India Can’t Boycott Chinese Goods, Here’s What It Can Do Instead

Our economy is more dependent on Chinese goods and capital than China is on exporting it to us.

Updated18 Jun 2020, 07:40 AM IST
Opinion
5 min read

A minor cacophonous patriotic neta once went viral for selling trinkets on social media which were allegedly rebrands of stuff he had bought on the Chinese e-commerce platform Alibaba. The man was mercilessly trolled for peddling extreme nationalism with Chinese imports. The irony was especially ripe given that the leader belongs to the same ecosystem which periodically trends calls to boycott Chinese products on Twitter using China-made phones.

This might look like rank hypocrisy, but the reality is not that black and white. Just because we use Chinese products, it does not mean that we shouldn’t want to boycott them or gradually replace them. India’s national movement was full of periodic calls for boycotting British goods. Many people willingly threw away clothes made in Manchester, but went home to use other stuff that was being imported. It was an inevitable aspect of living in British India.

India is Heavily Dependent on Chinese Products

We, in India, are heavily dependent on Chinese products, whether we know it or not. Forget smartphones, three-fourths of which come from China, there are innumerable goods of daily use that are made by Indian companies, but depend heavily on Chinese inputs.

For instance, when you buy an India-made LED bulb to reduce your power consumption, what you probably don’t know is that 30-40 percent of its components are imported from China. Most drugs that we buy are turned into pills in India, but at least two-thirds of the active pharmaceutical ingredient in it is imported from China.

Many things that we use today have tiny chips in them to make them user-friendly. Most of these are imported from China.

So, even if we face a military standoff with China, it is impractical to boycott everything that’s made there. And there is nothing shameful about it. This is the nature of the globalised world that we inhabit, and it will take decades for us to be fully self-sufficient.

The Massive Growth of Chinese Investment in India Since 2014

Chinese investments in India is a more complex matter. A paper by Ananth Krishnan for Brookings India, published just before the lockdown began, estimates that Chinese investments in India amounted to $1.6 billion till 2014, the year Narendra Modi became PM. In another three years, it grew five-fold to $ 8 billion. Mr Krishnan argues that this is an underestimation, since Chinese equity investments in Indian companies and investments routed through third countries are not included in these calculations.

The paper identifies key areas in which Chinese companies have either already made investments or have planned to invest in the next few years. Amongst the first Chinese companies to set up shop in India were heavy equipment makers Sany & Liugong. Sany has been running a plant in Maharashtra’s Chakan since 2010, and Liugong built a factory in Pitampura in Madhya Pradesh.

Chinese steel companies also have big plants in India. A majority of power companies in India use China-made power-equipment, and TBEA, one of the biggest equipment exporters, has set up a China-dedicated industrial park in Gujarat.

Chinese companies Lany, Longi Solar & CETC are expected to invest $3.2 billion in renewable energy in India. Chinese companies have entered into auto, real estate and several other sectors.

In a sense then, many products that are sold by Chinese companies are actually made in India. One key example is China’s overwhelming presence in India’s mobile-phone market, where four out of the top five brands are Chinese. Xiaomi, the market leader, has seven factories in India, and plans to invest more than $ 500 million to expand its retail presence here. Xiaomi’s rival, BBK Electronics, which sells phones under three different brands – Oppo, Vivo and OnePlus – has two factories in UP and have plans to open a third soon.

Chinese Investment in Indian Startups

Chinese capital is also making big equity acquisitions in Indian companies. As the Brooking paper says, the biggest one was Fosun’s billion-dollar stake buy in Gland Pharma in 2017. Hundreds of Indian startups have got investments from Chinese finance companies such as Alibaba & Tencent. Alibaba today owns most of PayTM. It has also made big investments in the ecommerce company Snapdeal, and the food delivery app Zomato. Alibaba is also planning equity investments in the entertainment and media space.

Alibaba’s rival Tencent has nearly 10 percent stake in our desi cab aggregator Ola. Tencent also has strategic equity investments in Flipkart, Byju’s, Practo, Swiggy, and Gaana. Xiaomi has also diversified outside mobile phones into picking up stakes in over a hundred Indian startups along with its sister investment firm Shunwei.

Much of these investments have taken place during PM Modi’s rule. Taking action against these will jeopardise a large part of India’s startup ecosystem. Similarly, making life difficult to Chinese manufacturers in India will cost jobs and affect supplies of crucial heavy equipment and electronic goods, without which no modern economy can hope to function.

'Need to Tackle this Standoff Carefully'

It is easy to attack the Modi government at a time like this, because it cannot be as bellicose with China as it can with Pakistan. Statesmanship involves understanding realpolitik and being pragmatic. There is little doubt that our economy is more dependent on Chinese goods and capital than China is on exporting it to us. So, a responsible and rational government will need to tackle this stand-off carefully.

One thing is clear, we have now reached an inflection point in our relationship with China. We need clear alliances to tackle the dragon’s overwhelming presence all around us – especially in Pakistan, Sri Lanka and Nepal. One way to neutralise China is to leverage its growing business interests in India and simultaneously building closer military ties with the US.

It’s been three decades since the end of the Soviet Union and more than a decade since Pakistan ceased to be America’s natural ally in this region. This is an opening for the Modi government, which it needs to use. It might ruffle domestic egos, but that needs to be managed through controlling public discourse. That is one thing no one needs to teach Mr Modi.

(The author was Senior Managing Editor, NDTV India & NDTV Profit. He now runs the independent YouTube channelDesi Democracy’. He tweets @AunindyoC. This is an opinion piece. The views expressed above are the author’s own. The Quint neither endorses nor is responsible for them.)

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Published: 17 Jun 2020, 02:07 PM IST
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