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Sunday, 28 June 2020

Is Boycotting Chinese Goods Feasible? CAN INDIA BOYCOTT CHINESE IMPORTS?

Is Boycotting Chinese Goods Feasible?  

The Indo-China tensions at the Line of Actual Control has flared up the 'Boycott China' movement in India, with several influential Indians supporting the movement.

 As PM Modi urged the nation to foster self-reliance, the government is taking concrete measures such as providing a 'Made in India' filter in the Government E-Marketplace. 

Several Indian industries are heavily reliant on Chinese imports to meet the consumer demand.

 In addition, Indian exports to China constitute a major chunk of its total exports.

 Hence, any move to boycott Chinese goods will result in trade retaliation by China, which will impact India's economy more than China's. 

Will this movement of boycotting a nation fail like many others in the past have?

Can India Boycott Chinese Imports?

 CAN INDIA BOYCOTT CHINESE IMPORTS?  

With rising anti-China sentiment, there have been calls to 'boycott' China but this may not be a feasible option.

 WR .ESELF-RELIANT INDIA AND A BOYCOTT 

• Last month, PM Modi addressed the nation, strongly supporting and requesting the people to foster self-sufficiency - to rely on local goods and services.

 • While Indo-China tensions flared at the LAC, influential Indians promoted the movement on social media, garnering over 20 lakh views in 2 days.

  • Thus, began a movement toward 'boycotting' Chinese goods;  from 2015-19 India's imports amounted to $ 70.3 bn while exports to China were just $ 16.7 bn.

 INDIA'S RELIANCE ON CHINA 

• While China exports only 2% of its total exports to India, India exports roughly 6% of its total to China.

• 60% of India's electronic demands, 30% automobile components and 90% of toys, among of other major industries, come from China

. • China has invested, as FDI, over $1.2 Billion in India since 2015; they have also invested over $4 billion into Indian tech start-ups.

 • 90% of Active Pharmaceutical Ingredients for Indian antibiotics come from China


Chinese Investment into Start-Ups

Companies based in China have significant contributions into major Indian start-Ups, therefore they hold a direct stake in Indian companies and benefit through them too.

Betting on Unicorns

Chinese firms have invested in at least 18 Indian start-ups which are or were Unicorns.

Start Up
Investors
Amount($mn)**
Zomato
Alibaba
500
Swiggy
Tencent, HillHouse, etc.
500
Ola
Tancent, Steadview, etc.
500
Paytm And Paytm Mall
Alibaba
500
Flipkart
SteadView, Tencent
300
BigBasket
Alibaba, TR Capital
250
Dream11
Steadview, Tencent
150
Oyo
Didi Chixing
100
Udaan
Tencent
100
Bygus
Tencent
50
Delhivery
Fosun
25
PolicyBazaar
Staedview
NA
** Amount raised from Chinese investors; not all deal values are disclosed.

 ATTEMPTS TO BOYCOTT GOODS IN THE PAST 

• In 1930, China boycotted all Japanese goods as protest against Japanese colonization. 

• France refused to send troops to Iraq post 9/11 in response to which the US attempted to boycott French goods.

 • Arab nations have boycotted American goods over the years due to their conflicting stance about Palestine.

 • The US-China trade war is a recent situation when such a limitation has caused harm.


OUTCOMES OF SUCH MOVEMENTS 

• None of these movements to boycott a nation and its produce have been fruitful globalization, and the deep integration of supply as a result of chains.  

• Every nation is intricately reliant on multiple other nations;  hence, it is no surprise that the US-China trade war has reduced both countries' GDP growth by nearly 1 percentage point. 

 • There are consequences to other countries too, as the same trade war has reduced global GDP growth by 0.7 percentage points.

THE CONUNDRUM WITH CHINESE GOODS 

• While India aspires to be self-reliant, it also aims to contribute and be a part of global supply chains;  2 goals which could possibly be contradictory. 

• Nations operate on quid-pro-quo trade agreements;  if India manages to steer away from Chinese goods, it could trigger retaliation and a potential trade war.

  • Indian consumers 'buy Chinese' because of their high quality-low cost nature;  buying an 'inferior' product out of patriotism could indeed foster inefficiency and hinder the goal of being part of global supply chains.

 GOVERNMENT ACTION TOWARD THE STEP 

• In an implicit move to curb Chinese imports, the government asked sellers to mention the 'Country of Origin' of goods and services listed on the Government E-Marketplace (GeM).

 • A 'Make in India' filter will be provided for products that comprise of at least 50% local content.

 • A similar mechanism in private platforms is being suggested, aiding consumers in not 'buying Chinese'.

 • The Government might also hike import duties and strengthen trade barriers on 300 products.

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NOT A FEASIBLE COURSE OF ACTION PRODUCT

 • While import substitution seems like a good idea, it often doesn't maximize welfare;  goods produced in India will likely be more expensive and obsolete.

 • Economically irrational protections' to Indian industry,   Indian immune to major international a competitor, could prevent the advancement of said industry.

 • Finally, India's immense reliance on Chinese goods makes a boycott unfeasible;  it would be years before the vacuum could be filled an immediate unplanned boycott will cause far more harm than good.

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