China’s 5,000-ton digging machines are a trade war risk to India

China’s dominance in tunnel-boring equipment gives Beijing potential leverage over India’s infrastructure projects as it tightens export controls on construction machinery. (AI-generated image)

Beijing’s newest export controls target construction equipment — including tunnel-boring machines, some of the world’s largest and most complex industrial devices. They’re used to build subways or drill roads and railways through mountains. China dominates the global market and India is among its main customers.

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Building sites might not be an obvious chokepoint in the global economy — unlike the AI technologies that Beijing has also proposed adding to its restricted list, or the rare earths used in smartphones and high-tech weapons. What’s more, China’s grip on this industry is strong but not absolute, and seeking to turn it into leverage could spur others to catch up.

“Beijing increasingly sees its position as a key global producer of construction equipment in strategic terms,” said Kyle Chan, a fellow at the Brookings Institution. “It raises the risks of dependency, and incentivizes other countries to try to de-risk from China.”

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Still, that’s hard to do in the short run. Meanwhile wars in Ukraine and Iran have highlighted the growing military importance of underground facilities. And when it comes to India, there’s a particular edge to the new curbs due to take effect later this month.

Along with tunnel-diggers, they apply to other construction equipment including machines for spraying concrete at high altitudes. Beijing invoked the potential for so-called dual use in military as well as civilian projects. It said “sensitive countries and regions with disputes with China” will face stricter rules.

There are reasons for India’s leaders to think this language points in their direction.

The Himalayan border between the world’s most populous countries has long been a flashpoint and tensions there flared again just last week. India is building railway lines and roads in the area, with an eye on reducing troop mobilization times. They’ll need a lot of tunnels.

“Controls on specialized construction equipment could slow some infrastructure projects, including strategic construction along their disputed Himalayan border”

“But China’s tightening export control regime could also strengthen India’s case as an alternative manufacturing base. Foreign equipment makers ... have an incentive to add capacity in large markets such as India” said Chetna Kumar Geoeconomics Analyst for South Asia.

The inclusion of high-altitude machinery could suggest particular attention to “strategically sensitive terrain,” said Sun Chenghao, a fellow at Tsinghua University’s Center for International Security and Strategy in Beijing.

“For China, the central concern is where Chinese engineering capabilities are used and whether they could strengthen another country’s military infrastructure,” Sun said.

China has flexed its muscle as chief exporter of tunnel-diggers in the past. In 2024 it delayed efforts by Germany’s Herrenknecht AG – which manufactures some of its boring machines in China — to sell them to India, for use in projects like the Ahmedabad-Mumbai bullet train and the Delhi metro.

A spokesperson for Herrenknecht said the firm is studying the latest Chinese restrictions.

For any “priority project,” India can shift equipment from other sites, said Ajay Srivastava, founder of the New Delhi-based Global Trade Research Initiative. But there’s another catch: China’s new curbs apply to components too.

“When there is heavy wear and tear in these machines we require regular supply of parts,” Srivastava said, so there’ll be an impact on the existing stock of machines as well as procurement of new ones.

India is far from the only buyer of China’s tunneling gear. Beijing state media put the country’s global share of the industry at around 70%. The top producer, China Railway Engineering Equipment Group Co Ltd, says its kit is used in 36 countries including Denmark and France.

Besides Herrenknecht, there are other manufacturers in the US and Japan that build potential substitutes. In the long run, China’s restrictions could prove a boon to some of them. But for most customers an immediate switch away from a Chinese supplier is difficult.

So is building domestic capacity – an appealing option in a large country like India with ambitious infrastructure plans.

Road Transport and Highways Minister Nitin Gadkari has said India aims to invest up to $9.6 billion on tunneling over the next five years, and urged local industry to manufacture boring machines. The government is reportedly considering a $1.2 billion incentive plan for makers of construction equipment.

R. Shankar Raman, president of Mumbai-based engineering giant Larsen & Toubro Ltd., said his company is building a prototype tunnel-borer and “if our experiment proves successful” might be able to source its own machinery and sell to others. But with India at an earlier phase of manufacturing, and China doing it at scale, there’s no way to compete on cost.

“If people are still going to compare with Chinese price and find ways to import from China,” he said, “then India will be at a disadvantage.”