General Money || Personal Finance || Stock Markets || Real Estate ||
Well, this may seem to be the tone raised by almost all political wings every now and then at the outburst over Chinese reservations favouring Pakistan. Adding in certain elements of reality to this context certainly helps to base our judgements on stronger economics of trade that lies between India & China.
China’s exports to India were an estimated $61 billion in 2016-17 while India’s exports to China were $10 billion in that period. China has an enormous surplus with regard to India. India’s trade deficit with China rose to $46.56 billion last year. As per economic times, China’s exports to India totalled $58.33 billion, registering a meagre increase of 0.2% compared to $58.25 billion in 2015. India’s exports to China dropped 12% from 2015 to $11.76 billion.
Yes, it is perhaps true that China is certainly very friendly with one of India’s neighbours, which New Delhi does not get on with. It also has live border disputes with India (and Bhutan) in multiple places. China has excellent relationships and huge economic ties with several other neighbours.
What Happens If We Boycott:
Going by this stand – If there was a trade war, India would have to source the same goods from elsewhere and ditto for China. India is internationally competitive in the things it offers to China. Similarly, China offers good value in its exports to India. But both India and China would also need to find other markets and that would not be easy since both nations are large markets themselves.
As we already know, Chinese goods are cheaper mainly because of ‘Large scale production’ and ‘cheap labor’. If we ban Chinese products, customers will have no choice and have to buy goods at higher rates. As a thought experiment, assume that both countries have to pay a 10% premium to source from elsewhere, China then pays the equivalent of 0.09% of its GDP and an absolute amount of about $11 billion while India pays the equivalent of 2.9% of GDP and an absolute amount of about $66 billion. So going by these standings net net – India stands to loose significantly compared to China. China’s exports to India account for only 2 per cent of its total exports. So even if Indians boycott all the goods imported form China, it will not make as big an impact on China as to bring it to its knees before India.
How China Benefits From India:
As India’s economy is on the boom, every country wants to take advantage of this growth and Chinese companies are investing in India madly. And even companies like Oppo and Vivo picked the easiest way to reach to the vast Indian audience by targeting Cricket. By making a deal of $166 million and displace the logo of star India and showing the Oppo logo on Indian team Jerseys for 5 years.
And the trend is still increasing, the only difference is products are little reliable and come under well-known brands of China. But China is playing the same tactics they used to play to get more and more Indian customers by making and selling cheap products. By companies like oppp, vivo, mi, one plus with such amount of promotions and advertisements with Bollywood celebrities like Aamir Khan, Katrina Kaif as brand ambassador, they just ruined the market for mid-range smartphone companies of India like Micromax and Intex.
Well, It has been long believed that Chinese industries doesn’t spend much money on innovation, research and development, rather they just manufacture imitation goods whenever new products are innovated in other countries. Indian industries do spend money on research and innovation, hence their products are a bit costlier. So, it is morally incorrect to create a competition between Indian and Chinese goods.
India exports less to China (mainly raw materials) and imports more (mainly electronics and other manufactured goods which are in high demand). India’s pharma sector has critical dependence on Chinese imports used in drugs manufacturing like the machinery & other industrial supplies related to pharmaceutical companies.
What Specifically Happens To China If We Boycott:
China is emerging as a global power and it is trying to portray itself as a responsible economy. Any negative propaganda against China or any escalation in India-China conflict will harm China’s bid to portray itself as a progressive nation and not an authoritarian dictatorship. This portrayal helps China attract western countries and take into confidence smaller Asian and African countries for trade & Investments.
Remember the negatives of recent bilateral trade policy changes between US & China and its repercussions felt all across the world. But that’s true for all kinds of conflicts and not just a boycott of Chinese goods. In the short term, the boycott is more harmful for India than China.
Of course, China needs new markets for its manufactured goods, and India is one of those new markets where its electronic goods, especially smartphones, have found a large market. But China can find markets in other Asian countries and even in Africa. It is also trying to create a market for its good in Europe. It is in no way dependent on India.
Facts:
We cannot ban the import of Chinese products because of the WTO regulations. We should utilise the opportunity of importing some goods at cheaper rates, and need to protect the interests of Indian manufacturers as well. We should learn to take positive lesson from our counter parts to increase our focus on setting up more manufacturing bases with greater involvement by R&D groups that focuses mainly on quantifiable engineering precision & outcome based research methodologies.
Younger population of India certainly has a role to play, by way of innovation in engineering concepts with genuine business interests. It would be noted as a progressive measure – if the younger population develops a mental attitude ‘to graduate’ from being users of technological innovations to being innovators behind high precision forward looking technologies which can be exported by India to the world over.
– Article by Suman Adithya Rao (SEBI Certified Research Analyst, Management Graduate in Entrepreneurship & Small Business Management)
Looking for an investment advice – Click here!
How do you analyse business and hedge against inflation in your normal life