Is self-reliance the mantra to shrug off China?

While the commerce ministry data shows that Bharat’s trade deficit with China has decreased, Honk Kong’s trade deficit with Bharat has turned into a trade surplus for the specially administered region of China. Is this the Chinese way of hoodwinking Bharat into believing that its huge trade imbalance is being rectified, though in reality China is pushing its exports into Bharat through Hong Kong of the same goods that Bharat buys from China.

According to Biswajit Dhar, Professor & Head Centre of WTO studies at IIFT (Indian Institute of Foreign Trade), Chinese companies like Xiaomi, Vivo, Oppo control 51% of our smartphone market. 44 of the 100 android apps used by us are Chinese including TikTok and UC browser. 90% of our solar equipment is imported and a majority of it is from China, according to Government of India data. 60% of the electronic products and components are imported from China.

Chinese investors have been investing increasingly in our startups which were otherwise facing resource crunch. All startups with a worth of over 1 million dollars have Chinese interests. Mohammad Saqib, Secretary General of the Indo-China Economic & Cultural Council (ICEC), says that in the past 3 years Chinese have invested more than 3.7 billion dollars in Bharat’s startups.

Alibaba has invested close to 700 million dollars in PayTM till 2017 and 500 million dollars in Snapdeal. This is in addition to 150 million dollars in Zomato, 100 million dollars in Firstcry and 200 million dollars in Big Basket. Tencent, the Chinese tech giant, has investments worth 400 million dollars in OLA and 700 million dollars in Flipkart. China’s drug giant Fosun spent 1.09 billion dollars to buy 74% stake in Gland Pharma. We are big importers of Chinese capital goods, machinery and electrical parts, intermediate goods and auto parts.

Bharat is under lockdown for the past one month and before that our economy was already gasping for breath. The manufacturing sector which is the lifeline for any economy has been stuttering. Our pharma, solar and chemical industry is over dependent on China for its raw materials. The pharmaceutical sector sources almost 90% of it’s raw material from China.

Global Data has said that Covid-19 has exposed the dependence of Bharat on China for its API (Active Pharmaceutical Ingredients) requirements. For the pharma industry, this is a wake up call since the pharma players depend heavily on China for their drug intermediates . The Bharatiya government has called for the pharma companies to ramp up the production of 38 APIs to end dependence on China according to “Global Data”.

84% of the country’s National Solar Mission requirement are met by China. Cheap imports of solar cells/ modules and PUCs from China are hampering the growth of the domestic industry and making it noncompetitive, according to a report tabled in the parliament in July 2018.

The 165 million dollar chemical industry and its 80,000 commercial products are unlikely to survive without Chinese raw material in the short term, according to Mr. Satish Wagh, ex- chairman of Chemexcil. The projected growth for this sector was almost 304 million dollars by 2025 but that target seems to be a distant dream as of now.

Only a few days back a plane was sent to China to source PPE kits, masks and other protective gear. So our dependence on China in times of crisis or otherwise is very predominant, be it health gear, equipment, antibiotics and even ventilators if the need arises. Our phone gadgets, apps, service drivers (Swiggy, Zomato, OLA, Paytm) are all Chinese driven. China is all pervasive in our lives. Our industry cannot survive without China and our burgeoning middle and lower middle class will feel powerless without the Chinese influence in their lives.

Post Covid-19, social media is abuzz with messages calling for boycott of Chinese products and understandably so. The anti-Chinese sentiment is running high in Bharat and across the world. But China has permeated deeply into our country’s industry and service sector over the last decade and it won’t be easy for us to shake off the dragon’s dominance. For the 600 million+ middle class of our country, Chinese goods and services are a way of life. Almost all middle class households have one, if not two or three, Chinese smartphones with Chinese apps like TikTok in wide use.

Our festivities have China written all over them be it Holi, Diwali or for that matter even Christmas with Chinese gadgets, lighting abd colours available across the shelves. According to Counterpoint Research (Feb 2020), of the 158 million smartphone units shipped into Bharat, 114 million (72%) were Chinese.

The Bharatiya government had to issue an advisory to its defence forces to refrain from using Chinese apps but the Chinese infiltration in our service sector is formidable and the data of millions of Bharatiya customers must have already found its way back into Chinese data banks for appropriate or misappropriate use depending on the unfolding scenario.

The service and the manufacturing sector cannot survive without Chinese support in the present scenario because any curbs on imports from China will have a crippling effect on our already stuttering economy with growth projections nose diving from 1.8% to 0.8% in the latest Fitch ratings which forecast the 2020-21 GDP at 0.8% as opposed to the previous years 4.9 % in its GEO (Global Economic Outlook) in the wake of the global pandemic.

Chief Economist Brian Coulton of Fitch Ratings has forecast a global GDP fall of 3.6% in 2020 due to the ongoing pandemic. Professor Biswajit Dhar says that the government should immediately come out with a package for the MSME sector. “India will suffer very badly as the biggest impact will be on MSME exporters. They will also face issues in calling back their workers as several of them have migrated to their villages,” according to him.

With the manufacturing sector in disarray and relying heavily on Chinese imports, it would be imprudent and implausible to tinker let alone curtail imports from China. However, the government stepping in to impose a barricade for Chinese companies thinking of gobbling our beleaguered companies through the FDI (Foreign Direct Investment) route is a welcome sign.

China’s predatory habits where they encash on the crisis in another country cannot be underestimated and the government needs to prop up the domestic industry through much needed sops to make it withstand the Chinese onslaught.

The Prime Minister struck the right chord when he said that self reliance was the only mantra for our country looking ahead. But that will need a lot of doing and the government needs to inject our small and medium enterprise with a mixed dose of monetary and moral support to make it competitive and profitable. Only then can we reduce our dependence on China.

References:

Forbes Asia
Economic Times
Outlook India


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About the Author

Aman Gupta
Political Editor, Samast Bharat magazine