People are talking about boycotting Chinese goods, reducing dependence on China and governments across the world are making efforts to woo companies exiting China to set up their manufacturing bases in their countries. There are many questions raised regarding this shift in people’s intentions and policy changes governments are looking to adopt. Is there a mutual consensus to isolate China from the global stage? Is it even possible? How badly do we need China? Aren’t there any alternatives? Why are border tensions escalating between India and China? and many more important questions which every individual would want answers for.
In this article, we’ll try to find answers to a few of those questions specifically in the Indian context. As a disclaimer, I’d like to inform that these views are entirely personal.
Starting off at a point, that possibly could’ve triggered this wave of anti-Chinese sentiments among the public which has made people averse to China.
WHO’s pro-China stance
It all started around late December and early January. A virus outbreak was making news all around the world and countries were getting their first imported cases of the virus. The World Health Organisation (WHO), which was supposed to lead from the front in fighting the pandemic ended up losing people’s trust. They declared it as a ‘public health emergency of international concern’ only after a few deaths and a few hundred cases began to emerge in Wuhan and officials completely locked down the city. By that time, a few cases were reported in Taiwan, Japan, Thailand, South Korea and the United States. Coincidentally, India got its first case on the same day after a Wuhan University student who had returned home for a vacation. Experts felt that the announcement was very late and it was when the functioning of the WHO came under the scanner.
They downplayed the situation without realizing its gravity. Instead of investigating into what was happening in China, sharing accurate critical information about the virus to other countries, ordering an inquiry into the origin of the virus, they were in all praise for China. They put out statements claiming that there is no evidence of human-to-human transmission according to preliminary investigation conducted by Chinese authorities, congratulated the Beijing government for its extraordinary measures to contain the outbreak, and the world would’ve seen more cases and deaths outside China for its efforts. They even went to the extent of applauding China’s transparency after the Director General’s China visit a few days before the pandemic was declared. A WHO official went on to say that he’d want to be treated in China if he had Covid19.
There was confusion when it said people needn’t wear masks if they didn’t have any respiratory symptoms and it would give a false sense of protection. Only a fortnight back, it changed its stance and advised governments to encourage people to wear masks where there is widespread transmission and physical distancing is difficult.
Such statements from the guardian of international public health during these testing times has invited criticism from across the world. US President Trump accused it of acting too slowly to alert the world and slammed China by calling it ‘Chinese Virus’ though he himself initially downplayed the spread of the virus by calling it a minor nuisance. Taro Aso, the deputy prime minister and finance minister of Japan said the WHO should be renamed “Chinese Health Organization” because of what he described as its close ties to Beijing. Taiwanese officials say the WHO ignored its early warnings about the virus because China refuses to allow Taiwan, a self-governing island it claims as its territory, to become a member. Indian Prime Minister Narendra Modi called for a stronger WHO to fight the coronavirus and the need to empower its capacity of early warning, developing effective vaccines and capacity building. He also said international bodies like WHO were set up on models of the previous century.
Conflict at the border
Talks about India’s relations with China gained more attention recently when 20 Indian Army soldiers including a colonel were killed in a clash between both armies at Galwan Valley. India argues that the People’s Liberation Army (PLA)wasn’t retreating as per the June 6 agreement and that there were illegal structures in the Indian side of the Line of Actual Control (LAC). An agreement was reached to restore status quo during Corps Commander level meet held at the Chinese side of the LAC. However Chinese accused India of crossing the LAC and trespassing into its territory. Though they haven’t officially confirmed the actual number of casualties, the estimated count is around 43. This shows how transparent China with respect to giving exact statistics. Also, it’s the first clash between these two countries where casualties have been reported since 1975.
There could be different reasons why China is getting into this conflict. A few of them are as follows:
- When the Jammu and Kashmir Reorganisation Bill was passed in the Parliament in August 2019 revoking the special status granted to Jammu and Kashmir bifurcating the erstwhile state into two Union Territories Jammu and Kashmir and Ladakh, Union Home Minister Amit Shah ascertained that Pakistan occupied Kashmir (PoK) and Aksai Chin were integral parts of India and that leaders were ready to sacrifice their lives for it.
Kashmir is an integral part of India, there is no doubt over it. Whenever I talk about Jammu and Kashmir, Pakistan occupied Kashmir and Aksai Chin are included in it and we can die for it.
In a closed door informal session of the United Nations Security Council (UNSC), China strongly condemned this act and alleged that it violated its sovereign interests and violated bilateral agreements on maintaining stability in the border area. It urged India to ‘respect Chinese territorial sovereignty’, ‘abide by their bilateral treaties’ and ‘uphold peace and tranquillity in the border areas and create favorable conditions for the proper settlement of boundary question. Since then, India’s stance officially hasn’t changed and has been a factor for China to worry about.
So, the next immediate question would be is Aksai Chin so important for China to worry about? Is it fearing India? No. China isn’t frightened about India’s claim. For them, Aksai Chin is not just any other region to administer. It is a strategically very important region for them. A national highway runs through Aksai Chin connecting Tibet and the Xinjiang province. The all weather road not only connects the two regions, but it also facilitates the mobilisation of troops. It also acts a natural barrier between the two countries as the region is clamped between two mountain ranges. So, letting loose of Aksai Chin leaves it strategically exposed.
- China thinks India wants Aksai Chin back. India is ramping up its road building that would make Aksai Chin accessible through good roads. Recently, over 1600 workers were recruited by the Border Roads Organisation (BRO) and were sent to Ladakh to ramp up the border roads and allied projects along the LAC. Quoting the words of a retired Lieutenant General from an article in ThePrint,
China is extremely suspicious of India. It believes that in the long term, India’s strategic aim is to restore the status quo ante 1950 by recovering Aksai Chin and other areas captured/secured by China. India’s alignment with the US, the presence of Tibetan government-in-exile in India, and the aggressive claims on Pakistan-occupied Kashmir (PoK) and Gilgit Baltistan — through which the prestigious China Pakistan Economic Corridor (CPEC) passes — only strengthen China’s suspicion.
- China has heavily invested in infrastructure projects in PoK and can’t afford to lose control over LAC. Its worth was $11–12 billion even before the Belt and Road Initiative (BRI) was launched. Among the notable ones is a road that connects Kashgar in western China with Gwadar Port in Pakistan, spanning 3,000 kilometers. This has drastically reduced the time and money spent for movement of goods across the world. Earlier, imports from Africa had to take a very long route through the Indian Ocean passing through the Malacca Strait (the channel between Malaysia and Indonesia) and then ultimately reach China. Now, it can leverage the Gwador Port in Pakistan and then the road that directly reaches Kashgar. So, China would go out all guns blazing to retain access of Aksai Chin.
- Another plausible reason would be to distract international attention away from its handling of the pandemic. Countries like Australia and US were vocal in calling out against its transparency in sharing important information. Australia and the European Union jointly conceived a resolution backing by many countries including India that calls for “impartial, independent and comprehensive” evaluation into the “WHO-coordinated international health response” to the COVID-19 pandemic. China immediately retorted by placing tariffs on Australian barley and banned beef imports from Australia’s four largest slaughter houses. Responding to that, Australia said is prepared to take China to the World Trade Organization over both the beef and barley issues. Placing tariffs and threatening to impose more trade sanctions didn’t distract attention. So, a line of thought could’ve been to escalate tensions at the border. Now, people especially in Social Media keep discussing about this and the limelight seems to have shifted away from the pandemic. The plan, if it was one, actually turns out to be successful.
- India is now heading the Executive Board of the World Health Organization for 3 years from now. It has got to make a tough decision on whether to back the US move to reinstate Taiwan’s observer status at the World Health Assembly or stick with its one-China policy not recognizing Taiwan. Given the fact that many countries want Taiwan on board for its exceptionally good handling of the pandemic, China is pressing India to decide in its favor.
- Companies, especially based out of US, are relocating their manufacturing bases to other countries especially in the South East Asian region like Thailand, Vietnam and Taiwan (not a recognized country though, but still functions as an independent region). India is trying to woo those companies to set up their bases here. It has identified land and is working on bringing out reforms to that investors would find it attractive. Uttar Pradesh has brought out some lucrative incentives like exemption of labor laws for almost three years, good connectivity through airports and expressways, easy availability of land parcels for developing industrial units and technology parks. Tamil Nadu has also chalked out a plan for the investors. Its single window clearance system avoids procedural delays in getting statutory clearances from various authorities. If this materializes for India and the other countries, it would be a strong backlash for China as it generally touted as the ‘World’s Manufacturing Hub’. So, it would be hitting them where it hurts and obviously they won’t want this.
- India has revised its Foreign Direct Investment (FDI) policy prohibiting direct investments under the automatic route from countries sharing land borders with India. Though it is aimed at preventing “opportunistic takeovers” of Indian companies by buying distressed assets at throwaway prices in a bid to protect local interests, it restricts the much needed capital infusion in the private sector. As we are aware of the fact that China has invested several million dollars in Indian startups — Paytm, Ola, Byju’s, Zomato and BigBasket to name a few, the Chinese have put sizable funds into 18 out of 26 India’s unicorns which have achieved valuations of more than a billion dollars. Also, this is a blanket ban on investments as there aren’t any exemptions on sectors. This doesn’t obviously augur well with the sentiments of the Chinese investors.
Having extensively discussed some of the possible reasons why the conflict is escalating at the border, let us now try to analyze why China thinks it can dominate and how heavily India is dependent on China.
- Putting up the facts first, India has a trade deficit of around $60bn with China. This effectively means it is importing goods and services worth $60bn more that what it exports to China.
- While China accounts for 5% of India’s exports and 14% of India’s imports in terms of USD, India’s imports from China (that is, China’s exports) are just 3% of China’s total exports. More importantly, China’s imports from India are less than 1% of its total imports.
- The point is that if India and China stop trading then — on the face of it — China would lose only 3% of its exports and less than 1% of its imports, while India will lose 5% of its exports and 14% of its imports.
Let the numbers sink in for a while.
Is boycotting Chinese goods a sensible option now?
There have been calls to boycott Chinese goods amid the border tensions between India and China. However, it is not as simple as it sounds as from supplying industrial components and raw materials to investments in India’s startups and technology firms, China is India’s biggest trading partner after the US.
- Indian manufacturers import intermediate goods and raw materials from China which are then made into final products for the domestic as well as international market. Active Pharmaceutical Ingredients (APIs), the biologically active substances in drugs, which are essential to produce drugs, are themselves imported from China. Electrical Components, fertilizers and chemicals are a few of the other imports we make. Cutting imports would be a double blow because it would not only make us incapable of making the finished goods, but it’ll also put businesses which are already struggling as the country unlocks, in tatters. It isn’t possible to find alternatives quickly and even if they manage to find it, it’d probably be comparatively expensive. China has the advantage of scale that is far ahead of the others, which makes it a top preference for businesses to purchase raw materials in bulk at cheap prices. Costlier raw materials naturally translates into more expensive finished products.
- It would hurt the poor who are extremely price sensitive. Consider the smart phone market for example. Xiaomi, Vivo, Oppo and Realme are the brands generally they are fond of. They offer the best value for money products that are affordable for them. Jio and these smart phones together have helped to deepen internet penetration in India. India is now the second largest online market in the world, ranked only behind China.
Around half of the 1.37 billion Indians had access to internet in 2020. There has been a consistent increase in internet accessibility compared to just five years ago, when the internet penetration rate was around 27 percent.
- Though announcing ban on everything from China might spur up nationalistic sentiments, it would be detrimental to us in a very short span. Just stop here and think what would happen if investments from China are stopped, all Chinese products are removed from the market, and all containers from China are stopped. The impact it’d have is unimaginable.
So, what can we do?
So, the practical solution would be to continuing to trade with China while making efforts to set up alternatives. We could either look for alternative sources of imports which isn’t still viable for many at this stage, incentivize local manufacturers to produce raw materials locally or getting foreign companies set up their plants in India. Simplified tax structures, faster clearance, easy acquisition of land, uninterrupted power and water supply are all the incentives companies look for. This attracts investors and helps in growth of the nation. Some states are have already started doing the needful by coordinating with the Union Government. If this materializes, a lot of employment would be generated, saves transport costs and time and helps us in realizing our ‘Atmanirbhar Bharat’ and ‘Vocal for Local’ dreams. As individuals, we can make cautious efforts to reduce using Chinese products and look for local alternatives that’ll benefit local businesses. All of them won’t happen overnight. It would surely take time but if we don’t take the big step now, we’ll probably never stand shoulder to shoulder with China forever.
Thanks for patiently reading it till the end. Feedback and suggestions are much appreciated!
