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China Vs. India:
Defanging the Devious Dragon - Is it Possible?
Abhijit Banerjee
June 12, 2020
10 Min
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China’s economic rise in a competitive free trade world is a narrow one-way street that is paved with in flow of capitalist Western resources but not of west propagated and universally accepted principles such as free speech, free press and freedom to access of information among its people. This cusp of economic and military power coupled with a medieval mindset with lust fo land and feudal domination over weaker neighbours with intent to reinstate its historic silk route supremacy over the current global order is what makes the current-day communist China!
Since China’s forceful & bloody takeover of Tibet, India has been compelled to share a long, arduous and disputable border with China. The humiliation of the 1962 war was salvaged in 1967 by India. However, the recent fallout is more than an isolated event that meets the eye and the pertinent question is ~ Can the dragon be contained by defanging it economically?
A couple of weeks back, Sonam Wangchuk of 3 Idiots fame made a fervent appeal over a social media post to boycott Chinese gods. This, coupled with the barbaric killing of Indian soldiers by the PLA, has fuelled the rhetoric among trade bodies and consumers to impose a punitive financial cost on China by boycotting the trade of its products in India and thereby needle them by denying our markets without incurring any collateral damage that a war imbalanced in favour China would thrust on India. Before we go into whether this trade boycott will have any impact, let’s get a snapshot of how both economies are stacked as of today!
~ However in 1980 China's GDP was at $306B and India's GDP was at $383B in PPP terms.
Though it is only natural to have an emotive reaction to border skirmishes, boycotting of Made in China products does not naturally mean more of Made in India products. Rather it would be more of Made in Bangladesh, Vietnam & Korean products. In short boycott Made in China is far from having any immediate tactical advantage for India or unexpected to have any tangible impact on China in the short-term when we delve into trade data.
Historically, there have been goods boycott movements from burning British-made clothes in pre-independent India to the boycott of Japanese cars in the US in the 1980s and early '90s to a boycott of American consumer products in the Middle East during the Gulf War. All of these have had limited financial impact initially, however, over time such movements did trigger behavioural change and found their way into trade pacts, shift of manufacturing bases and re-focused local hiring policies by global enterprises.
The answer is yes and no. In recent history, India unofficially substituted palm oil imports from Malaysia to Indonesia, thereby compelling Malaysia to withdraw its objections to its abrogation of Article 370. The US has prevented China’s Huawei from participating in 5G installations, and few other nations have obstructed Chinese companies from bidding for its critical port building and management, citing security concerns.
Despite free trade policies and WTO norms, the US has acted in a protectionist way and drawn the ire of the European Union. The US-China trade pact under the Trump administration requires China to give preferential treatment to American firms and thereby increase its purchases of US goods and services by more than 50% over the next two years.
Transatlantic Trade & Investment Partnership (TTIP) between the US & EU and the China-backed Regional Comprehensive Economic Partnership (RCEP) in the Asia Pacific are all initiatives that threaten the WTO order. However, the attempt remains to be compliant with the WTO rules.
Current day import from China might be cheaper but considering the holistic cost of containing a belligerent China, the gross national cost of import is way more expensive.
The clarion call of being ‘Atmanirbhar’ by the PM can actually reenergise the non-starter ‘Make in India’ initiative in areas we have an advantage or by broad-basing India’s import basket albeit at a cost.
These immediate to long-term shifts would require the industry to be competitive through skill development, cheaper access to capital, consistent tax laws and no ad-hoc regulation and predatory regulators.
Formation of the Quad alliance, closer ASEAN & deeper association with Japan and its large financial bodies such as JICA and other pacts are paramount as no singular nation, including India, has the required might. Trade apart, given the current world order, India has a greater diplomatic role to play as a non-permanent member in the UN Security Council, including pushing for long pending UN reforms to reflect the 21st-century scenarios, WHO and an enlarged G7. China has boundary disputes with 23 neighbouring countries and is finding historical reasons since the Qing & its predecessor, the Ming Dynasty era of 500+ years ago. India does have levers when it comes to Uyghar, Taiwan, Tibet, the South China Sea, and CPEC, but all of these need to be navigated carefully.
India cannot afford to see its relationship with China through a narrow prism of border disputes given its extensive co-mingling of various issues. One such is the Paris climate deal where the convergence of interests and futures of both nations is intertwined and pitted against the US. One cannot choose neighbours and neither is there any permanent friends in international politics ~
India must calibrate its ‘Atmanirbhar ~ a newer form of non-aligned policy’ beyond commerce and not allow itself to be pitted against China in the hands of the Western powers yet act in its national interest. How well our leaders blend the reality of the ‘Compete – Collaborate – Contain’ stance with the dragon, keeping its individuality, will make India’s rise to the world league tables imminent!
