#NewsBytesExplainer: Why 'boycotting Chinese goods' will not be easy
A few days ago, soldiers from India and China locked horns in the most gruesome clash along the Line of Actual Control (LAC) in decades. The conflict resulted in the martyrdom of 20 Indian soldiers and has since triggered a wave of calls to "boycott Chinese goods." But, is it really possible across different sectors? Let's find out.
- Clashes have angered the public
- Government has taken controlled action
- Some Chinese apps have also been red-flagged
- But, can the trade situation escalate from here?
- What does India-China trade look like in numbers?
- Chinese products are cheaper than their counterparts
- Replacing Chinese goods a daunting task
- Same goes for other sectors
- Across sectors, substitution would prove costly
- Finally, several Indian start-ups are backed by Chinese giants
Clashes have angered the public
Ever since the clashes, Indians have aggressively protested against China and its President Xi Jinping. Effigies of Jinping, along with Chinese products, have been set on fire and widespread calls to boycott China-made goods, sever trade relations with the country are being made. Chinese companies in India, including Xiaomi and OnePlus, are also bearing the brunt of Indian consumers in light of the matter.
Government has taken controlled action
Following the clashes, PM Narendra Modi said India wants peace but is capable of giving a "befitting reply" if provoked. Now, the government hasn't suspended trade with China but there have been some repercussions, including the termination of a Rs. 471 crore Indian Railways contract to a Chinese firm and DoT instructing BSNL and MTNL not to use Chinese equipment for their 4G upgrade.
Some Chinese apps have also been red-flagged
Among other things, reports have suggested that the DoT is also mulling informing private telcos to reduce dependence on Chinese firms for their network gear. Additionally, Indian intelligence agencies have asked for a ban on as many as 52 'unsafe' Chinese apps - this includes prominent names like TikTok, Mi Store, SHAREit, LIKE, Helo, SHEIN, Weibo, ClubFactory, and WeChat.
But, can the trade situation escalate from here?
However, amid calls for boycotting Chinese goods, the possibility of severing trade ties entirely looks bleak, given the economic gap between India and China ($2.7 trillion v/s $13.6 trillion) and the former's dependence on the latter. Over the years, affordable Chinese parts/goods have made their way into every Indian industry, starting from consumer durables to the digital/technology sector.
What does India-China trade look like in numbers?
In FY 2018-19, India exported Rs. 1.17 lakh crore worth goods to China but imported much more (worth Rs. 4.92 lakh crore), making a trade deficit of about Rs. 3.75 lakh crore with the Jinping-led country. Chinese goods made 13.69% of India's total imports.
Chinese products are cheaper than their counterparts
The reason Chinese products are so widely used across several Indian sectors is their affordability. Specifically, China's cheap labor and raw materials, combined with an extensive network of suppliers, manufacturers, distributors with advanced technologies and trade-supporting laws, have enabled the country to deliver goods at much lower prices than its competitors in other countries. This is why China is often called "the world's factory."
Replacing Chinese goods a daunting task
If we consider replacing Chinese products, things would be really difficult across sectors. In the smartphone market worth Rs. 2 lakh crore, 72% of the products are Chinese. Similarly, Chinese suppliers make up 26% of the Rs. 43.10 lakh crore auto component market, 60% of the Rs. 1.5 lakh crore pharma market, 25% of the telecom equipment market, and 90% of solar power market.
Same goes for other sectors
Among others, Chinese products make about 42-45% of India's smart TV market, 10-12% of the home appliances market, and 18-20% of the steel industry.
Across sectors, substitution would prove costly
That said, in the broader scheme of things, substituting Chinese products with other alternatives might be difficult in most, if not all, industries. Not to mention, even in cases where substitution might be possible, it will be hard to procure similarly-priced alternatives, be it for telecom equipment or something else. The alternatives will most likely be pricier.
Finally, several Indian start-ups are backed by Chinese giants
Beyond that, it must also be noted that several Chinese giants have invested in dozens of start-ups, including many unicorns, in India. Since 2015, the Chinese have pumped as much as $7 billion in Indian start-ups and, currently, 118 start-ups have $5.6 billion in un-exited Chinese investments, according to data from Venture Intelligence. This makes blocking out China even more unlikely.
