Aksai Chin is the territory responsible for the violent stand-off between China and India on the 15th June 2020. China claims they administer the Aksai Chin region whereas India is adamant that it is part of the union territory of Ladakh. The skirmish occurred on the Galwan River Valley (a line of demarcation) which flows through Aksai Chin into Ladakh and has cost the lives of 20 Indian soldiers as well as an unreleased number of Chinese casualties. It is the first deadly clash in the border area in at least 45 years.

Geopolitical tensions have risen between the two Asian economic powerhouses alongside the surging nationalistic feeling within India, which is enraptured in the heightened ‘Boycott Made in China’ campaign promoted by Indian officials and locals.

Ramdas Bandu Athawale, India’s Cabinet Minister of Social Justice and Empowerment, firmly believes that “China is a country that deceives. India should boycott all products from China”.

Supporting Athawale’s belief is Ram Vilas Paswan, India’s Cabinet Minister of Consumer Affairs, Food and Public Distribution. He said in a June 18th conference that he wants “to appeal to everyone the way China is behaving” and “we should boycott all Chinese products” as a “strong reply for their barbaric attack”.

Additionally, the Indian Telecom Ministry has also acted by banning Chinese tech products. The ministry has asked state-owned telecom carriers Bharat Sanchar Nigam (BSNL) and Mahanagar Telephone Nigam (MTNL) to shun Chinese telecom equipment in their 4G network upgrading.

The posing question is therefore the effectiveness of this campaign. Senior Congress Leader P. Chidambaram maintains the opposing view that “India must continue to be part of the global supply chain and not boycott Chinese goods. What part of Chinese trade with India is China's world trade? It's a fraction”. Statistics can support the latter part of Chidambaram’s belief as China is India’s second largest trading partner with whom they have a US$51.2bn trade deficit with. On the other hand, India only ranks 7th as China’s trading partner which shows that China does have the comparative export advantage over India.

Besides the view that boycotting Chinese products will have little impact on China’s economy, it may also backfire onto India. Although India has tightened its FDI rules to prevent hostile takeovers of Indian companies, India’s persistent limitations in manufacturing has inevitably allowed Chinese inputs to become entrenched in all aspects of the supply chains. This ranges massively from footwear to solar panels.

The most significant industry that China has penetrated would be the technology sector.

In the smartphone industry, the four oligopolistic brands: Xiaomi, Vivo, Realme and Oppo have accumulated over 60% of the smartphone market share in India. Chinese technology companies Alibaba and Tencent have also invested heavily in Indian unicorns (tech start-ups) such as Zomato ($200m), Paytm Mall ($150m), Big Basket ($250m) and Ola ($500m). Another highly Chinese-reliant industry would be India’s pharmaceutical industry. According to some reports from the Times of India, India imports an average of 68% of its bulk drugs and intermediates from China annually. The significance of this reliance lies in the current climate of COVID-19. Hydroxychloroquine (HCQ) is believed to be a potential preventative COVID-19 drug but it greatly depends on Active Pharmaceutical Ingredients (APIs) of which China is one of the leading sellers of. Due to this increased interconnectedness between India and China, some key sectors of the Indian economy are critically dependent on China.

Despite Prime Minister Narendra Modi’s vision for ‘Atmanirbhar Bharat’, India is simply not ready to be self-sufficient yet. The withdrawal of Chinese money could lead to several unintended consequences: mass unemployment (Huawei alone has 4,000 employees in India) and a further drop in declining consumption and investment levels which would endanger the staggering economic growth in India. Perhaps this would explain Modi’s diplomatic announcement that “no one has intruded into our territory” even though it contradicts previous government statements. He is clearly a man who prioritises trade and with good reason to do so.

by KeThie Kiew

India's Boycott of Chinese Products