Does Boycotting Chinese Products Work or just a delusion?

India is very indignant after the gory clash on June 15, 2020, between the Indian and Chinese armies at Galwan Valley. In this clash, 20 soldiers including Lt. Colonel have been martyred and it is the first deadly clash in the border area in the last 45 years. After this incident, across the country, there are many calls to boycott Chinese products and halt bilateral trade, with people burning Chinese goods and electrical appliances. Does it affect China’s Economy? That’s after all, burning our own wallet money. Our Union Minister has demanded a ban on restaurants selling Chinese food even though these would be in Indian restaurants, employing Indian chefs and using largely our agricultural products to serve such Chinese dishes. It sounds ridiculous. However, many economic advisors said that boycotting the Chinese products will not benefit India right now but before going to the reasons, we have to know what is the background behind the bloody clash between our army and the Chinese army.

The background behind this deadly clash:

India shares the border that is more than 3400 km long with China and both have protruding territorial claims. From May 05, 2020, the Indian Army and People’s Liberation Army of China have been locked in a tense stand at the three points Galwan Valley, Hot Spring Area, and The Pangong Lake. Why are tensions suddenly on the rise in this area? This is because India is trying to construct a feeder road emanating from Darbuk - Shyok Village - Daulat Beg Oldi Road. This road runs along the Shyok river and it is the most critical line of communications close to the Line of Actual Control ( LAC). Hence, China is keen on controlling this area as they fear that the Indian side could end up threatening their position on China - occupied Kashmir (i.e) Aksai Chin Plateau by using the River Valley.

Reasons that led us to the present scenario:

The prime reasons are first, China is India’s second-largest trade partner. China accounts for 10.6% of our trade. But our country is one of the smallest trading partners in China. India accounts for only 2.1% of Chinese trade. Suppose if India bans trade with China, India will lose 10.6% of the trade whereas China only loses 2.1% of their trade with us. Therefore, banning trade will not affect China.

Secondly, Boycotting Chinese products will wreck the Indian poor at the most because they are price-sensitive. For example, if the Chinese electronic gadgets and appliances were replaced by either costlier American/ Japanese electronic gadgets and appliances or less efficient Indian ones, Richer Indians may still survive this ban by buying the costlier option. But the number of poor, either have to forgo buying this costlier option or suffer by buying less efficient Indian ones.

Likewise, all the Chinese goods and products that are in India are already paid for and by banning their sales, it will be hurting the Indian retailers. According to the World Trade Organisation (WTO) data for 2018, 15.3% of India’s imports are from China and 5.1% of India goes to China. For instance, if India imposes the ban on the import of Chinese goods, several businesses in India which imports raw materials like organic chemicals which used to manufacture drugs and intermediate goods like electric machinery, optical and photographic measuring equipment, nuclear reactors which are used to produce final goods that are either sold domestically or exported to other countries will get affected.

We may lose out on Chinese investments, as China investment in India has been augmenting steadily over the past 2 decades. Nearly 225 Chinese companies have invested in India between 2003 and 2020 for Indian startups like Paytm, Zomato, Swiggy, Oyo etc. Therefore, overall it will hurt India a lot more than China.

Will India boom up without depending on the Chinese products ?

From my point of view, India will overcome by itself without depending on Chinese products. The call to boycott Chinese products comes at the right time when our Prime Minister Narendra Modi is promoting a campaign to make the country self - reliant under the Aatmanirbhar Bharat Mission. India can boom up itself if our government improves or changes certain economic and funding policies, but also at the same time we have to find and accept the alternatives for Chinese products and apps.

According to the World Trade Organisation (WTO) regulatory law, any country should not impose high tariffs on imports for a particular country. So India cannot impose high tariffs over the import of Chinese goods to some extent and also cannot ban trade with China completely. Instead, we can reduce the purchasing of Made in China products and we must be very clear that we must reduce the purchasing of ‘Made in China’ products rather than ‘Assembled in China’ products. There is a vast difference between them. Made in China products means products which are made with the help of Chinese laborers with the Chinese raw materials, whereas Assembled in China means parts will come from the other countries and will be integrated by the sourcing manufacturers who put the parts together to assemble the product in its final form with the help of Chinese laborers. For instance, Apple iPhone’s sub-components come from the USA, and the parts are assembled to form the final product (i.e) iPhone. So we have to be aware of this before buying a product.

Importing raw materials for the manufacturing sectors like Steel, Copper, etc from China is very economical compared to the production of steel, copper in India despite our country having vast resources. This is not because of Production cost. Both India and China have the same production cost. It is just because of inadequate transportation infrastructure and excessive service taxes. So, if our government improves our country’s transportation infrastructure and minimizes the service taxes over the domestically produced raw materials, then depending on the imported raw materials from China by our manufacturers will be drastically reduced. They must also provide lucrative incentives to the private manufacturing sectors for both domestic transporting and exporting their products like China.

Likewise, the government should increase the domestic credits with a low-interest rate for our domestic business firms, startups, and for the aspiring entrepreneurs. According to the 2018 World Bank’s report, Domestic credits to the private sectors in China was 161.4% of its GDP. Whereas Domestic credits to the private sectors in India was only 50.1% of its GDP. So, the government must have to increase the domestic credits to the private sectors with the help of the Reserve Bank of India (RBI) with updated regulatory acts and funding policies because a high value of Domestic credits to the private sectors (% of GDP) is a harbinger of a strong national economy. So, it provides greater opportunities and spaces for the private sectors to develop and grow and the betterment of the private sectors plays a vital role in the development of our country’s economy.

Due to the Cost leadership strategy of China’s smartphone industries like Xiaomi, Vivo, Oppo, Oneplus, etc., Indian smartphone industries like Micromax, Lava, Celkon, Xolo, Lyf, etc were about to go extinct in March 2014. If these Indian companies improve their technologies and provide good quality products with a proper marketing strategy, then many will start to buy our own nation’s product. Also, we must encourage and start to support the Indian smartphone industry’s initiatives and innovations.

Indian alternatives to Chinese Apps:

We have lots of apps in the play store and app store but still, many among us are using Chinese apps immensely in day to day life starting from Shareit, PUBG to TikTok, Zoom video conference app, etc. I know many youngsters like me will find it difficult to stop using and uninstalling Chinese apps like PUBG, TikTok but if you have faith and hope in our nation, then you will stop using all the Chinese apps and start preferring Indian alternatives to Chinese apps. Here are some of the Indian alternatives to Chinese Apps,

So say bye to Chinese products and apps and start encouraging our Indian products and apps. Jai hind !

Article by

Ajay Viggnesh U

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