Opinions

Is Indian Economy in a position to boycott China?

By: Apurv Chaudhary

The graph shows that imports from China decreased by 10%. Vietnam has been benefitted the most from the trade war.

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China and its Chinese Communist Party have been using unfair trade practices to achieve economic, political, and geographical domination. It is important to boycott China, not only for India but for every democratic country in the world, realistically and practically.

Source: United States International Trade Commission

The US-China Trade War

The trade war was supported not by Donald Trump and the Republican Party, but also the Democratic Party. This trade imposed increased taxes and tariffs on imports from China, making the imports costlier. The people of the USA would not want to buy them.

Source: IMF

But doing this, the USA would also incur losses. Even the US companies which used to make products in China due to cheap labour would also face taxes and tariffs. In turn, China increased import taxes on imports from the USA. This trade war would result in economic losses for both countries.

Impact of the US-China trade war

According to the calculations of the Bank of Finland (Nov’19), due to the trade war, there was a 1% and 0.9% difference in China’s and USA’s GDP growth rate, respectively. In the USA, the most significant losses were borne by the farmers, who exported agricultural products like soybean to China. Though Trump was aware of the losses, his primary purpose was to build pressure and reduce its dependency on China. Under pressure, China finally promised to stop currency manipulation in Jan’20, protect intellectual property, and end forced technology transfer.

Phase 1 trade deal was signed to reduce tariffs mutually. This deal forced USA companies to shift its production facilities from China to Vietnam, Taiwan, South Korea, Thailand, Netherlands. India was not considered as one of the options. The government of India should focus on the growth and improvement of industries, economic conditions, and the nation’s social image.

Is India ready?

If India increases taxes and tariffs on imports from China, it will suffer a big blow, much higher than the USA. In my opinion, India is not prepared for this trade war. India has been in a trade deficit. For 2018-2019, the goods worth 70 billion dollars were imported in India from China, while only goods worth 16.7 billion dollars were exported. This deficit has been increasing since then. India is hugely dependent on China. These dependencies mostly comprise of electronics like TV and smartphones. Chinese smartphones have 76%, and pharmaceuticals have 65-70% of the Indian market share.

WHAT CAN INDIA DO?

In the case of Chinese companies On an individual level, as a consumer, Chinese software and apps could be replaced with other non-Chinese useful alternatives. The government should take the initiative to motivate the people. The Indian government recently banned 59 Chinese apps, which was necessary. Further, as Sonam Wangchuk pointed out, the nexttime the Chinese hardware like smartphones or electronics should be purchased from non-Chinese companies like Samsung, ASUS, HTC, Nokia, Apple, LAVA, Micromax, etc.

In case of products made in China, but the non-Chinese company (e.g. – iPhone manufactured in China) The companies mostly manufacture in China due to the availability of cheap labour. Imposing taxes and tariffs on these products would increase their prices, even for its people. I feel we should not boycott these products.

In the case of Chinese investment in a company

There are many Indian startups, which have some percentage of ownership with Chinese investors. Chinese companies own some percentage of companies like Zomato, Swiggy, Ola, Paytm, BYJU’s, OYO.

On the one hand, it could be argued that these companies were started in India, provide jobs and benefits to Indians, and should not be boycotted. On the other hand, it could be argued that some profit of these companies would go to Chinese companies. Chinese companies follow the Chinese Communist Party (CPC). They are bound to give their entire data if the party demands so.

In this case, we should evaluate what percentage of a company is owned by Chinese companies. If the figure is small, around 10-20%, then it would not make a huge difference. But in the case of companies like Paytm, where the share is 40-60%, these companies should be boycotted. By using it, we are, in a way, transferring majority profit to China. More than 50% share would mean that even decision making would get transferred to Chinese companies. Chinese companies, but made in India, should also be boycotted.

What can businesses do?

We need to understand that Companies and businesses would do what their customers demanded. If the customers demand the cheapest products, then no company would want to bear losses. Instead, the companies can use “not made in China” marketing tactics to attract more customers.

Government Level

Free trade agreements with countries other than China. Free trade agreements are signed between two countries to cut down their import taxes and remove barriers to facilitate trade. India’s free trade agreement with Australia and the European Union has been in negotiations for the past 8 and 10 years, respectively. As long as India does not increase these agreements, it would be challenging to reduce China’s dependency.

Vietnam has already signed a free-trade agreement with the European Union. India would have to face the brunt of it. Exports of footwear, marine products, garments, furniture that India used to send, will now diminish because products from Vietnam would now be cheaper. At this point, a complete boycott is not possible, but it is possible to reduce the dependency.

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