Outsourcing by developed economies to China in search of low-cost manufacturing has actually created a “Frankenstein”. It is now clear that Chinese have been stealthily making chessboard moves to put India in a tight position — both militarily and economically. Chinese are so swayed away by their inspiration of ancient treatise The Art of War that they have forgotten that they are messing up with India — the land of Chanakya.
Chinese for centuries have been inspired by ancient military strategist Sun Tzu, whose The Art of War is popular these days; it even inspires corporate strategies. The treatise has lessons on when to fight and when not to fight; avoid what is strong and strike at what is weak; know and deceive the enemy; appear week when you are strong, and strong when you are weak; know your strengths and weaknesses, if you know yourself, you need not fear the results of a hundred battles. Basically, it teaches that all warfare is based on deception.
In Ladakh, Chinese used their usual deceptive tactics and have challenged both military and economic might of India. While Indian Army is giving a befitting reply and is battle ready, we will have to look into the economic aspect. What should India be doing when there is a nationwide sentiment of boycotting Chinese goods?
Well, in the face of both military and economic crisis, India doesn’t have to look far away to counter the Chinese moves. ‘Chanakya Niti’ offers good solutions to the art of deception. By following Chanakya’s treatise India can pay back China in the same coin.
After what Chinese did in Ladakh, it’s a natural instinct for every Indian to hate anything belonging to China. A commanding officer and nineteen Indian Army soldiers were martyred while giving a befitting reply to People’s Liberation Army’s (PLA) misadventures. It was not expected of China to own up 43 casualties on its side, remember Sun Tzu teaches to appear strong when you are weak.
After 1962, perhaps anger against China is at an all-time high. People cannot come out on streets in high volumes to protest due to Covid-19 restrictions. But there is a public outcry, Chinese made goods are being broken down and burnt on the streets in full public view to express the national anger. There have been protests of Indian diaspora in Chicago.
Swadeshi Jagran Manch and Bharatiya Majdoor Sangh have given a call for boycott. A social media campaign called #AbChiniBand has been started. Meanwhile, Confederation of All India Traders has given a call that Chinese should not be allowed to stay in any hotels and guest houses in India. In the past too there have been clamours of boycotting Chinese goods but all such attempts fizzled out. These days the feeling is the strongest.
Interestingly there have been no restrictions from the side of Government on the inward movement of Chinese containers both at Mumbai’s Nhava Sheva port, Delhi Tughlakabad Depot or any other freight facility in India.
The question is whether is this the right time for jingoism and making reckless moves? Bureaucrats in the Government believe boycotting Chinese goods or Chinese citizens in India is an impulsive move, which could have far reaching consequences. A view has to be taken.
There is a need to understand why nobody from the Government condoned the call of boycotting Chinese goods. One reason could be that India is bound down to honour several World Trade Organization agreements. Though WTO guidelines also provide enough mechanism to stop Chinese goods by stopping them through quality testing and strategic compulsion clauses.
Government is actually exploring options of doing away with dependency on China on the economic front. It certainly cannot happen overnight. But it is not impossible amidst the strong public opinion. If people of the country decide to do anything no one could stop them.
While India’s military retaliatory action requires a surprise element and the right time to strike like a crouching tiger, economic dependence on China needs long-term planning. All of us could have made a better sense of India’s wait and watch. We carefully heard what Prime Minister Modi has to say in his recent address to the nation. He said timing is very crucial for finding solutions to any problem.
Acharya Chanakya in his treatise explained that before beginning any work or implementing any strategy or initiating any plan, you should always go through questions exploring all pros and cons so as to define the possibilities of your success and failure.
So, let us examine the feasibility of boycotting Chinese goods in India. My friend recently sent me a WhatsApp message. It said in his house warming party he received several gifts. When all the friends left, he unwrapped his gifts. What did he see– barring two gifts, what he got was a laughing Buddha, Feng Shui Pyramid, Chinese dragon, tortoise, Feng Shui coins, three-legged frog, and paw waiving cat. It was a realisation how we have drifted unwittingly into a trap over the past two decades because of greed for cheaper and easier options, policy and market manipulations, shift in educational job preferences and corruption. And that reversal is completely doable.
We need to rewind only 25 years i.e., when China began unleashing its treacherous designs for world domination. Unfortunately, it’s most potent allies to begin with were Americans politicians- Nixon, Kissinger, Clinton, Obama, investors businesses and Wall Street. Indian businessmen, political class joined the rat race less than 25 years back. Now that the Indian national ego is hurt once again, the proposed economic retaliation seems very much possible. The past three months during Covid-19 restrictions have already trained us to live in austerity. A year more should not be a problem. And by then we would have worked out an effective strategy to do away with the Chinese allurements. These are the national sentiments.
It is a fact that Chinese goods have penetrated deep into the rural markets of India so much so that even the remotest village in Bihar today uses Chinese electrical appliances. But there is a need to understand Chinese exports to India constitute a tiny three per cent of its total world exports. So, it becomes debatable that if India stops all the imports from China, will it really hit it hard? What about employment in India by the Chinese firms?
Feng Shui, paw waiving cat, electronic and electric appliances are not the only things China exports to India. The above-mentioned items don’t even figure among the top ten items India exports from China. According to Department of Commerce data among the top ten items which India imported from China in 2020 are organic chemicals ($7,530 million), fertilisers ($1802 million), mineral fuels ($716 million), miscellaneous chemical products ($1,143 million), plastic articles ($2,580 million), nuclear reactors, boilers, machinery and equipment, TVs and sound recorders ($12,780 million), electric machinery and equipment ($18,117million), optical photographic, cinematographic, medical and surgical instruments ($1,275 million).
In 1919 India’s total export to China was $16.32 billion and import was $68 billion. This accounted for $58.04 billion of trade deficit. The situation is indeed an alarming situation. All countries importing from China have now become dependent on it. The biggest example is the US.
In fact, the US has played a big role in multiplying Chinese economy. According to a research on US-China trade relations after 2001 China joined WTO with US support. There was free flow of capital and technology from the US to China and manufactured goods from China to the US. China became the biggest US trade partner and biggest exporter.
It started with low end manufacturing like textiles and consumer goods and gradually increased in the value chain towards machinery and electronics. Thus, as China started moving up in the value chain, there were sufficient loss of jobs in the US and many segments shifted their supply chains to China because of cost advantage. This resulted in a gradual increase in trade deficit between the two countries.
China, with its vast resources, enjoyed the developing country status as a WTO member and did not open its market for US companies through different protections available to a developing country under WTO. Also, it kept a tight control over its market and exports through state owned enterprises directly or indirectly. Thus, what US policymakers had hoped that China would become a liberal free market economy never happened; rather with time, state control increased through discriminatory policies towards foreign business through regulation, licensing norms and similar laws.
Technology transfer became more of a compulsion for US joint ventures in China rather than commercial decisions. In some cases, state owned enterprises and Chinese firms specifically targeted niche US dual use technologies which could be used for military purposes as well.
Similarly. India too has now become heavily dependent on China in a big way not just on buying ‘Ganeshji’ idols, fire crackers, Holi pichkaris and Diwali decoration lights but also on importing heavy machinery and tools.
Top bureaucrats are of the view reduction of Chinese goods import is possible but sudden snapping economic relations could lead to a major crisis situation. China is the world›s biggest chemical industry and its exports of agents for pharmaceutical ingredients in India is the largest. If we stop importing APIs from China in the absence of any immediate substitute, we may find ourselves in a situation, where we will not even be able to make life saving medicines.
Especially after the Covid-19 experiences, India will have to make a true assessment of its Chinese dependence and could even think about restricting imports of non-essential goods such as toys, clothes, shoes, phones cover, electrical goods. But before doing this there is also a need to make a realistic assessment of the capacity to deliver these goods at competitive prices.
‘Atma Nirbhar Bharat’ can certainly become a reality if we start looking for cheap alternatives for obtaining raw materials and strengthen our technology and infrastructure. Covid experience has also taught us overdependence on a particular country could be a dangerous thing. The US has learnt it the hard way.
India manufacturer’s raw material supply chain is dependent on China. If for months his factory would be closed, he would become bankrupt. So, India will first have to create an ecosystem for making parts especially for the mobile industry and lithium battery for electric cars. And find ways of becoming self-sufficient in manufacturing heavy machinery.
As of now we don’t even have an ecosystem for making crucial parts required for making medical ventilators. They are being imported. There is an urgent need to develop a Smile Curve, just like Taiwan did and China did. The Smile Curve concept developed by Stan Shih, founder of Acer Computers. It says any country which typically starts industrializing by leveraging cheap labour which provides incentives to manufacturers to shift to low cost manufacturing locations like China and Vietnam, the value addition in manufacturing countries is very low.
For example: when China initially started iPhone manufacturing, it was doing only 6 per cent value addition in the total price of iPhone. As manufacturing countries grow in experience and integrate developed indigenous technology, they grow up in the value addition, for example in the last 15 years, value addition in iPhone in China has grown from 6 per cent to 25 per cent. Now every iPhone you buy 25 per cent of revenue goes to China. There in India there is a need to invest in research and development aimed at improving technology and infrastructure. Until you have good technology you cannot make world competitive products.
As a country develops in design and technology capabilities, it will also grow in value addition. And eventually to tertiary services and R&D hub. China has grown strong in the Smile Curve and actually today it not only offers low cost manufacturing but also high-end technology, research and product development.
The outsourcing by developed economies to China in search of low-cost manufacturing has actually created a ‘Frankenstein’, which is now using its experience in manufacturing and dual use technologies to develop its military strength.
Therefore, India needs to improve its technology and infrastructure to become an alternative outsourcing destination in the post Covid scenario. This needs to be complemented by Indian missions in foreign countries. KOTRA- Korean Trade Investment Promotion Agency is a good example of how a foreign ministry could help small and medium-sized enterprises to explore overseas markets and create global jobs. Similarly, Japanese missions in foreign countries are not only pro-actively promoting Japanese entrepreneurs but are also giving suggestions to Indian Government on how to improve ease of doing business.
Indian missions abroad should be doing the same, there is a need for handholding of Indian entrepreneurs so they are informed to operate in foreign countries. Indian missions have done a great job in promoting Indian culture in foreign countries, it should be doing the same for promoting Indian businesses.
Let’s pitch our capabilities to the world and let it decide whether the countries want an economic world order dominated by Communist China or they should look at democratic India as a viable option. Chanakya’s smart and informed moves had built the Mauryan empire both militarily and economically. With a strong and favourable public opinion behind it, the Government needs to make similar moves — only then it will be able check mate Xi Jinping’s Vision 2025.
The author is the Executive Editor of ITV Network. With inputs from research paper by Abhishek Anand, IRS.
