Since the deadly clash between Chinese and Indian troops in the Galwan Valley on June 15, hyper-nationalism appear to have taken over India, where calls for boycotting Chinese products and footage of Indian citizens destroying TV set have been dominating social media. In China, very few take those calls and actions seriously, with some saying India waging a trade war with China is like throwing an egg at a rock. Still, to help Indian nationalists and their followers better understand the potentially devastating consequences of their words and deeds on the already fragile Indian economy as well as India’s poor, the following is a GT investigation into four areas of the Indian economy where Chinese involvement is simply irreplaceable.
Indian elites call to boycott Chinese goods, denying the poor their right to a better life: experts
Calls from India’s elite to resist or substitute made-in-China goods, which range from telecoms instruments and electronic components to consumer electronics and toys, will deny the Indian masses their right to a better life, Chinese experts said. Challenging the dominance of small Chinese goods in the Indian market would be to challenge the market itself.
Han Feng, a professor at Beijing Foreign Studies University and an Indian affairs expert, told the Global Times on Monday that the average Indian consumer is simply unable to boycott every product, particularly not for a long time.
“Economic nationalist stick-waving by India’s elite after the recent border clash would deny the Indian poor cost-effective Chinese goods, thus denying them their right to a better life,” Han said.
There are so many Indian import merchants at Yiwu, the world’s capital of small commodities, that an Indian expat town was in the process of being formed, the Global Times has learned.
An Indian businessman surnamed Thaprace told the Global Times that he estimates over 90 percent of hardware in India is from China. Thaprace has traveled to Yiwu in East China’s Zhejiang Province five times a year since 2015 to buy handbags, bicycles, shoes and purses to sell in India.
“Indians like Chinese products, as the items are good,” said Thaprace.
“For the wealthier Indian middle class, demand will be killed. Those who are convinced to buy or deterred from buying a Xiaomi smartphone may never have the money to buy an iPhone. Instead, they will choose to delay their purchase, and that’s bad news for the Indian economy which is in need of a consumption boost amid the COVID-19 pandemic,” Han said, noting that this situation can only stall the Indian government’s aim to build a $5 trillion economy by 2024.
In recent years, India has periodically resorted to economic nationalism when it comes to China.
However, Han has noted an interesting pattern: With repeated “boycott China” movements in India in recent years, the reach of Chinese products in the Indian economy has actually expanded rather than contracted.
India’s decisions to walk away from various free trade deals such as the Regional Comprehensive Economic Partnership have also resulted in India’s export competitors – like Pakistan and Australia – enjoying better tariff rates in trade with China, replacing India’s exports to China, according to media reports.
China’s tariff authority this week announced that China will begin to offer zero-tariffs for 97 percent of trade items from Bangladesh from July 1. Some media reports have suggested that Bangladesh, one of India’s textile competitors, may replace some of India’s textile exports to China, further worsening India’s trade deficit with China.
Swaran Singh, a professor at Jawaharlal Nehru University, told Global Times that the recent border tensions have strengthened the movement to resist Chinese goods and investments within India. He estimated that, coupled with other factors like the overall global economic slowdown put, 2020 will see India-China bilateral trade shrink by at least $10 billion.
In terms of investment, Han said scaring away Chinese investors who are genuinely interested in India is not a good idea as cross-border investment is scarce during the pandemic.
In reality, some of that investment will be redirected toward India’s neighboring countries, like Pakistan, Sri Lanka, Bangladesh and Myanmar, Han said.
Without Chinese parts, many Indian sectors will be crippled: insider
Some nationalist Indians are calling for a boycott of Chinese products and a decoupling from China following the border clash, but industry insiders say such calls are in vain as India relies heavily on China for key components of products like smartphones, solar power equipment and automobiles.
A Chinese smartphone sector worker in India surnamed Wu told the Global Times on Tuesday that core components such as camera modules, motherboards and screens for smartphones sold in India rely on Chinese suppliers.
“Although a top Chinese brand operating in India said it purchases around 65 percent of components locally for its smartphones sold in India, they are mainly less important parts like packing boxes,” Wu said, noting that even these are produced by Chinese manufacturers in India.
Indian media Economic Times recently reported that Chinese smartphone brands have a market share of about 72 percent in India, dominating every price segment.
Shares of Chinese solar power products account for a sweeping 90 percent of the local market, auto components about 26 percent and telecoms equipment 25 percent, according to the report.
India’s auto industry relies heavily on China for electric parts, pressure sensors and fuel injectors, among other components, Cui Dongshu, secretary general of the China Passenger Car Association (CPCA), told the Global Times on Tuesday.
Data from the CPCA shows that China exported 2,957 cars to India in April. India came in as No.7 among China’s auto export destinations, despite the impact of the global pandemic and noise calling for a boycott of Chinese products in India.
“If Indians are serious about boycotting Chinese cars and parts, their auto industry will be battered, especially as India is pushing for electric vehicles” Cui said.
Rajan Wadhera, president of the Indian Society of Indian Automobile Manufacturers, said in March that supply chain disruptions in China caused by the coronavirus outbreak in part affected the clearance of BS-IV car stocks for transition to a new BS-VI emissions regime.
Industry data shows China exported $4.3 billion worth of parts to India’s $57 billion auto component industry in the 2018 financial year alone.
Calls to boycott Chinese products have been appearing on India’s social media platforms since April, but they are in vain, said Wu. “Impacted by the global pandemic and an economic growth slowdown in India, Indians are tightening their belts to weather the impact. If they don’t buy cheap Chinese products of good quality, they’re fighting against their own money,” he said.
India won’t find a cure for its drug industry if API supplies stop coming from China
India is unlikely to find alternatives for its drug industry if it shreds its dependence on China’s active pharmaceutical ingredient (API) supplies, despite the country’s recent movement to boycott Chinese products.
The Indian government will reportedly announce the final guidelines for its Production Linked Incentive (PLI) Scheme by the end of this year, aiming to encourage the local production of APIs, according to local media. It is said the scheme will have financial implications of more than 6,940 crore rupees ($913,272) over the next eight years.
China’s API industry plays an exclusive role in the global supply chain, particularly for major importers like India. India has been importing an average of 68 percent of its total bulk drugs and intermediates from China every year, according to reports from the Times of India.
The over-dependence of India’s pharmaceutical industry on Chinese exports reveals the fragility of its supply chain. But according to the China Chamber of Commerce for Import and Export of Medicines and Health Products (CCCM), India’s dependence on made-in-China APIs will not be easy to trim.
According to CCCM, a total of $5.65 billion worth of APIs were exported to India in 2019, accounting for almost 17 percent of China’s total API exports that year, but most were APIs and pharmaceutical intermediates with low added value like penicillin, cephalosporins and hormone drugs.
The production of such APIs usually involves high-energy microbial fermentation and high water and electricity consumption, which are still lacking in India, meaning the country will be unable to shake China’s exporter status for several years, Wang Xuegong, deputy director of the China Pharmaceutical Enterprises Association, told the Global Times.
“As it is, the current supply chain is the result of market competition and specialization, and there is a reason for that,” Wang said.
For Indian drug companies, Chinese APIs excel in terms of price and quality, a manager surnamed Yang with Shandong Luning Pharmaceutical (SLP) told the Global Times on Tuesday.
According to Yang, his company exports mainly intermediates such as vitamins to India, some of which are used in medicine and some of which are used in food additives.
Yang said that if the Indian government imposes tariffs, it would probably force Indian drug companies to find other alternatives. But Indian pharmaceutical companies would still look to China for API imports given the strong global competitiveness of Chinese suppliers.
“Other countries do not have the same scale of API production as China, and we also have absolute advantages in terms of price and capacity,” he said, adding that India also needs to consider a stable supply of raw materials in order to ensure stable production and orders of their medicines from abroad.
Yang told the Global Times that so far SLP’s business contact with India remains as normal, unaffected by any government action.
According to China’s National Medical Products Administration, there are almost 9,000 API manufacturers in China. But Yang said that if they do not export to India, they have other export destinations such as Japan, South Korea, Europe and the US where their goods are also doing well.
“We don’t make a lot of money in India in particular,” he said, adding that companies usually prefer clients from the US and Japan as their orders are often prepaid.
Originally published on www.globaltimes.cn