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How India’s ‘Made in China’ boycott could backfire

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A ‘boycott China’ campaign is gaining steam in India.

Groups in India are seeking out economic tools to punish China after a military dispute between the two sides in the Himalayan border region of Ladakh killed 20 Indian soldiers and an unspecified number of Chinese soldiers on June 15. The two sides are engaged in weekly discussions aimed at de-escalation, but the talks may not conclude until this winter.

In the meantime, a group called Swadeshi Jagran Manch, a branch of the right-wing Hindu nationalist party Rashtriya Swayamsevak Sangh, is leading calls in India to cease purchases of Chinese goods. On Sunday, the group held a rally near New Delhi, where activists burned phones and computers that were imported from China.

“We appeal [to the people of India] to boycott ‘Made in China’ items,” Vikas Chaudhary, an organizer of the event, told the Press Trust of India. “We want to hit China economically to make it realize that it will not be spared by Indians for killing our soldiers while earning money through its goods.”

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On Tuesday, India’s government took its strongest retaliatory measure yet against China, banning over 50, mostly Chinese-owned apps from Google Play and Apple App stores in India. Booted from the stores were apps from major Chinese tech giants like Bytedance’s TikTok, Tencent’s WeChat messaging platform, and Alibaba’s UC Browser, a search engine with over 130 million users in India.

In a statement, India’s Ministry of Information and Broadcasting did not tie the ban to recent tensions, but said it took the action due to “raging concerns” that the apps were “stealing and surreptitiously transmitting users’ data in an unauthorized manner to [foreign] servers.”

Nikhil Gandhi, head of TikTok India, said in a statement Tuesday that the company complies with all data privacy and security requirements and has not shared user information with any foreign government, including China.

Earlier this month, online retailers like Amazon and Walmart-backed FlipKart agreed to a government demand to display the country of origin on products sold on their platforms. The move would make it easier for consumers to single out Chinese goods.

The current backlash is the latest flashpoint in India’s anti-Chinese sentiment that has simmered for years alongside India’s rising nationalism. In 2014, Narendra Modi launched a ‘Make in India’ campaign to cement India as a manufacturing power. The ongoing coronavirus pandemic has turned India even more inward, as Modi has espoused self-reliance and domestic consumption as India tries to jumpstart its economy after a six-week lockdown.

Discretionary consumer boycotts and app bans are arguably easy initial targets in India’s rift with China. Efforts by India to further decouple from China will prove more challenging. From pharmaceutical supply chains to tech industry funding, India’s economy depends heavily on China, and it’s a largely one-sided relationship that gives Beijing an upper hand.

“In India, there has been a fairly deep resentment on Chinese imports and it’s becoming very pervasive now,” said Amitendu Palit, senior research fellow at the Institute of South Asian Studies at the National University of Singapore. “But as much as India wants to reduce its dependence on China it’s not really in a position to do so.”

China-India trade

In 2013, China overtook the United Arab Emirates to become India’s largest trading partner. China would hold onto this title until 2019, when the U.S. edged China out.

China and India’s trade relationship is far from reciprocal. From January through November of 2019, India ran a $52 billion trade deficit with China, according to India’s embassy in Beijing.

Muslim activists hold placards against China during a protest in Mumbai, India on June 20, 2020. Anti-China rhetoric has picked up in India following a clash between the two countries’ militaries in June.
Himanshu Bhatt—NurPhoto/Getty Images

The largest component of the relationship is the $20 billion worth of electrical machines and equipment India imports from China every year, a haul that includes smartphones.

India’s smartphone market is dominated by Chinese firms. Four of India’s top five cellphone makers are Chinese, and in the first quarter of 2020 those four companies controlled 73% of India’s market. Xiaomi, a Chinese cell phone maker, leads the pack, with 30% market share.

Manu Kumar Jain, managing director for Xiaomi India, told CNBC last week that Xiaomi was not “seeing any major impact on [its] business” amid the boycott campaign. Jain said potential tariffs on Chinese goods, which India reportedly has been mulling since April, are not a major concern for Xiaomi since most phones it sells in India are manufactured locally. But Xiaomi is clearly on defense; its 10,000 stores in India have started placing ‘Made in India’ banners on their storefronts.

Beyond smartphones, India depends heavily on Chinese supply chains in several other key sectors like automobiles, pharmaceuticals, and telecoms equipment.

India, for example, is the world’s largest producer of generic pharmaceuticals and supplies roughly 20% of the world’s generic drugs. But 70% of the generic drugs’ active pharmaceutical ingredients, or APIs, come from Chinese factories.

Broader decoupling?

China also wields influence in India by way of funding, with Chinese money propping up India’s tech sector in recent years.

Since 2013, Chinese firms have invested $8 billion into Indian tech startups. Chinese tech giants Alibaba and Tencent have led the way, each taking significant stakes in premiere Indian tech firms. Alibaba, for example, owns a 30% stake in BigBasket, one of India’s largest online grocers. The Chinese e-commerce giant also holds a 7% stake in Paytm, India’s top mobile payments company. Tencent has poured a combined $2 billion into 15 different Indian tech firms since 2014, including food delivery app Swiggy and the ride-hailer Ola.

In the last five years, Chinese firms have accounted for 90 investments in Indian startups. And 18 of the top 30 Indian companies valued at over $1 billion have at least one Chinese investor, Amit Bhandari, an analyst at the Indian think tank Gateway house, told the BBC last week.

In late May, Reuters reported that India’s government had drafted rules to screen all investments from countries that share a land border with India, meaning China, Pakistan, Nepal, Bangladesh, Bhutan, and Myanmar. Chinese media outlets have claimed that the rules will specifically target Chinese investors.

Going forward, Palit says, Indian policymakers will need to be careful that such scrutiny doesn’t cause Chinese funding for Indian companies to evaporate. Many Indian startups have struggled amid the pandemic and find it hard to attract domestic funding, he says. India must “be careful” to ensure foreign direct investment restrictions “don’t end up hitting its domestic industry,” Palit said.

To dull the self-inflicted blow, India’s clampdown on China must target industries that are less essential domestically, like toys or furniture, Palit says. At the same time, India must maintain ties with China for critical supply chain goods like pharmaceutical ingredients or funding for its tech sector.

India may want to decouple from China, but it must make sure it doesn’t injure itself in the process.

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Lyron Foster is a Hawaii based African American Musician, Author, Actor, Blogger, Filmmaker, Philanthropist and Multinational Serial Tech Entrepreneur.

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