India Must Deal With China Cautiously

A report in ‘Times of India’ makes one think.

“China has trounced India 4-1 in trade in the first 10 months of this year with a trade surplus of $3 billion against India as compared to a trade deficit of $946 million in the same period in 2005. Chinese exports to India shot up 61% to reach $11.58 billion in that period. Indian exports notched a minor rise of 4.49% totaling $ 8.5 billion, according to the latest statistics released by the Chinese Customs for the January-October period.

Indian trade and industry has been far more receptive to Chinese goods rather than energetically taking up the task of selling Indian goods to China. Indian trade bodies visiting China, ostensibly to promote Indian goods are more interested in sourcing cheap Chinese products.

The $20 billion target of the bilateral trade set for 2008 was reached in October 2006 itself, because of a dramatic growth on the Chinese side and a slide by India, which lost the trade advantage it enjoyed in 2005. A Beijing-based businessman says, “Indian companies have been most aggressive in sourcing low-cost goods from China. Most of the businessmen visiting China are only looking for sourcing opportunities.’

How do you feel after going through this report? Is it not disgusting?

And do you know what India exports to China?

The two of its most important export items are – ores, including slag and ash, and iron and steel. Ores, mostly iron ore accounted for 57% of India’s export basket last year. With the humongous Olympics facilities in Beijing nearing completion, their demand has tapered off. Unfortunately, in the last 60 years Indian steel sectors could not expand sufficiently. Till late nineties, none of the Indian steel producers could produce the extra deep drawn steels, leave aside the more sophisticated ones, for the outer skin panels of passenger car industry Iron ore export is a real lucrative business for small players to make huge money with no value additions and exhausting the natural national wealth. Cotton is another major export item to China. India is the second largest producers of raw cotton, but Indian textile and apparel manufacturing capacity is just miniscule in comparison with the Chinese.

China exports all value-added finished products- electrical machinery, iron and steel products and paper and paper boards besides all the junk households things that are flooding the markets all over India courtesy our unscrupulous traders who visit China and buy all the rejected third class flashy stuffs that are rejected by other countries and sell to Indian consumers at huge margin.

Unfortunately, China’s quality control system is very flexible. Its manufacturers leave it to the buyers to evaluate. Wal-Mart and other buyers of US and the Western countries have their own quality control checks. Indian traders buying consumer supplies in bulk hardly bother about the quality. They are hardly accountable for the quality off the Chinese goods. It is for the consumers to buy the cheaper Chinese goods or go for the goods from other sources. And in process, the majority of them get cheated but they come to realize that late when they can’t do anything. Will the traders associations taking all the advantages from the government stop this practice of importing all the sundry items from China and cheating the domestic consumers?

If India wishes to win the race with Chinese, it will have to be smarter in deciding the strategies to save its different manufacturing and service sectors where it has some inherent superiority. Chinese are moving so fast that it will be difficult to survive. The latest news from pharma sector is the warning.

Ind-Swift Laboratories, a pharmaceutical major based in Chandigarh, halted the production of roxycomycin and arithromycin last month. “While our manufacturing cost comes to $115 per tonne, the Chinese supply the same drug at $105 a tonne. Since we could not match their rates, we discontinued the production, which stood at 1.5-2 tonnes a month,” said V K Mehta, joint managing director, Ind-Swift. It is not Ind-Swift alone. Companies like Alembic, Kopran and Torrent are all bearing the brunt of Chinese imports.

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