Sainka Walia Tuesday, 7 July 2020

Boycotting China : Yet another Masterstroke?

Sainka Walia
Tuesday, 7 July 2020

Boycotting China : Yet another Masterstroke?

After the recent stand-off between the Indian and the Chinese army, The Government has called for a boycott of Chinese products, apps, and so on. The real question is, Whether this boycott is plausible or not?

Experts say that boycotting China is easier said than done given the sheer volume of Indo-China trade and the dependence of the Indian industry and consumers on both Chinese goods and capital. This is exacerbated by the poor economic condition of India at present.

China is India’s largest source of imports by some distance. In 2018-’19, India imported goods worth $88 billion from China (including Hong Kong). This was more than 17% of India’s total imports. This figure is more than double what India imports from the United States, which is at the second place with goods worth US$ 36 billion. India, on the other hand, only exports around $30 billion worth of goods to China (2018-’19).

What makes this trade worse is the nature of what we’re exporting and importing. While India exports only raw materials and low-value items to China, it imports intermediate and value-added items. A report by American think tank Brookings estimates that three in four power plants in India use Chinese equipment.

Not only this, China completely dominates the smartphone market in India. For example, Xiaomi, Oppo, Vivo, Realme etcetera. As per Counterpoint Research, three out of four cellphones sold in India were Chinese.

Along with the technology market, China also dominates rural consumer purchases. Most of the chemicals used to manufacture fertilizers are imported from China. Any stoppage in this sector will harshly affect the Indian farmer.

In some cases, restricting imports from China will severely affect the industry’s production capability. For example, bulk drugs, Crisil classifies the sector as one with “high dependency on imports from China” with as much as 69% imported from the country. Of specific concern are antibiotics, where dependency is as high as 90%. “If China decides to pull the plug on supply [of antibiotic], it will lead to a huge public health crisis in India,” explained Sandeep Narula, Associate Professor & Assistant Dean, School of Pharmaceutical Management, IIHMR University, Jaipur

Considering the huge role of China in these sectors of our country, boycotting it will do more harm to us than them. The only solution that remains is becoming a significant part of the global supply chains ourselves which currently we are not and that is the problem.

Apart from this, Chinese companies have invested huge amounts of capital in some very successful startups in our country. Brookings estimates that total and planned Chinese investment in India stands at $26 billion as of March 2020. Much of this investment has been in the form of acquisitions. For example, Brookings explains that so deeply invested is Alibaba in India’s largest online wallet PayTM that “the Paytm app, from its design to its colours, is a mirror image of Alipay, Alibaba’s widely used payments app in China”.

China’s biggest funds and their bets in India Tencent Byju’s,Ola,Dream11,Flipkart,Hike,Swiggy,Udaan,Niyo,Gaana,Doubtnut,Khatabook,MX Player,Pine Labs,Pocket FM,Practo,MyGate Alibaba Paytm,Bigbasket,Paytm Mall,Snapdeal,Zomato,Healofy,Ticketnow,Rapido,Vidooly,Xpressbees Xiaomi Hungama,Sharechat,Rapido,ZestMoney,Oye!Rickshaw,City Mall,Marsplay Internet Source:

Thus, experts believe that the boycott will further put on hold the tech investments in India hence, startups need to prepare themselves. However, China has for long now routed its investments through subsidiary companies. Chinese funds and companies often route investments in India through subsidiary companies located in Singapore, Hong Kong, etc for eg Alibaba’s investment in Paytm was through Alibaba Singapore Holdings PVT LTD. These don't get recorded in the Indian government’s data as Chinese investments. The latest Chinese app-venture has also proven a hit with the Chinese App TikTok, being the most downloaded social media app during India’s Covid-19 lockdown, as per data from App Annie.

In 2018, as many as 44 out of 100 of India’s top downloaded apps were Chinese However, those companies that have seen the wisdom of not putting all their eggs in the Chinese basket and have decided to relocate their facilities, unfortunately, do not see India as a favoured alternative. Of the 56 companies that relocated manufacturing out of China between April 2018 and August 2019, only three came to India while 26 relocated to Vietnam, 11 went to Taiwan, and eight to Thailand. Not only this, but the past five years data also shows that India’s share in global exports has contracted, with countries like Vietnam and Bangladesh managing to grow their share. How likely is it that India would be able to reverse this trend now given how badly it has been hit economically by the effect of Covid-19?

Thus, the boycott China campaign will not only worsen our already broken economy but also cause the downfall of many successful startups and many sectors like medicine, sports, chemical etcetera. Instead of focussing on the government’s impulsive thought of boycott, we should slowly incorporate ourselves in the global supply chain and become a significant part so that, sometime in the future, we can think of boycotting China. References: