monopoly on rare earths has given it significant bargaining power, and now it is seeking to apply a similar strategy to another industry: construction equipment. Beijing has imposed export controls on machinery such as tunnel-boring machines, which are used to build subways and drill through mountains. India is among the countries that rely heavily on Chinese equipment, making it a prime target for these new restrictions, which come into effect later this month.

While construction equipment might not seem like a crucial component of the global economy, it could serve as a strategic lever for China. Kyle Chan, a fellow at the Brookings Institution, believes that China's position as a key global producer of construction equipment could make it vulnerable to dependency, which in turn could encourage rival nations to develop their own capabilities.

The new export controls apply to various types of construction equipment, including those used for high-altitude spraying. Beijing has cited "dual use" concerns, implying that these restrictions could be used to limit the sale of such machinery to sensitive countries and regions with disputes with China. For India, this means that tensions along the Himalayan border could be exacerbated, as the nation is in the process of building railway lines and roads in the area, requiring a significant number of tunnels.

However, China's tightening export control regime could also benefit India in the long run. Chetna Kumar, a Geoeconomics Analyst for South Asia, suggests that India might become an alternative manufacturing base for equipment makers, as foreign companies have an incentive to establish capacity in large markets like India. The inclusion of high-altitude machinery in the restrictions could also indicate particular attention to strategically sensitive terrain.

China has demonstrated its capability to wield its dominance in tunnel-diggers before, such as when it delayed Germany's Herrenknecht AG from exporting its machines to India for use in projects like the Ahmedabad-Mumbai bullet train and the Delhi metro. India can still source equipment from other sites, but the recent curbs may impact existing stocks and the procurement of new machines.

India's position is not unique among China's customers. The country accounts for about 70% of the global market for construction equipment. While there are potential substitutes available from manufacturers in the US and Japan, most customers would find it challenging to switch away from Chinese suppliers in the short term. Moreover, building domestic capacity would be an appealing option for India, which has ambitious infrastructure plans, but it will take time to compete with China's scale in this sector.