Can India Afford Economic Boycott of China After Ladakh?

Indian consumers are hooked to a whole range of Chinese products. India's industry sources critical components from China. Indian startups rely on Chinese venture capital. Can Indians really afford to boycott China without seriously hurting themselves after the killing of Indian soldiers by the Chinese Army in Ladakh?  Let's look at the data.


China-India Lopsided Trade. Source: Times of India

Volume of China-India Trade:

India accounts for $70 billion of China's export,  less than 3% of the country's $2.5 trillion in exports. Chinese products make up about 18% of India's total imports.

India imports almost seven times more from China than it exports to it, according Indian media reports. India runs huge trade deficit with China – its largest with any country. In 2018-19, India’s exports to China were mere $16.7 billion, while imports were $70.3 billion, leaving a trade deficit of $53.6 billion.

Indian Industries Dependence on China:

Indian industry depends on China for a range of raw materials. About a fifth of  components used by Indian automobile industry come from China. 70 percent of all electronic components used by Indian companies are imported from China.

Over 45% of consumer durables, 70% of APIs (active pharmaceutical ingredients) come from China. Nearly 75% of the telecom equipment used by Indian carriers is from China, according to the Sunday Guardian.

Chinese Venture Capital in India. Source: Economic Times

Indian Startup Venture Capital:

China is the biggest source of venture capital in India.  Chinese VCs have poured about $4 billion in 90 startups in India. Two-thirds of Indian start-ups valued at more than $1 billion have at least one Chinese investor.  High-profile startups like Byju, Flipkart, Ola, PayTM and Zomato.

India's startup ecosystem continues to be dependent on large swathes of foreign funding given the ongoing absence of home-grown pools of capital. It will face significant near-to-medium term cash constraints if investors from the world’s second-largest economy walk away, according to Economic Times. 

Summary:

With growing Chinese trade and investment in India, the Indian economy has become significantly dependent on China.  Chinese VCs have poured about $4 billion in 90 startups in India. Two-thirds of Indian start-ups valued at more than $1 billion have at least one Chinese investor About a fifth of  components used by Indian automobile industry come from China. 70 percent of all electronic components used by Indian companies are imported from China. Similarly, 45 percent of consumer durables, 70% of APIs (active pharmaceutical ingredients) come from China. Nearly 75% of the telecom equipment used by Indian carriers is from China, according to the Sunday Guardian. Indians can not boycott China without seriously hurting themselves.

Related Links:

Haq's Musings

South Asia Investor Review

China in Ladakh

Pakistan's Startup Ecosystem

Consumer Durables in India and Pakistan

Digital BRI and 5G in Pakistan

Pakistan Tech Exports Exceed Billion Dollars

Pakistan's Demographic Dividend

Pakistan EdTech and FinTech Startups

State Bank Targets Fully Digital Economy in Pakistan

Campaign of Fear Against CPEC

Fintech Revolution in Pakistan

E-Commerce in Pakistan

The Other 99% of the Pakistan Story

FMCG Boom in Pakistan

Belt Road Forum 2019

Fiber Network Growth in Pakistan

Riaz Haq's Youtube Channel


Comments

Riaz Haq said…
Omnipotent Tencent eyes promising high-tech industries for future
By Zhang Dan Source:Global Times Published: 2020/6/24 22:12:33

https://www.globaltimes.cn/content/1192625.shtml

Chinese tech giant Tencent has invested 10 billion yuan ($1.41 billion) in a large-scale big data center in North China's Tianjin, covering an area of 280 mu (18.67 hectares).

Equipped with 300,000 servers, the center will provide significant support to the company's business in North China and serve domestic internet users while offering comprehensive cloud platform services to other enterprises.

Closely following Tencent's investments in recent years, Liu Dingding, a Beijing-based veteran tech industry observer, found cloud-services have become top priorities for the company.

"Once finished, the data center will greatly facilitate Tencent's cloud service capacity and help with its partners," Liu said.

Owning China's most popular messaging app WeChat, the omnipotent tech giant is eyeing more.

And, Tencent is preparing to buy a stake in Oxford Nanopore, a biotech firm leading the UK's charge to develop testing kits for COVID-19, Sky News reported on June 19.

Investing in a diverse range of business sectors, from e-commerce to video gaming, from ride hailing to fintech, and from electric cars to social media, the tech giant has a vision for promising industries in the future.

So far, Tencent has built two major labs for artificial intelligence (AI) and cutting-edge technologies, covering AI, robotics, quantum computing, 5G and the Internet of Things.

"It is notable that Tencent has invested in multiple areas. More importantly, it does not seek control over the companies that it invests in. Instead, it empowers the companies and helps them grow together," Liu told the Global Times on Wednesday that Liu Qiangdong is still the decision- maker for e-commerce platform JD.com, rather than Tencent.

Like fellow conglomerate Alibaba, Chinese tech giants do not seek a particular label, but dabble in all areas, Liu said. "In the future, Tencent and Alibaba will perform as platforms, assisting developers and partners to explore, research, test and expand."

On Tuesday and Wednesday, Tencent's stock price soared. After eliminating weight price, the share surpassed a record high on January 29, 2018 and has witnessed 28 percent growth since 2020.

Liu noted that it shows the capital market remains optimistic about Tencent's future due to its far-sighted layouts in different industries, of which some have already achieved good results.

"The destiny of China will be driven by tech companies. The 'new infrastructure' is based on technological manufacturing and technological infrastructure building, relying on giants like Huawei, Tencent, Alibaba and the like," Liu said.

After domestic tech giants go international, they will definitely challenge the positions of Western tech giants, namely Google and Facebook, he said, giving credit to the better services and multiple functions of Chinese apps.

The Boston Consulting Group (BCG) recently published a survey of 2,500 global innovation executives and found Huawei had made an impressive leap - jumping 42 places to rank 6th among all the most innovative companies around the world.

Alibaba, Tencent and JD.com are all in the top 50.

"Digital, networked and intelligent applications make China's economy and Chinese society more resilient in the face of the COVID-19 outbreak," Ren Yuxin, chief operating officer of Tencent Holdings, said at the Fourth World Intelligence Congress in Tianjin on Tuesday.

He noted smart logistics, online healthcare services, online education and telecommuting have facilitated China's work resumption accurately and in an orderly manner.
Riaz Haq said…
Can #India afford to boycott #China? China is India’s second-largest #trading partner after #US. It accounts for nearly 12% of India’s imports incl #chemicals, #auto parts, consumer #electronics and #pharmaceuticals. $6.2 billion Chinese #FDI in India https://www.bbc.com/news/world-asia-india-53150898

India’s booming smartphone sector also heavily depends on cheap Chinese phones made by Oppo, Xaomi and others with the lion’s share of the local market.

Most consumer electronics makers say they’ll be paralysed if they can’t import crucial intermediate goods from China.

“We are not worried about finished goods. But most players across the globe import key components such as compressors from China,” says B Thiagrajan, managing director of Blue Star Limited, an Indian manufacturer of air conditioners, air purifiers and water coolers.

Mr Thiagrajan adds that it will take a long time to set up local supply chains, and that there are few alternatives for certain kinds of imports.

Chinese money funds Indian unicorns

India and China have also become increasingly integrated in recent years. Chinese money, for instance, has penetrated India's technology sector, with companies like Alibaba and Tencent strategically pumping in billions of dollars into Indian startups such as Zomato, Paytm, Big Basket and Ola. This has led to Chinese giants deeply "embedding themselves" in India’s socio-economic and technology ecosystem, according to Gateway House, a Mumbai-based think tank.

“There have been more than 90 Chinese investments in Indian startups, most of them made over the last five years. Eighteen out of 30 Indian unicorns [tech startups valued at over $1bn] have a Chinese investor,” says Amit Bhandari, an analyst at Gateway house.


At $6.2bn, direct Chinese investment in India appears relatively small. But, Mr Bhandari says, restricting the likes of Alibaba from creating monopolies in the Indian market will be crucial given the “outsized impact” of these investments.

To that effect, India has already amended its FDI (foreign direct investment) rules to stave off hostile takeovers of Indian companies.

While China has accused India of contravening WTO principles, it’s unlikely to cut ice under current circumstances "as there is no way of enforcing any decision if an inter-country conflict is cited as a reason to justify the violations”, Zulfiquar Memon, managing partner at MZM Legal, said in an email interview.
Riaz Haq said…
Retired Indian General Says #India vulnerable to #Sino-Pak cooperation on 3 fronts in #Ladakh: #Kargil (with #Pakistan), East Ladakh (with #China) and the central Karakoram-Siachen-Shyok (KSS) area with #Pakistan ranged against India. #CPEC #BRI #US https://www.newindianexpress.com/opinions/2020/jun/23/ladakh-and-the-pakistan-connect-2160116.html

By Lt Gen (retd) Syed Ata Hasnain
From the very active western front in J&K with high-intensity anti-terrorist operations in the hinterland and the Line of Control (LoC), the security focus of the nation has shifted to Ladakh and the China-related front. We have been pursuing a policy of stabilising our relationship with China over the last many years with reasonable results. The economic benefits to both nations appeared a rational way forward although the trade relationship has been largely skewed in favour of China.

Doklam 2017 put a halt to the process of stabilisation temporarily but the same was revived through the informal summits at Wuhan and Mahabalipuram in 2018-19. Military stand-offs along the Line of Actual Control (LAC) have also been rife for some years, and the hot and cold in the relationship with China had come to be accepted as something both nations could yet live with. In May 2020, all this seems to have changed with a serious military stand-off at the LAC in Ladakh, leading to a higher level of military readiness all along the northern and eastern borders.

The recent incident in the Galwan Valley involving a major fracas between Indian and PLA troops led to bloodshed on both sides for the first time in 45 years. As tempers cool and heavy deployments continue, it is increasingly evident that besides just the Chinese connection to the Ladakh face-off, there is a serious Pakistan connect too. An understanding of this will assist in further appreciation of the situation in Ladakh.

There is no region better suited for Sino-Pak military collusion than Ladakh. Coordinated military operations from both can converge and this can seriously threaten India’s security in this area. On the political front, India’s declaration of intent to secure the areas of J&K under the occupation of Pakistan appears to have caused major concern in Islamabad.

The latter has been able to convince China of the potential Indian threat to their mutual interests in PoK and Gilgit Baltistan (GB), which are primarily about the China-Pakistan Economic Corridor (CPEC), a reasonably fragile communication artery leading from Xinjiang in China to the Indian Ocean port of Gwadar in Pakistan, along with connected projects. India’s greater political confidence in dealing with the J&K issue, as demonstrated by the decision to abrogate Article 370 in August 2019, is also leading to this consternation in the Sino-Pakistan sphere. Left at that, it is probably jointly appreciated by both that it will help boost Indian strategic confidence.

The strengthening Indo-US strategic partnership is also considered as a phenomenon that aids a scaled-up Indian confidence. Given the altered international strategic environment with the onset of the current pandemic, China views this as an opportunity to aggressively set the narrative for its domination in the post-pandemic world order. Intimidation and coercion of India are aimed at denting its strategic confidence, cautioning it in relation to its emerging partnerships with the US and its allies, and curtailing its ambitions that impinge on China’s interests. The latter primarily relates to the GB region.

Pakistan’s potential role in trying to militarily intimidate India in Ladakh can be better understood from the military geography. Three fronts exist here: Kargil (with Pakistan), East Ladakh (with China) and the central Karakoram-Siachen-Shyok (KSS) area with Pakistan ranged against Siachen and China against the Karakoram. Some interest seems to have been generated in Pakistani strategic circles about the details of the military geography of the KSS area.

Riaz Haq said…
#India bans 59 Chinese Apps, including #TikTok. The move came amid tension with #China following the June 15 clashes at #Ladakh in which 20 Indian soldiers died in action and more than 70 were injured. #BoycottChina #Modi #BJP https://www.ndtv.com/india-news/tiktok-uc-browser-among-59-apps-with-chinese-links-blocked-by-government-amid-tension-with-china-2254153 via @ndtv


The Centre has blocked 59 apps with Chinese links that included the hugely popular TikTok, WeChat and UC Browser, amid a huge economic backlash against China following the June 15 clashes at Ladakh in which 20 Indian soldiers died in action. Sources said inputs from intelligence agencies suggested that the apps have been violating the terms of usage, compromising users privacy, and being used as spyware or malware. Within minutes of the announcement, the Indian government's TikTok account MyGov, which had 1.1 million followers, was disabled.
The move comes a day after Prime Minister Narendra Modi said India has given a "befitting response" to China. He also spoke of the countrywide call for boycott of Chinese goods, juxtaposing it against the government's "Atma Nirbhar Bharat" campaign. "We will buy local and be vocal for local and this will help India become stronger," he said.

In a statement this evening, the government said the apps were blocked "in view of information available they are engaged in activities which is prejudicial to sovereignty and integrity of India, defence of India, security of state and public order."

The statement from the Ministry of Electronics and Information and Technology said it had received an "exhaustive recommendation" from the Indian Cyber Crime Coordination Centre and the Ministry of Home Affairs.

The ministry said it also received representations from people on "security of data and risk to privacy" regarding certain apps.

"The compilation of these data, its mining and profiling by elements hostile to national security and defence of India, which ultimately impinges upon the sovereignty and integrity of India, is a matter of very deep and immediate concern which requires emergency measures. At the same time, there have been raging concerns on aspects relating to data security and safeguarding the privacy of 130 crore Indians," said the release.

The move comes amid a countrywide call from traders and civil society to boycott Chinese products and services after the June 15 clashes. The government had chipped in with a bar on Chinese equipment for the 4G upgradation of the state-owned Bharat Sanchar Nigam Ltd and sacking of a Chinese firm that had a Rs 471-crore railways contract.

Last week, the government also made the mention of the "Country of Origin" mandatory for sellers listing their products in the Government e-Marketplace -- a move that's expected to add to the odds against Chinese products. E-commerce companies including Amazon and Flipkart, have decided to follow suit.

Experts suggested that the ban on apps is a major blow to China's Digital Silk Route ambitions, eroding millions of dollars from valuation of its companies. This could also lead to more countries following India's path in acting against these Apps.

"The Modi government shows its tremendous resolve and dexterity of engaging China on multiple fronts and hitting China where it hurts the most," said a party source. "This is India's first salvo to China after the border clashes, showing that India has a diverse range of retaliatory options," he added.
Riaz Haq said…
#Modi's 50% cut in #Chinese #FDI poses bleak prospect for #Indian economy. #China has become a significant FDI source for #India in recent years, with some estimates pointing to investments totaling $10 billion from 2017 to 2019.- Global Times https://www.globaltimes.cn/content/1193101.shtml#.Xv0YZonbp7o.twitter

Double blows from the COVID-19 pandemic and hostility of the Indian government may turn 2020 into a turning point for Chinese investment to India, according to a Global Times survey of experts on China-India economic and trade relations.

All experts surveyed by the Global Times predicted Chinese overseas direct investment (ODI) into India will drop "sharply" in 2020, with two experts forecasting a more than 50 percent cut. Globally, foreign direct investment is already expected to shrink by 40 percent in 2020, according to a UN report released in June.

Experts said the bleak prospect is a warning sign for the Indian government, which sees its economy running out of steam and could have counted on investment from China if Chinese investors' confidence had not been shattered.

China has become a significant FDI source for India in recent years, with some estimates pointing to investments totaling $10 billion from 2017 to 2019.

Qian Feng, director of the research department of the National Strategy Institute at Tsinghua University in Beijing, said that while investment from China steadily increased in the past few years, 2020 will not only see a 50 percent decline in Chinese investment but a turning point in bilateral economic and trade relations.

"Bad feelings go both ways, and the chance for China-India relationship to pick up in short-term is slim. Chinese investors are on the edge with risk-aversion instinct kicking in," Qian told the Global Times.

Since the deadly clash between Chinese and Indian troops in the Galwan Valley on June 15, hyper-nationalism has risen in India where calls for boycotting Chinese products and footage of Indian citizens destroying TV sets have been seen on social media. India's new investment regulation in April, which some claim is a thinly veiled policy to thwart Chinese investment in India, has also worsened ties, experts said.

Dai Yonghong, director of Institute of Bay of Bengal Studies with Shenzhen University, declared that age-old economic populism, unconstrained and unchecked by India's elite class, has simply made India an unfit destination for additional investment from China.

A sudden contraction of Chinese investment will affect India, experts pointed out, in contrast with Indian media outlets downplaying the role of Chinese capital.

Declining investment from China would further add pressure to the Indian economy, which is facing heavy growth pressure amid a severe domestic COVID-19 outbreak, Lou Chunhao, deputy director of the Institute of South Asian Studies at the China Institutes of Contemporary International Relations, told the Global Times.

"Raising thresholds or rejecting investment from Chinese companies will drop the rock on India's own feet," he said.

As India risks becoming the next epicenter of the pandemic, with more than 540,000 confirmed cases as of Sunday, its value as a viable investment destination also vaporized, analysts said.

In the IMF's latest world economic outlook released last week, India's 2020 growth projection was revised down 6.4 percentage points, from positive growth of 1.9 percent to a negative growth of 4.5 percent. The world's fifth largest economy is heading toward its first recession since 1979.

The June forecast is in marked difference with that of April's, in which India was believed to have a slightly faster growth rate for the year than China.

Liu Xiaoxue, an associate research fellow at the Chinese Academy of Social Sciences' National Institute of International Strategy, said it is economic situations that ultimately determine the flow of investment and the sudden rise in uncertainty in India would have a decisive consequence.

Riaz Haq said…
Economists say: No more a recession, India headed towards ‘depression’. From an output and employment point of view, #India is looking at anything between 15% and 22% contraction. #Modi #BJP #COVID #Economy #depression #Ladakh #Kashmir #Pakistan #China https://www.nationalheraldindia.com/opinion/economists-now-say-future-bleaker-than-ever

While everyone now has accepted the inevitable, that the GDP will contract in the current financial year (2020- 2021), the estimates vary. The World Bank pegs it at 3.2 per cent while Crisil puts it at 5 per cent. An RBI survey paints the rosiest picture as of June 10, saying that the economy will contract by only 1.5 per cent.


However, several economists warn that the impact will likely be much worse. Surajit Das, assistant professor at JNU’s Centre for Economic Studies and Planning (CESP), puts a perspective to the situation.

“Since economic recovery does not happen overnight, economic activities in the next few quarters will also take some time to recover. Looking at GDP from an output and employment point of view, I would say you are looking at anything between a 15 and 22 per cent contraction,” he says.

Das’ ominous predictions are not without ground. According to India’s retail association, sales of non-essential items - such as clothes, electronics, furniture - fell by 80 per cent in May. Even sales of essential goods - such as groceries and medicines - dipped by 40 per cent.

An independent countrywide survey involving 1,000 respondents carried out by research scholars at CESP found out that at least 80 per cent of them have put off plans of purchasing consumer durables (ACs, washing machines, TVs and other white goods), automobiles and real estate while also postponing domestic travel plans.


Veteran economist Arun Kumar in fact thinks the contraction of GDP in the months of the lockdown has been even more severe.

“I would say about 75 per cent of the GDP was wiped out in April and about 65 per cent in May. Exports, investment and consumption, all three engines of growth went into a tailspin,” says Kumar.


Kumar goes further in saying, “India would be the first country in modern history to face a depression. It would take at least three to four years to emerge out of it.”

“In the current fiscal, the GDP is set to contract by at least 30 per cent. My estimate is that from Rs 204 lakh crore, our GDP will come down to Rs 130 lakh crore. Tax to GDP ratio will fall from 16 per cent to 8 per cent. In such a situation, it would be difficult for the government to pay salaries or finance the defence budget.”

Das agrees and says, “I will strongly urge the government to universalise the MGNREGA programme and expand it to urban areas. About 50 crore Indians live in urban and semi-urban areas and there are scores of non-salaried people there who do not work in the organised sector. I will also call upon the government to remove the 100 days cap and revise the pay from Rs 202 a day to Rs 350 in rural areas and Rs 450 in urban areas. These are absolute musts till these people find employment again,” he says.

While economists have been saying time and again wage-led growth that will boost demand is the only way to remedy the situation, the government seems to think supply-side interventions will save the day. More demand leads to more output and profit and more employment. Unless the government wakes up to the reality that without aggregate investment there would be no change in demand, output and employment, the situation is likely to get worse.


Liquidity infusion into banks is meaningless unless that money reaches the economy. Loans at lower interest will simply be used by old borrowers to service old loans and not get translated into aggregate investment. Already, non-food credit offtake growth is in the negative.
Riaz Haq said…
#Modi's ban on #TikTok devastates users in #India. #Chinese app made stars out of poor villagers in India. Then it was banned. 90% of TikTok’s revenues come from #China but it had hired 2,000 #Indians and planned to invest $1 billion in 3 years in India. https://www.latimes.com/world-nation/story/2020-07-02/ban-on-chinas-tiktok-app-devastates-users-in-india

India’s TikTok nation has felt the sting.

“I am so dejected,” Gaikwad said by phone from Ambad, a village of cotton and millet farms 200 miles east of Mumbai.

By Monday, the day the ban was announced, her account had amassed nearly half a million followers. That night, she barely slept. She was mourning the loss of not just a favorite “timepass” — Indian parlance for a frivolous activity — but of a new way of seeing herself.

Gaikwad became known as the “mutton lady” after that early video and soon began posting several times daily — mostly snapshots of rural life, laced with zany comedy. Often, she is squatting over a stove on her tiled floor, stirring mutton cubes or kneading dough in her dark patterned nightgown. Or she’s lip-syncing old Bollywood love songs, using her bewildered husband, Ankush, as a prop.

In one clip, she’s sitting atop a brick wall like an Indian Lucille Ball, mock-shrieking: “I’m stuck! How do I get down?” That got 1.4 million views.

Celebrity isn’t something Gaikwad expected, growing up poor in Maharashtra state and raising four children with Ankush, who earns $120 a month as a local government employee. When she goes to the market now, she said, people stop her for selfies. Strangers ask to shoot videos with her. Some even come to her house.

“I never got into TikTok for money,” she said. “But I got respect, legitimacy and confidence. We are poor people. We have never received any attention in life. All we have gotten is disdain and scorn. TikTok turned it around.”

Akash Jadhav, a 21-year-old farmer’s son who drives a rickshaw in the rural town of Beed, is a voice for social justice on TikTok, where he posts about sexual harassment, acid attacks, alcoholism and domestic violence to more than 284,000 followers.

Now he is regularly invited to inaugurate offices and shops across the area, his travel expenses paid. His parents, who have struggled financially due to a years-long drought in the farming region, boast of him to relatives. Born into one of the lowest rungs of India’s ancient caste hierarchy, he described with pride the friendships he’d formed with a doctor, a lawyer and a police officer, men he considered far above his social station in heavily stratified India.

“TikTok opened up a new world for me,” he said.

Jadhav said he hoped India would introduce alternatives to the app. Instagram and Facebook, he added, were “dominated by a completely different section of society.”

Nikhil Pahwa, founder of Medianama, a website that covers the Indian digital industry, said that TikTok’s intuitive, full-screen design and emphasis on music made it a hit with rural Indians who found American apps too text-heavy or clunky.

“TikTok specialized in being a platform that is accessible irrespective of socioeconomic class,” Pahwa said. “That’s why it’s become a hub of creative activity from places that we didn’t expect.”

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