In FY 2019 India had a trade deficit of USD 59 Billion with China. Put simply, China was selling goods and services worth USD 59 Billion more than what it was buying from us Indians. Now, in the world of free markets and increasing globalisation, a perpetual trade deficit is not something that is healthy for the uniform growth of both the countries. India has always had a by-the-book approach to trade owing to the fact that we are the world’s largest democracy. China on the other hand has been using its whims and fancies to play around and sometimes even ignore the various trade tenets set by the WTO.
A classic example was how China reported a reduction in the trade deficit last year. Even though the trade deficit with China had come down by around USD 10 Billion in FY 2018-19, it became evident that in the same period the trade surplus we had with Hong Kong had turned into a trade deficit by almost the same amount. These are the kind of smoke and mirror tactics the Chinese use to achieve their end in everything they do.
India. The perpetual little boy
Considering the fact that China is our next door neighbour and undoubtedly the big boy in this neighbourhood, it has never left a stone unturned to ensure that India stays a superpower in progress. China wants India to be the little boy in the neighbourhood, thanks to its growing influence across the world, which is largely due to its economic might. A bigger GDP also translates into a bigger say for China in its immediate neighbourhood. China is India’s largest trading partner and in pure Dollar terms China has more to lose if it picks up a quarrel with India.
But, history has proven again and again that China doesn’t see any merit in the economic relationship whenever it comes to flexing its military and global leadership muscle. The trade deficit in question is largely due to our heavy reliance on cheap electronics and components that are made in China. Reports suggest that almost 30% of what we import from China is related to electronics. As Indians we also need to understand that unlike India, China doesn’t have a clear definition for a state-owned (public) or private enterprise.
Xi Jinping’s continuous rise as the supreme leader in China has also seen the state working its way into the Boards of almost all leading private Chinese companies. A recent report had highlighted how the Chinese State asks listed companies to include the Party in their Articles of Association.
How Private becomes Public in China
This when coupled with the introduction of a new national intelligence law in 2017 which states that “any organisation and citizen shall support and cooperate in national intelligence work” makes it clear that dealing with Chinese companies and their products can have grave consequences for national security. It is not uncommon for Chinese entrepreneurs to use their business ventures to further the interests of the Chinese government. It is also not uncommon to see highly successful entrepreneurs also holding esteemed positions in the Chinese Communist Party.
Our consumer behaviour as Indians is largely devoted to getting the maximum bang for our buck. And that is not a wrong thing to do as a consumer. But, if our need to procure that latest mobile phone with the latest camera and newest processor comes with a threat to our nation’s security, then I think it’s time we evaluated our consumer behaviour as a whole. Going forward, as Indians we need to be careful in what we buy and even more careful in ensuring that our hard earned rupee is not going to empower the Chinese Communist empire.