Amid the clamor to boycott Chinese goods and cut trade ties, in the wake of the killing of its 20 soldiers in a border clash, experts in India have warned that it will inflict more damage to the country itself.
Out of $92 billion worth annual trade, Indian exports account for just $18 billion, according to the figures available with India’s Commerce Ministry.
Videos of Indians breaking and burning functional Chinese appliances, such as television sets, have been doing the rounds in social media. Ramdas Athawale, a government minister, even demanded a ban on restaurants selling Chinese food.
But a fact check suggests that the Indian economy is largely dependent on Chinese imports worth $74 billion annually right from antibiotics to semiconductors to equipment for power generating plants.
The data suggests that India may be opposing the Belt and Road Initiative (BRI) tooth and nail, due to strategic reasons, but it has virtually joined the Chinese trade bandwagon in a big way.
In 2014, when Prime Minister Narendra Modi assumed the office, the influx of Chinese capital in India was at $1.6 billion, which grew to $8 billion in just three years.
Most of the investments were recorded in the infrastructure space, involving major Chinese players in this sector, predominantly state-owned enterprises, Ananth Krishnan, a visiting fellow at the Brookings India, said in his study for the institution affiliated with the US-based Brookings Institution.
India’s former Finance Minister P. Chidambaram cautioned that simply boycotting Chinese products will not hurt the economy of the neighboring country. Responding to questions on the issue, he said the Chinese trade with India is only a fraction of its world trade.
"We must become self-reliant as much as possible but we cannot decouple with the rest of the world. India must continue to be part of the global supply chain and not boycott Chinese goods, “he said.
Demonetization profited Chinese company
The Chinese capital has been flowing in the Indian market in a big way over the past few years through venture investments in start-ups and penetration in the online ecosystem with its popular smartphones and their applications (apps).
According to a study conducted by the Gateway House, a foreign policy think-tank, Chinese tech investors have put an estimated $4 billion into Indian start-ups.
“Such is their success that over the five years ending March 2020, 18 of India’s 30 unicorns are now Chinese-funded. TikTok, the video app, has 200 million subscribers and has overtaken YouTube in India. Chinese smartphones like Oppo and Xiaomi lead the Indian market with an estimated 72% share, leaving Samsung and Apple behind, “the study said.
Modi’s 2016 decision to demonetize high-value currency notes to strike at the hoarding of currency by corrupt and to move to digital transactions hugely profited Chinese company Alibaba. Just a year ago, Chinese company had taken over 40% stakes in Paytm, a digital payments platform.
“Paytm benefitted from Alibaba’s superior fintech experience, making it a dominant player,” said the joint study conducted by researchers Amit Bhandari, Blaise Fernandes and Aashna Agarwal for the Gateway House.
Although China’s economic footprint in India seems negligible compared to other South Asian countries such as Pakistan, Sri Lanka, Myanmar, and Bangladesh, the study has found that 18 of the 30 Indian unicorns have a Chinese investor.
China weaving diamond necklace around India
The joint study said that China was creating a diamond necklace around India that is so attractive and insidious that it makes China’s String-of-Pearls strategy less threatening.
The String-of- Pearls is a geopolitical theory describing Chinese intentions in the Indian Ocean to build a network of military and commercial facilities to encircle India.
“The last decade has also seen heavy investments from Chinese companies into India, over $5 billion in myriad sectors, such as consumer goods, especially electronics, logistics, retail – that is, normal FDI, mostly,” the researchers said.
By 2024, India’s smartphone users are expected to double to 1.25 billion. Chinese smartphone manufacturers in India already have a 66% share of the smartphone market.
The App Annie’s The State of Mobile report said that India has witnessed a 165% increase in app store downloads between 2016 and 2018, and 50% of top app downloads were those with Chinese investments, such as UC Browser, SHAREit, TikTok, and Vigo Video, among others.
China’s investments in steel and power
According to Brookings India, two of China’s biggest steel companies have also set up plants in India. The first entrant was the Xinxing Group, which set up a two-phase project in a joint venture with three Indian partners and invested $1.25 billion in the southern state of Karnataka.
The first phase for an 800,000-tonne iron ore palletization facility was launched in 2011, while the second phase with three million tons of steel capacity is in the works. The Xinxing Group was originally a company that was set up and run by the People’s Liberation Army’s Logistics Department.
Further, an estimated three in four power plants in India use Chinese equipment. For Shanghai Electric, one of China’s biggest power companies, India is the biggest overseas market and one of its single biggest deals was the sale of 36 coalfired thermal power generation units to Reliance Power, said Krishnan.
According to the company, it has 12 power projects in India in operation supplying 20,000 MW, more than in any other country.
A fact check published by one of India’s leading newspaper the Indian Express pointed out that if two neighbors stop trading, 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. “On the whole, it is much easier for China to replace India than for India to replace China,” the newspaper said.
India was looking at the US-led Trans-Pacific Partnership (TPP) to balance Chinese trade in the region. However, US President Donald Trump’s decision to withdraw from the TPP in 2016 left India bemused.