[Business World]

Published date: 19 Aug 2017

Sushma swaraj said it simply in parliament in early august when she ruled out war with China over the Doklam plateau: “China has contributed to our growing economic strength. For them, there’s a lot at stake… here. They have been awarded many contracts.”

That’s putting it mildly. Chinese companies have a dominant position in electricity generation and supply in 18 Indian cities. Whether it is Oppo handphones or Paytm e-wallets (Alibaba) oretailer Flipkart (Tencent), or Chinese investments in ‘Make in India’ manufacturers (foreign direct investment totalling
$1.54 billion 2014 to 2016), or the $1.3 billion takeover bid for Gland Pharma by Shanghai Fosun, Chinese businesses are greedily eyeing India’s huge market, nearly as bigas their own. And they are only just starting to rev up.

The Narendra Modi government, worried about malware and cyber-at­ tacks that could cripple power and com­munications (remember the telecoms equipment maker Huaweiand the data­ protection hackles it raised both in the United States and India?), is movingto ring-fence Chinese companies, asking probing questions about security and requiring local units to hire Indians in senior management roles. That hasn’t prevented Huawei from expanding here
– it plans to double market share soon.
Overall, Chinese makers accounted for 51.4 per cent of India’s smartphone market in the first quarter of 2017
– a142 per cent year-on-year growth.
It is not going to be easy to disentangle the two economies. Here are some figures to illustrate how dependent we have become on Chinese goods: India’s imports from China totalled $1.5billion in 2000-01,orjust half of imports from the United States. By2016-17importsfrom China had ballooned to $61.29 billion, while imports from the UShadgrownfarmoreslowlyto$22.34 billion. India’sexports to China, on the other hand, have struggled up to $10.2bil­ lion in 2016-I7from $831million in 2000-01. In contrast, India’s exports to the US have jumped to $42.3billion in 2016-17from $9.3billion in 2000-01.

Put differently, India ran a trade deficit with China of over $51billion in 2016- 17 (nearly half of our global trade deficit of $108 billion), and a trade surplus of about $20 billion with the United States.

We import every conceivable item from China. The list is longand numb­ing. Department of Commerce data show that the biggest items we bought from China in 2016-17were organic chemicals ($5.6 billion), fertilisers ($1.25 billion), plastic items ($1.85bil­ lion), and iron and steel, raw material as well as finished products ($2.58 billion).Then there are the really
big-ticket items: nuclear reac­tors, boilers, machinery, etc. (which rose to $11.12 billion in 2016-17from $10.55billion in 2015-16) and electrical ma­ chinery and electronic goods ($21.98 billion).
Small Indian manufactur­ers I spoke with complained that Chinese products were sub-standard and came with built-in rapid obsolescence. But they were at least a quar­ter of Indian prices. “Even when a buyer wants to buy In­dian, he uses Chinese prices to negotiate us down to a level where our profit margins are paper-thin,” one manufac­turer grumbled. Fortunately, Indians give the Chinese a run for their money on precision­ engineering products, automobile parts like gears, and ball-bearings. China is good at mass manufacturing, engineering products, automobile parts like gears, and ball-bearings. China is good at mass manufacturing, but Japan still holds sway in measuring instruments and microelectronics. But are we ever going to graduate from Hindi-Chini buy buy?

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