The Trade War With China

Considering the unfortunate killing of 20 soldiers from India by Chinese troops at Galwan, the entire nation is indirectly seeking a cold war against the dragon.The whole nation all together raising voice to boycott Chinese products. Few cases we have witnessed where few of the patriots of Indian had destroyed Chinese TVs, mobiles and Chinese products, even demanding a ban on Chinese food at Indian restaurants.

 

Twitter and social media are exploding with #ChineseProductsInDustbin and #BharatUnitedAgainstChina etc. Outrage against China is stoking anti- China sentiments not only in India or the countries encircling the South China Sea which was suffering due to Chinese attempt of self development but along with all these nation , few major powers like  Europe and America witnessing the pandemic are also against the dragon

 

Before getting trapped with nationalistic wave lets understand the matter in brief and lets have a reality check :

1.China is the world’s second largest economy with a GDP of $13.6 trillion

2China is also India’s second biggest trading partner after the USA (Rs 7.3 lakh crore in FY 2019-20)

3.India’s export to China is around  Rs 1.8 lakh crore nearly  25 percent of the total trade.

4.China exports to India is around Rs 5.5 lakh crore that accounts nearly 75 percent.

China is enjoying a comfortable trade surplus with the USA, the UK and many other countries. Apart from it , the total goods that china exports to India are not finished products; most of it is in the form of raw materials and products like pharmaceutical ingredients which India processes into generic drugs and exports all over the world.

 

Other goods like electrical machinery and parts, auto components,organic chemicals, fertilisers, etc. covers 67 percent of India’s imports from China, and in the event of a trade blockade, it is Indian manufacturing and exports that are going to be hurt the most. As per the data received by DGCIS for 2018- 19, China covers more or less nearly 14 percent of Indian imports (USA 7 percent) and 5 percent of Indian exports (USA 16 per cent), but for China, its trade with India is almost inconsequential.

 

Keeping just  2.1 percent of its share of total trade, India  is quite lagging behind in chinese share if we consider or analyse other trading partners of china like USA, Japan, South Korea, Germany and others. Indian is at the 12th place in 2018 if we see the share in Chinese economy. Trade suspension is hardly going to impact China, and certainly cannot be an effective tool to resolve India’s border disputes with that country. Rather it is going to hurt India in many more ways. Take for example the Chinese investments in India.

 

Chinese Investment In India

1.A Brookings report in April 2020  analysed briefly that by 2017, the total Chinese investment in India had stood at over $ 9 billion, with Alibaba and Tencent being the two biggest investors in India

2.Report was also stating that over 800 Chinese companies operating in the Indian market with 75 manufacturing facilities spread throughout India. These industries include the intermediate industries like that of smartphones, appliances, equipment for construction and others . Many of the major companies that are operating in India have involvement in China. Industries like  Adani, Godrej Boyce, and even the Indian PSU like BEML, BHEL and others are having operations of China

 

3.Chinese investment can be seen in many Indian companies – Snapdeal, Swiggy, Ola, Paytm, Flipkart, Bigbasket, Zomato etc

4.As of March 2020, 18 of India’s 30 unicorns were funded by Chinese companies.

5.Nearly 60 percent of the Indian market share is claimed by three Chinese companies, Xiaomi, Vivo and Oppo.

6. The top 10 Chinese companies including Huawei and Xiaomi are running 68 ongoing projects in India.

Blockade of trade and investment would be almost suicidal for Indian start-ups and other companies, especially when the economy is in the doldrums.

Government policies and vision to make India import-substitution, self-reliance, Atmanirbhar Bharat etc. is not a one day deal . To manufacture everything and to mark a presence in the International market is a continuous process.  For that, we must source the raw materials and capital from wherever we could get them the cheapest, because that is what basically drives international trade.

The only way to stand up to China is by increasing our competitiveness. One should not feel shy from using Chinese capital, Chinese technology and Chinese products. We have to work hard with a forward looking vision as it is  our inefficiency that has enabled China to penetrate our market to pose serious challenges to domestic industries.If we ban Chinese products we will not be able to save our own economy rather the nation all together should work to become self reliant in all phases.

The pandemic Covid’19 situation left a question in front of market experts: one should never rely on one trade source who at any time can claim and enter our economy. This has given India one lifetime opportunity to attract investments and companies away from China unto itself. Hence the Prime Minister’s emphasis on ‘Buy Local, Be Global’ and Atmanirbhar Bharat, and to ultimately substitute China as the world’s supplier. With drawing the focus towards vocal to local prime ministers has emphasised upon self-reliance in all segments.

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