Let’s get started with the trending talk of #BoycottChina. It sounds really good to say goodbye to Chinese goods thereby being self-reliant and self-dependent. But, are we riding on quite a high horse? China is just trying to penetrate at India’s border on the northeast & 20 Indian soldiers killed in face-off with China. Sino-Indian border face-off in eastern Ladakh, soldiers of China’s People’s Liberation Army (PLA) attacked and killed 20 Indian soldiers, including a colonel, on 15th June 2020, but, moreover, it has penetrated into our lives so much that we don’t even realize. Just to give you a hint, the value of goods that India imports from China is more than 515 billion yuan (with the current value of yuan being equal to Rs. 10.75 you can imagine how huge the amount is).
(1 Chinese Yuan = 10.75 Indian Rupee)
And, this was just about the products. Now think about the technology, apps that you have in your phone and the companies that have received huge amounts in Chinese investments. So, now when we say boycott China it’s not just about diplomatically ignoring China but saying no to each and everything that originates in China. And, for that, of course, we would have to develop a competitive infrastructure that can replace Chinese products and services to a certain extent.
In order to take a stand against something we first need to assess ourselves. Have you heard of Panda diplomacy? China gifts a cute pair of baby Pandas to the countries as a gesture of friendship (with which it wishes to maintain diplomatically friendly relations). Well, India still doesn’t have it. Besides that, there are border issues arising now and then. And, at international forums as well, China favours Pakistan over India (we have seen it several times in the last few years).
But, did all this affect the trade relations between India and China?
To answer this question, we’ll have to understand the preference of the Indian market and then go back a few years. India is undoubtedly an attractive market for the world and that is companies from various parts of the world wish to sell in India. But, a prominent feature of the Indian market is price sensitivity. If we find something cheap, we fall for it (in most cases). And, this is where China gets the advantage. It overproduces stuff at negligible overhead costs and dumps that in India.
(source; INDIA TODAY)
Now, we get that Chinese stuff in the market at lesser rates as compared to indigenously produced stuff. And, this is how China captures the Indian market. Compare a Chinese smartphone (Xiaomi, Vivo or OnePlus) with an Indian counterpart (Lava or Micromax). Cheap smartphones from Chinese companies have dominated the Indian market because consumers have often prioritised “
price+quality” above all else. Last year, it only took fifteen minutes for
Xiaomi’s smartphone, Redmi Note 8, to sell out once it went on a “
flash sale”. And competition from Chinese phone makers has forced incumbents to cut prices as well, in effect boosting smartphone penetration in India. In 2015 we had close to 200 million smartphone users. By 2019, this number had almost doubled. Indians surely prefer Chinese phones.
Surprisingly, some of these phones are also produced under the Make in India initiative! The problem is that Indian companies are not able to bloom because land and resources are provided to foreign companies under Make in India initiative due to which they produce and sell in India but do not let Indian companies raise their heads. However, if could pull off agreements such as technology and information sharing, then Indian companies have a chance. And, then we would be better off to become self-dependent.
In fact, foregoing these interdependencies can sometimes entail some very real consequences. For instance, India imports close to $8 Billion worth of chemicals from the
Red Dragon. But China has only been able to carve an edge in the production and distribution of organic chemicals by incurring steep social costs.
Chemical factories are notorious for emitting high amounts of pollutants. And
China’s lax environmental laws enabled manufacturers to run coal plants in full steam with the ultimate objective of minimising costs. And so, toxic factories mushroomed across the country burning dirty fuel; turning the blue skies of northern China into a dark cesspool of carbon and sulphur dioxide. Pollution masks became a staple among Chinese citizens and by some estimates, over a million people were expected to die prematurely.
So in effect, China was able to offer dyes, chemicals, and surfactants at affordable prices by polluting their skies. And reducing these interdependencies would also entail bearing the same burden. We would have to minimize compliance costs by diluting environmental norms and putting human lives at stake — Indian lives at stake. And it’s a price that we’ve refused to pay.
But that doesn’t mean we shouldn’t reduce interdependencies at all. In fact, if reducing interdependencies can provide the necessary fillip for local manufacturing to compete with foreign imports, then it’s something we should pursue vigorously. However, the approach we adopt to pursue this end goal ought to be meaningful. For the last few weeks, there’s been a concerted effect to boycott Chinese products. And truth be told, I share these sentiments. On the face of Chinese aggression, people feel the need to act. To revolt. But this is a suboptimal approach since it doesn’t achieve the stated objective and can often lead to excessive collateral damage.
The '
Remove China Apps', which was released on May 17, deletes apps like
TikTok, UC Browser and other apps that are purportedly Chinese in origin. Remove China Apps was launched last month just days after a cross-border skirmish between Chinese and Indian forces resulted in minor injuries to troops.
The incident, at a remote, mountainous crossing close to Tibet, was the latest in a long line of border flare-ups between the neighbouring powers and has fueled a fresh round of anti-China sentiment in India.
The app did identify
TikTok as a Chinese app, according to several reviews. India is one of TikTok's biggest markets, though it has run into some issues in the country. The app was temporarily banned in India last year after a court ruled that TikTok could expose children to sexual predators, pornographic content and cyberbullying. TikTok appealed the decision, saying it had cracked down on inappropriate content, and the court reversed its ruling. At the time, Bytedance reportedly told the country's top court that it was
losing $500,000 in revenue each day that TikTok was blocked.
18 of the 30 Indian unicorns (startups worth over $1Bn) have Chinese investors on board. Local MSMEs who sell quintessentially desi products often have ties to suppliers from China. Your local toy store is probably shipping all its products from China. In fact, India carries a trade deficit of $58 billion with the country and we can’t wipe away this deficit overnight.
But there is an economically sustainable approach to promote local manufacturing and it’s not driven by boycotts.
Instead, it's driven by incentives.
It's a catchphrase that I’ve been using for quite some time now and I’ll say it again. Offer the right incentives and you can get people to do the most amazing things.
The Indian government set aside
₹50,000 crores, to incentivize local and global electronic manufacturers to Make in India only yesterday. They also set aside another
₹10,000 crores to incentivize manufacturers to source and produce raw materials for pharmaceutical drugs.
This is how you reduce dependencies with China. Not boycotts.
The tragedy here is that news media has dedicated very little time to discuss the incentive programs. Instead, we’ve had endless shows on Chinese boycotts and mindless posturing. This feedback loop is dangerous. Because it gives people the impression that we are left with no recourse. But that isn’t true. Effective policymaking and incentive programs can help us reduce interdependencies. It’s a time tested principle and it is economically sound.
So if we really want to hurt China, let’s get behind policymakers and scrutinize the incentive programs. That’s how you contribute to nation-building. And on that note, might
I also ask you to share this article with your family, friends, uncles and that annoying sibling who keeps telling you to boycott Chinese products.
Jai HIND !!
VANDE MATARAM
THANK YOU
HAPPY LEARNING!!
Disclaimer: Information contained herein is not and should not be construed as an offer, solicitation, or recommendation to buy or sell securities. It is for educational purposes only.
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