Indians prefer Made in China: China has overtaken the United States as the number one trading partner, and it is expected to triple in the future

Time Weekly

2024-05-18 11:53Posted on the official account of Guangdong Times Weekly

Source of this article: Times Weekly Author: Ma Huan

Coming around in circles, Indians may still prefer Made in China.

According to India's "Economic Times" and other media reports, the Global Trade Research Initiative (GTRI), an Indian think tank, recently released a report saying that in the 2023-24 fiscal year, China has surpassed the United States to become India's largest trading partner.

According to the data, in the 2023-24 fiscal year, the bilateral trade volume between China and India reached US$118.4 billion, and India's exports and imports to China have increased. Among them, the export value was 16.67 billion US dollars, a year-on-year increase of 8.7%; The import value was 101.7 billion US dollars, a year-on-year increase of 3.24%.

In contrast, the bilateral trade volume between the United States and India was US$118.3 billion, and India's imports and exports to the United States both declined, with exports of US$77.5 billion, down 1.32% year-on-year; The import value was 40.8 billion US dollars, a year-on-year decrease of 20%.

In recent years, trade frictions between China and India have occurred from time to time, but after a few years, the bilateral trade volume between the two countries has been rising.

Xiaomi's factory in India Source: Xiaomi India's official website

In response to the question "why the bilateral trade volume between China and India is rising", Indian Foreign Minister S Jaishankar said: "If there is a neighbor like China, India must learn to compete...... If India does more to develop its manufacturing sector and boost economic growth, it will have more diplomatic resources and tools to make a real difference around the world. ”

Liu Xiaoxue, an associate researcher at the Institute of Asia-Pacific Studies of the Chinese Academy of Social Sciences, told the Times that it is normal for China-India and India-US trade data to rise and fall in recent years, but the general trend will not change. "India's economic ties with the United States will be even closer, and India's trade with China will steadily climb."

Rely on Made in China

From candles to laptops, from industrial raw materials to mobile phone parts, India has always relied heavily on Chinese manufacturing for its development.

Since 2000, when Sino-Indian trade was developing rapidly, there has been a trade deficit between China and India. Liu Xiaoxue told the Times reporter that the Indian side has been complaining, but "there is no way", because China is a big manufacturing country, and all kinds of products manufactured by India are needed in its development.

98.5 per cent of India's imports from China are industrial goods, with Chinese-made electronics being particularly popular. India's Economic Times said that in the 2023-2024 fiscal year, India's imports of electronic products, communication equipment and electrical products reached 89.8 billion US dollars, while Chinese mainland's share reached 43.9%, which means that nearly half of India's electronic imports are "Made in China." ”

MG cars in India Source: Social media

Indian economist Melotavin said that India's exports to China are mainly minerals, metals and other primary raw materials, while China's exports to India are electronic products, machinery and other finished products with added value.

Indians are also aware of this trade imbalance. Since the Modi government came to power in 2014, it has been emphasizing strengthening its own manufacturing industry and reducing its dependence on imports, especially unilateral dependence on Chinese products. Driven by the "Make in India" strategic objective, the Modi government has also introduced measures including production-linked incentive schemes, anti-dumping duties, etc.

However, from a practical point of view, India is currently unable to get rid of Chinese manufacturing at all.

From daily necessities to electronic products, the lives of Indian people have been inseparable from Made in China, and even India's manufacturing industry is inseparable from Made in China. Salongi, chairman of the Indian Chamber of Small and Medium Enterprises, said that India's manufacturing enterprises need to import a large number of intermediate products from China for processing and export. For example, in the generic drug industry, the vast majority of pharmaceutical equipment and more than 70% of APIs need to be imported from China.

The Modi government is working hard, but the trade deficit with China is gradually widening every year, and India's deficit with China in 2023 is close to $100 billion.

The BBC bluntly said that India's efforts to reduce its dependence on Chinese imports have failed.

Can the United States overtake it?

At one point, the U.S. overtook India in its merchandise trade relationship.

According to India's Ministry of Commerce, China was India's largest trading partner in the fiscal years 2013-2014 to 2017-2018, as well as in the 2020-2021 fiscal years. However, since then, the United States has become India's largest trading partner in fiscal years 2021-2022 and 2022-2023.

But the situation is different from that of China-India trade. Major Indian exports to the U.S. include polished diamonds, pharmaceutical products, jewelry, light oil and oil, frozen shrimp, cosmetics, etc. India's imports from the United States are mainly oil, rough diamonds, liquefied natural gas, gold, coal, recyclables and scrap iron, almonds, etc. The United States is also one of the few countries where India maintains a trade surplus.

India is the largest buyer of almonds in the U.S. Source: U.S. Department of Agriculture

India once saw this as a huge opportunity. Biswajit, a professor of economics at Jawaharlal Nehru University in India, said the presence of Indian expatriates in the United States was one of the main reasons for the growth of bilateral trade. "These diasporas are creating demand for Indian goods, such as consumer goods, and we are providing those demands."

However, the specific situation determines that India-US trade cannot replace China-India trade. The United States exports energy, minerals, and agricultural products to India, while China exports to India with high concentration and high value-added goods, and even occupies a dominant position in the fields of communication equipment and APIs.

At present, India's participation in global value chains remains limited, accounting for less than 2 per cent of global merchandise exports. The Americans also complained that India's arbitrary import barriers have disrupted supply chains and caused contradictions and frictions with trading partners.

According to the WTO, India has one of the highest import tariffs in the world, about twice the global average, with an average most-favored-nation (MFN) rate of 18%. This import restriction not only bothers foreign manufacturers, but also causes problems for local manufacturers.

Difficult to "decouple"

As the trade deficit between China and India continues to widen, India's trade friction with China has also intensified.

According to the statistics of the Ministry of Commerce, India launched a total of 22 trade remedy investigations against China in 2023, which is the largest number of trade remedy investigations initiated against China in the world this year, and the United States ranked second with 12 cases.

The 22 trade remedy investigations included 20 anti-dumping cases, 1 countervailing duty case, and 1 safeguard case. Among them, the top three industries are 10 in the chemical raw materials and products industry, 4 in the metal products industry, and 2 in the non-metallic products industry.

In late September 2023 alone, India launched more than a dozen anti-dumping investigations against China in 10 days.

In India, there are also some voices from time to time who are clamoring for "decoupling" from China.

But the wallets of Indians are honest. According to a December survey by Business Today, more than half (55%) of Indians still bought "Made in China" products this year, despite many calls not to buy.

Xiaomi mobile phone Source: Xiaomi official website

And among the "Made in China" products consumed by Indians, gadgets and electronic/mobile accessories topped the list. 56% said they had purchased smartphones, smartwatches, power banks, and other electronic or mobile accessories, among others. 49% said they had bought holiday lighting, table lamps, candles, water guns, etc. 33% said they had bought toys and stationery, 29% said they had bought gifts, 26% had bought consumer electronics and appliances (TVs, air purifiers, kettles, etc.), 26% had bought household items such as lighting and furniture, and 15% had bought fashion items such as clothing, bags, and accessories.

Faisal Ahmed, a China expert at the FORE School of Management in Delhi, India, said bilateral trade between India and China was "destined to increase". Because, compared to other countries, China has a clear advantage in terms of scale of operations, technology and global value chains.

For India, China is the most important source of imports because it is cost-effective and has established a functional supply chain for most goods.

In this regard, Liu Xiaoxue also said that India will not be able to achieve "decoupling" from China in the short term. In her view, although the international environment tends to be complex, the fundamentals of China-India economic and trade cooperation have not changed, and the continuous expansion of China-India trade volume shows that the industrial chain of the two countries is very closely integrated, and China-India trade will continue to expand.

According to Xinhua News Agency, Kulkarni, a well-known Indian think tank observer, said that considering the population, market size and rapid economic and social development of China and India, the trade volume between China and India could even reach 300 billion US dollars.

In other words, the bilateral trade volume between China and India is expected to more than triple in the future.

View original image 90K

• 

• 

• 

•