The most important quote from the article is this:
"While China dominates India’s imports, India comprises just under 3% of its total exports."
Even if India could boycott all Chinese imports, China would only lose 3% of its exports. That's hardly a scratch. So go ahead, please ban all Chinese products.
http://economictimes.indiatimes.com...trade-deficit-widens/articleshow/59611452.cms
Based out of Kolkata, Gyanesh Chaudhary thought of solar long before it became fashionable. In 2006, the Harvard alumnus founded Vikram Solar, today among India’s top 10 manufacturers of solar modules. Located in a special economic zone in West Bengal, it had billed itself as a pioneer in renewable energy in India. Today, it has a solar module capacity of 1 GW and employs 2,000 people.
But here’s the dichotomy. Just when India is pushing for solar energy (targeting 100 GW by 2022, 1 GW = 1,000 MW), Vikram Solar is hurting. Last quarter, capacity utilisation stood at half, even after exporting a fourth of its produce. “We are fighting the Beijing factor. Over 80% of India’s solar component supplies have been hijacked by the Chinese.” he says. Aggressive pricing on the back of state subsidy, a protectionist outlook and cheap finance have allowed Chinese manufacturers to outprice their domestic counterparts. Products of Vikram Solar are 8-10% costlier than Chinese imports. India’s aggressive solar energy targets would mean business worth over $40 billion for component manufacturers over the next five years. China seems to be grabbing most of it. “The US and Europe are taking measures to protect themselves against Chinese dumping. We have instead offered them a direct train to the Indian market. The government must ring fence Indian firms to allow them to grow,” says Chaudhary.
Miles away in Delhi, Rakesh Kumar Yadav shows you another Chinese-flavoured world. He is the president of the Federation of Sadar Bazar Traders Association. The umbrella platform for 83 other associations with 35,000 wholesale traders does business worth over Rs 3,000 crore annually and employs at least 100,000 people directly and indirectly.
About a decade back, the traders often used to source products — toys, plastic buckets, idols of Indian gods, among others — from domestic manufacturers. In toys alone, Yadav knows many Indian manufacturers who employed 500-plus people and were their suppliers. “They have all shut down and now import from China. Cheaper and better Chinese imports have wiped out the domestic industry,” says Yadav.
On the border, India is trying to ward off Chinese aggression. In the cold Himalayan plateau, temperatures have shot up as an old political rivalry heats up. India and China are sparring over the Doklam tri-boundary area (the third country being Bhutan), near Chicken’s Neck which connects India’s north-eastern states to the rest of the country. Shrill calls for a boycott of Chinese goods are getting louder, with the Rashtriya Swayamsevak Sangh (RSS) and its affiliate, the Swadeshi Jagran Manch, joining in and social media networks amplifying the noise. But deep inside India, at homes and in markets, in economy and in trade, Chinese dominance is a reality. “Although lopsided, bilateral trade has grown well. Political differences have not impacted it,” says DK Joshi, chief economist, Crisil.
China is India’s largest trading partner, with bilateral trade at $71.5 billion, but it is heavily skewed in favour of China. India imports $61.3 billion worth of Chinese products while it exports just $10.2 billion worth of goods to China. From -$37.2 billion in 2011-12, trade deficit has widened in the last six years to -$51.1 billion.
India must also worry about the qualitative skew in its trade balance. Chinese exports to India are dominated by value-added products like mobile phones, plastics, electrical goods, machinery and parts. In contrast, India’s exports to China are primarily raw materials like ores, cotton and mineral fuels. “If bilateral trade suffers I, for one, will not be shedding any tears,” says economist Rajiv Kumar, director, Pahle India Foundation.
A Layered Clash
For the two nations that have fought a fullblown battle in 1962, the current standoff is more complicated. China leaves little doubt of its desire to lead and shape a new Asian order. It is using all the weapons at its disposal — economic, political and diplomatic — to secure its place.
Over the years, a communist China has taken a range of policy measures to create, protect and nurture its own companies. In most sectors, it has built MNC giants like Alibaba (China’s answer to Amazon), Baidu (China’s Google), WeChat (China’s Facebook) and Xiaomi (China’s Apple). Steadily, these Chinese firms have evolved from brazen copycats who made cheap and cheerful products into world-class MNCs who can hold a candle to western MNCs.
The automobiles sector is a good example. Chinese carmaker Geely, which once made models like King Kong and Rolls-Royce copycat Geely GE, has come a long way. Snapping up Volvo’s passenger car business in 2010, Geely today is competing with Audi, BMW and Mercedes and eyeing the luxury car market with an all-electric thrust by 2019.
The $2 trillion Indian economy with relatively few globally competitive MNCs should hardly be a bother for the $12 trillion Chinese economy. But reality is multi-hued. Border disputes in the Northeast aren’t the only big thorn in India-China relationship. When many nations have acquiesced to China’s one-nation view on Tibet and Taiwan, India has refused to toe the line. Instead, it brazenly offers asylum and warm hospitality to Tibetan spiritual leader Dalai Lama and is also courting Taiwan. Prime Minister Narendra Modi’s bromance with his Japanese counterpart Shinzo Abe and deepening bilateral economic engagement too must cause Chinese President Xi Jinping some heartburn. India’s objection to China building a road in the trijunction ahead of the prime minister’s meeting with President Donald Trump in the US in end-June would also have not gone down well with Beijing.
Conversely, China’s support to Pakistan, disregard for India’s sovereignty in Jammu & Kashmir, the support to Jaish-e-Mohammed terrorist Masood Azhar and its opposition to India’s getting a spot in the UN Security Council are constant irritants for India. A new warfront recently opened when India boycotted China’s ambitious One Belt One Road project. India’s defiance amid Chinese assertiveness has set the two nations on a collision path. Lopsided bilateral trade further complicates this already loaded political-diplomatic relationship.
Dragon Eyes Elephant
Chinese companies today dominate the telecom sector in India. In handsets, they control 51% of India’s $8 billion plus smartphone market with brands like Xiaomi, Oppo, Vivo and OnePlus. The same story has been playing out in the telecom equipment sector for some time now.
NK Goyal, ex-chairman of Telecom Equipment Manufacturers Association of India, says: “India allowed import of telecom equipment without any testing or duty or protection for the domestic industry.” In 2010, around the time of the 3G auction, the government did wake up to impose an antidumping duty. In 2012, it announced a preference policy in which 30% of the orders of government departments would be reserved for local telecom gearmakers. This policy was later contested by the US and revised.
Yet, India today imports telecom gear worth over Rs 70,000 crore annually, much of it from Chinese firms like Huawei and ZTE. “China has always protected its own firms and pushed companies like Apple to set up data servers locally to cater to Chinese security concerns. In the current geo-political tension, India’s concerns are natural,” says Jayanth Kolla, founder of telecom consultancy firm Convergence Catalyst.
It’s the same story in the power sector. In the 12th Plan alone, almost 30% of the generating capacity was imported from China. In the rapidly growing solar energy sector, between April 2016 and January 2017, solar equipment from China had a share of 87% in a market pegged at $1.9 billion.
Unsurprisingly, in a range of sectors from steel to power to telecom, calls for anti-dumping duty and safeguard duty are rising, with the government taking note and also action. Recently, the prospect of Chinese firms bidding for BSNL’s tender for a submarine cable system raised a security alarm.
From mature sectors like power and telecom, China Inc is also taking positions in new sectors.
The automobile sector has attracted the biggest Chinese foreign direct investment, with SAIC recently buying General Motors’ factory in Halol in Gujarat. And Fosun Pharma took a majority stake in Hyderabadbased Gland Pharma for $1.3 billion.
According to consultancy firm Grant Thornton, in 2017, when inbound deals dipped, the Chinese shifted gears and accounted for 31% of the inbound deal value as against 27% from the US. China’s Tencent Holdings has so far invested $700 million in Flikart. Chinese digital giants have been investing heavily in India’s digital ecosystem — Alibaba in Paytm, and CTrip in Make-MyTrip. Chinese real estate firms like China Fortune Land Development Company and Dalian Wanda are entering India with multibillion dollar plans for industrial townships and similar projects. And Haitong Securities was one of the investment banks that managed the public issue of shares of Central Depository Services.
Fallout of the Standoff
For now, rhetoric and boycott calls have taken centre-stage in India, something that China has resorted to. Most recent example: as South Korea deployed US’s THAAD missile defence system, China got consumers to boycott Korean imports. In April, an official at South Korea’s central bank estimated this could shave 0.2 percentage points off South Korea’s economic growth this year.
Can India resort to similar boycotts? Not when Chinese imports dominate bilateral trade. In the worst-case scenario, if the border standoff escalates and trade shrivels, you don’t have to be an economist to figure who will hurt more.
Kai Xue, a corporate lawyer in Beijing, spells it out: “The impression is that consumer goods are the biggest import (into India). That is wrong. In reality, capital goods dominate. A boycott would mean Indian firms will have to buy costly products from others, which will dent growth,” says Kai. While China dominates India’s imports, India comprises just under 3% of its total exports.
There may be options. A venture capital investor in Bengaluru says: “If India shifts sourcing of electronics from China to Taiwan, imports from China will reduce.”
A recent government release, “Reducing Trade Gap with China”, shows that Chinese exports are facing pressure in markets like the US. India too is making an effort.
After rising consistently, between April and February in 2016-17, exports to China rose 8.69% while imports dipped 2.26%, reducing India’s trade deficit by 4.1%. The trend may continue, what with Swadeshi Jagran Manch, declaring 2017 as the “year of the boycott of Chinese goods and companies” (see Yang for the Buck).
“Boycott China. That’s what I hear these days during my morning walks,” says Yadav from Sadar Bazar. “We (wholesale traders) will support and nurture our own companies.” But he acknowledges that this cannot happen overnight. If a boycott is the call of the day, there needs to be an alternative. “For example, there is no domestic toy industry,” he says.
“The economic downside won’t be very disastrous. The only people that will be disillusioned by the boycott is the Indian middle class,” says Harsh Pant, head of strategic studies at the Observer Research Foundation.
Rajiv Kumar of Pahle India isn’t that sanguine. “India will be the biggest loser. Economy is at an inflection point. It will distract attention and resources away from growth,” he says. “India has to be smart and strategic. Factoring in security concerns, the government must make compelling offers to lure Chinese FDI.”
Additional reporting by Kunal Talgeri
"While China dominates India’s imports, India comprises just under 3% of its total exports."
Even if India could boycott all Chinese imports, China would only lose 3% of its exports. That's hardly a scratch. So go ahead, please ban all Chinese products.
http://economictimes.indiatimes.com...trade-deficit-widens/articleshow/59611452.cms
Based out of Kolkata, Gyanesh Chaudhary thought of solar long before it became fashionable. In 2006, the Harvard alumnus founded Vikram Solar, today among India’s top 10 manufacturers of solar modules. Located in a special economic zone in West Bengal, it had billed itself as a pioneer in renewable energy in India. Today, it has a solar module capacity of 1 GW and employs 2,000 people.
But here’s the dichotomy. Just when India is pushing for solar energy (targeting 100 GW by 2022, 1 GW = 1,000 MW), Vikram Solar is hurting. Last quarter, capacity utilisation stood at half, even after exporting a fourth of its produce. “We are fighting the Beijing factor. Over 80% of India’s solar component supplies have been hijacked by the Chinese.” he says. Aggressive pricing on the back of state subsidy, a protectionist outlook and cheap finance have allowed Chinese manufacturers to outprice their domestic counterparts. Products of Vikram Solar are 8-10% costlier than Chinese imports. India’s aggressive solar energy targets would mean business worth over $40 billion for component manufacturers over the next five years. China seems to be grabbing most of it. “The US and Europe are taking measures to protect themselves against Chinese dumping. We have instead offered them a direct train to the Indian market. The government must ring fence Indian firms to allow them to grow,” says Chaudhary.
Miles away in Delhi, Rakesh Kumar Yadav shows you another Chinese-flavoured world. He is the president of the Federation of Sadar Bazar Traders Association. The umbrella platform for 83 other associations with 35,000 wholesale traders does business worth over Rs 3,000 crore annually and employs at least 100,000 people directly and indirectly.
About a decade back, the traders often used to source products — toys, plastic buckets, idols of Indian gods, among others — from domestic manufacturers. In toys alone, Yadav knows many Indian manufacturers who employed 500-plus people and were their suppliers. “They have all shut down and now import from China. Cheaper and better Chinese imports have wiped out the domestic industry,” says Yadav.
On the border, India is trying to ward off Chinese aggression. In the cold Himalayan plateau, temperatures have shot up as an old political rivalry heats up. India and China are sparring over the Doklam tri-boundary area (the third country being Bhutan), near Chicken’s Neck which connects India’s north-eastern states to the rest of the country. Shrill calls for a boycott of Chinese goods are getting louder, with the Rashtriya Swayamsevak Sangh (RSS) and its affiliate, the Swadeshi Jagran Manch, joining in and social media networks amplifying the noise. But deep inside India, at homes and in markets, in economy and in trade, Chinese dominance is a reality. “Although lopsided, bilateral trade has grown well. Political differences have not impacted it,” says DK Joshi, chief economist, Crisil.
China is India’s largest trading partner, with bilateral trade at $71.5 billion, but it is heavily skewed in favour of China. India imports $61.3 billion worth of Chinese products while it exports just $10.2 billion worth of goods to China. From -$37.2 billion in 2011-12, trade deficit has widened in the last six years to -$51.1 billion.
India must also worry about the qualitative skew in its trade balance. Chinese exports to India are dominated by value-added products like mobile phones, plastics, electrical goods, machinery and parts. In contrast, India’s exports to China are primarily raw materials like ores, cotton and mineral fuels. “If bilateral trade suffers I, for one, will not be shedding any tears,” says economist Rajiv Kumar, director, Pahle India Foundation.
A Layered Clash
For the two nations that have fought a fullblown battle in 1962, the current standoff is more complicated. China leaves little doubt of its desire to lead and shape a new Asian order. It is using all the weapons at its disposal — economic, political and diplomatic — to secure its place.
Over the years, a communist China has taken a range of policy measures to create, protect and nurture its own companies. In most sectors, it has built MNC giants like Alibaba (China’s answer to Amazon), Baidu (China’s Google), WeChat (China’s Facebook) and Xiaomi (China’s Apple). Steadily, these Chinese firms have evolved from brazen copycats who made cheap and cheerful products into world-class MNCs who can hold a candle to western MNCs.
The automobiles sector is a good example. Chinese carmaker Geely, which once made models like King Kong and Rolls-Royce copycat Geely GE, has come a long way. Snapping up Volvo’s passenger car business in 2010, Geely today is competing with Audi, BMW and Mercedes and eyeing the luxury car market with an all-electric thrust by 2019.
The $2 trillion Indian economy with relatively few globally competitive MNCs should hardly be a bother for the $12 trillion Chinese economy. But reality is multi-hued. Border disputes in the Northeast aren’t the only big thorn in India-China relationship. When many nations have acquiesced to China’s one-nation view on Tibet and Taiwan, India has refused to toe the line. Instead, it brazenly offers asylum and warm hospitality to Tibetan spiritual leader Dalai Lama and is also courting Taiwan. Prime Minister Narendra Modi’s bromance with his Japanese counterpart Shinzo Abe and deepening bilateral economic engagement too must cause Chinese President Xi Jinping some heartburn. India’s objection to China building a road in the trijunction ahead of the prime minister’s meeting with President Donald Trump in the US in end-June would also have not gone down well with Beijing.
Conversely, China’s support to Pakistan, disregard for India’s sovereignty in Jammu & Kashmir, the support to Jaish-e-Mohammed terrorist Masood Azhar and its opposition to India’s getting a spot in the UN Security Council are constant irritants for India. A new warfront recently opened when India boycotted China’s ambitious One Belt One Road project. India’s defiance amid Chinese assertiveness has set the two nations on a collision path. Lopsided bilateral trade further complicates this already loaded political-diplomatic relationship.
Dragon Eyes Elephant
Chinese companies today dominate the telecom sector in India. In handsets, they control 51% of India’s $8 billion plus smartphone market with brands like Xiaomi, Oppo, Vivo and OnePlus. The same story has been playing out in the telecom equipment sector for some time now.
NK Goyal, ex-chairman of Telecom Equipment Manufacturers Association of India, says: “India allowed import of telecom equipment without any testing or duty or protection for the domestic industry.” In 2010, around the time of the 3G auction, the government did wake up to impose an antidumping duty. In 2012, it announced a preference policy in which 30% of the orders of government departments would be reserved for local telecom gearmakers. This policy was later contested by the US and revised.
Yet, India today imports telecom gear worth over Rs 70,000 crore annually, much of it from Chinese firms like Huawei and ZTE. “China has always protected its own firms and pushed companies like Apple to set up data servers locally to cater to Chinese security concerns. In the current geo-political tension, India’s concerns are natural,” says Jayanth Kolla, founder of telecom consultancy firm Convergence Catalyst.
It’s the same story in the power sector. In the 12th Plan alone, almost 30% of the generating capacity was imported from China. In the rapidly growing solar energy sector, between April 2016 and January 2017, solar equipment from China had a share of 87% in a market pegged at $1.9 billion.
Unsurprisingly, in a range of sectors from steel to power to telecom, calls for anti-dumping duty and safeguard duty are rising, with the government taking note and also action. Recently, the prospect of Chinese firms bidding for BSNL’s tender for a submarine cable system raised a security alarm.
From mature sectors like power and telecom, China Inc is also taking positions in new sectors.
The automobile sector has attracted the biggest Chinese foreign direct investment, with SAIC recently buying General Motors’ factory in Halol in Gujarat. And Fosun Pharma took a majority stake in Hyderabadbased Gland Pharma for $1.3 billion.
According to consultancy firm Grant Thornton, in 2017, when inbound deals dipped, the Chinese shifted gears and accounted for 31% of the inbound deal value as against 27% from the US. China’s Tencent Holdings has so far invested $700 million in Flikart. Chinese digital giants have been investing heavily in India’s digital ecosystem — Alibaba in Paytm, and CTrip in Make-MyTrip. Chinese real estate firms like China Fortune Land Development Company and Dalian Wanda are entering India with multibillion dollar plans for industrial townships and similar projects. And Haitong Securities was one of the investment banks that managed the public issue of shares of Central Depository Services.
Fallout of the Standoff
For now, rhetoric and boycott calls have taken centre-stage in India, something that China has resorted to. Most recent example: as South Korea deployed US’s THAAD missile defence system, China got consumers to boycott Korean imports. In April, an official at South Korea’s central bank estimated this could shave 0.2 percentage points off South Korea’s economic growth this year.
Can India resort to similar boycotts? Not when Chinese imports dominate bilateral trade. In the worst-case scenario, if the border standoff escalates and trade shrivels, you don’t have to be an economist to figure who will hurt more.
Kai Xue, a corporate lawyer in Beijing, spells it out: “The impression is that consumer goods are the biggest import (into India). That is wrong. In reality, capital goods dominate. A boycott would mean Indian firms will have to buy costly products from others, which will dent growth,” says Kai. While China dominates India’s imports, India comprises just under 3% of its total exports.
There may be options. A venture capital investor in Bengaluru says: “If India shifts sourcing of electronics from China to Taiwan, imports from China will reduce.”
A recent government release, “Reducing Trade Gap with China”, shows that Chinese exports are facing pressure in markets like the US. India too is making an effort.
After rising consistently, between April and February in 2016-17, exports to China rose 8.69% while imports dipped 2.26%, reducing India’s trade deficit by 4.1%. The trend may continue, what with Swadeshi Jagran Manch, declaring 2017 as the “year of the boycott of Chinese goods and companies” (see Yang for the Buck).
“Boycott China. That’s what I hear these days during my morning walks,” says Yadav from Sadar Bazar. “We (wholesale traders) will support and nurture our own companies.” But he acknowledges that this cannot happen overnight. If a boycott is the call of the day, there needs to be an alternative. “For example, there is no domestic toy industry,” he says.
“The economic downside won’t be very disastrous. The only people that will be disillusioned by the boycott is the Indian middle class,” says Harsh Pant, head of strategic studies at the Observer Research Foundation.
Rajiv Kumar of Pahle India isn’t that sanguine. “India will be the biggest loser. Economy is at an inflection point. It will distract attention and resources away from growth,” he says. “India has to be smart and strategic. Factoring in security concerns, the government must make compelling offers to lure Chinese FDI.”
Additional reporting by Kunal Talgeri
