Here's why a boycott of Chinese goods won't work to our economic advantage.
Calls to boycott China-made goods have erupted across India after 20 soldiers died for their country in a violent face-off with Chinese troops in Ladakh's Galwan valley late Monday night. The protesters have also demanded revenge and severing of trade ties.
According to reports by news agencies ANI and PTI, people are burning the Chinese flag, China-made products, and effigies of President Xi Jinping.
However, a question which unfurls itself in this backdrop is if India can even afford to boycott Chinese products at this stage, given the market share that China-made goods already hold. Here we analyze the data from key sectors and try to determine if India can afford to substitute Chinese products with local alternatives and if so, how difficult will it prove to be in the long run:
Trade with China: At a glance
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Export-Import Data Bank: India and China
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2018-19
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Remark
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Export
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1.17 lakh crore
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India earns from China
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Export % share in India's total
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5.08
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Import
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4.92 lakh crore
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China earns from India
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Import % share in India's total
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13.69
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Total Trade
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6.09 lakh crore
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Trade Balance with China
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-3.74 lakh crore
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Negative; it means Import is higher than Export
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Source: Department of Commerce; GOI (Dated: 17/06/2020)
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Boycotting China is not as easy as data from key sectors show:
Smartphones:
- Market size: Rs 2 lakh Cr
- Share of Chinese products: 72%
- Possibility of substitution: Very difficult.
- Chinese brands dominate every price segment and are way ahead in R&D.
Telecom Equipment:
- Market size: Rs 12,000 Cr
- Share of Chinese products: 25%
- Possibility of substitution: Doable, but costly.
- Telcos could see a 10-15% rise in gear procurement costs and lose attractive vendor financing options if they opt for US and European suppliers.
Television:
- Market size: Rs 25,000 Cr
- Share of Chinese products:
Smart TVs: 42-45%
Non-smart TVs: 7-9%
- Possibility of substitution: Doable, but expensive.
- Alternatives to Chinese smart TVs are 20-45% costlier.
Home Appliances:
- Market size: 50,000 Cr
- Share of Chinese products: 10-12%
- Possibility of substitution: Easy now.
- But if large Chinese brands enter with much cheaper products, this may change.
Auto Components
- Market size: 43.1 lakh Cr.
- Share of Chinese products: 26%
- Possibility of substitution: Tough.
- Although China accounts for around a quarter of supplies, alternatives domestically or globally will be hard to find.
Internet Apps
- Market size: 45.0 Crore smartphone users
- Share of Chinese products: 66% of people use at least one Chinese app on their smartphones
- Possibility of substitution: Easy.
- But only if Indian users can give up addiction to likes of TikTok. Domestic alternatives have been failures so far.
Solar Power
- Market size: 37,916 MW
- Share of Chinese products: 90%
- Possibility of substitution: Almost impossible.
- Domestic manufacturing weak. Other options are costlier.
Steel
- Market size: 108.5 MT
- Share of Chinese products: 18-20%
- Possibility of substitution: Doable, but tough.
- Finding similarly priced alternatives to some product lines may not be easy.
Pharma/API
- Market size: 1.5 Lakh Crore
- Share of Chinese products: 60%
- Possibility of substitution: Tough.
- Other sources are pricier. And many encounter regulatory hurdles for large domestic chemical factories.
A boycott of Chinese goods won't work to our advantage:
- Take apart any product today, whether it is a car, a phone or an aircraft, and you will find hundreds of components from several different countries, including China. Labeling a product clearly as “Chinese" would, therefore, be almost impossible.
- What’s more, given that country’s central role in global manufacturing, such labeling may render most critical products out-of-bounds for Indian consumers.
- Xi’an Aircraft Industrial Corp., for instance, is a key supplier of components to Boeing, whose 737 Max and 747 aircraft are part of Indian airlines’ fleets. Xi’an is a Chinese company, so will India boycott Boeing for its choice of sourcing?
In 2014, economist Kilian Heilmann published a study titled "The Effectiveness of International Trade Boycotts", based on an analysis of the boycott of Danish goods by Muslim countries after a rupture over comic depictions in 2005-06 and China’s boycott of Japanese goods in response to the Senkaku/Diaoyu Island conflict in 2012.
- This study suggests that even though an individual firm of the boycotted country might be hit hard, the overall effect on the export sector is negligible, rendering the punishment effect as mostly ineffective.
- The timing of any such move by India is also questionable. China has been first off the mark in restarting industrial operations after its COVID-19 lockdown. It was the first to be hit by the outbreak, and thus also the first to recover. It will be looking for raw materials to fuel its recovery, which gives Indian suppliers a business opportunity.
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