Wednesday, November 25, 2020
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The Chinese and the slow cook of the Indian industry

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The situation of the Indian Industry today is similar to that of the frog which is placed in normal water and the heat is gradually cranked up. Before the frog realizes this, it is already boiled and dead. The Chinese since the days of Deng Xiaoping and the Open Door policy which began with the Ping Pong Diplomacy in 1971 have followed the doctrine of “Bide and Hide” (Bide your time and hide your strength and never take a visible leadership position in any of the World Affairs).

Since the early 2000s the Chinese had gathered enough confidence through their business and economic growth  that they started dumping goods at unbelievably attractive prices in the various world markets, India being no exception. They started penetrating sector by sector and market by market. 

Indian industrialists (traders by nature) slowly but surely started shutting down factories and began importing these goods out of China and traded them. The reaction of the Indian government was extremely slow and in fact did not even realise what was happening which allowed an erosion of both capacity and capability.

In the beginning, this did not seem like a big problem. However as more and more sectors were taken over by the Chinese, the issues of Loan defaults, excess capacity and large scale unemployment reared their ugly heads. A few examples of sectors that I am aware of are as follow:

Large size hand moulded Castings for the Wind Turbines:

India in 2003-04 was one of the largest producers of Wind Turbines in the world in terms of Installations / year and had a thriving component market as well. In 2004 two new large foundries were established by the Chinese  funded by the Chinese government which started offering casting  at below production cost to the Indian Wind turbine manufacturers. Over the period of the next 10 years, this market was completely taken over by the Chinese. Foundries that survived in India either diverted or reduced capacity or went bankrupt. This is the same story for many other component manufacturers as well. To say that this complete sector is controlled by the Chinese would not be an understatement.

Our government at the time, in spite of many representations and evidence, did nothing for the longest time. It took them 10 years to impose anti dumping duty by which time, it was too late. Also it is interesting to note that the Chinese government started giving subsidies to their manufacturers equivalent to the antidumping duty imposed by the Indian Government, within one month of the imposition of duty.

Injection Moulding machines :

Indian injection moulding machine manufacturers also decided to abandon their Indian suppliers and went to China for components, but in doing so they drew the interest of Chinese Injection moulding Machine manufacturers. This led to the Chinese dumping complete machines in India, and when anti dumping duty was imposed on the machines, they started round tripping their machines through FTA countries such as Thailand. When belatedly the Indian government realised the same, these companies set up so called assembly shops in India where they import complete machines in knocked down parts and show as if they are assembling in India to evade the anti dumping duty. 

There are many such examples across sectors right from Road Construction, Earth Moving Equipment, Transformer Manufacturers, Toys, Electronics, Paper, Agarbatties, Steel, Forgings, Rare Earth Minerals, Permanent Magnet Industry, Foundry Chemicals, Cables, Electrical Cabinets, Bearings, Hydraulic Seals, Solar Cells, Power Tools, Measuring Instruments, Industrial Chemicals, Power Plants, Idols of our Gods, Fire Crackers etc  to name a few.

Further Chinese government uses all and any measures to ensure that their payments are realised under any circumstances promptly unlike in India

What makes China such a dangerous adversary:

  1. It has a large population. 
  2. They are members of the International Community and ask all the other members to follow the law, but when it comes to them they shamelessly refuse.
  3. They have no ideology and for them everything is expendable (even their own citizens )
  4. Their narrow world view. Historically Chinese have seen everything and everyone on the other side of the Chinese wall as their enemies. Even today they do not have any friends, only stooges, example is that of Pakistan, Srilanka, Nepal, a large part of African countries. In all these countries they have created debt traps which ultimately has resulted in them giving up critical infrastructure to China and China has used them to establish significant military presence in these regions . Therefore they will always see India, which has a strong Democracy and a country with a similarly large population as a country that they have to dominate and humiliate and keep in check no matter how much we do to accommodate them and no matter how much business we do with them.
  5. They are an authoritarian regime where there exists no labour laws, no contract laws and whatever laws may exist may be changed as per the wish of the CCP. 

How has the world dealt with them?

USA 

The USA has by far, the largest military apparatus in the world and the way they may see it is that they do not import goods from China but they export $. If push comes to shove, the USA knows that they can beat the Chinese militarily and since all their debt is in dollars they can always do what the Chinese did to them in 1950( Refuse to pay the debt). Also the USA leads the world in cutting edge technology in IT and electronics and software and even though China is catching up,they still have a long way to go . Even so they have now belatedly acknowledged the flaw in the foriegn policy in which, the lure of cheap Chinese goods and so called big market, allowed the theft of trillions of Dollars worth of trade secrets. Their assumption that with prosperity, the Chinese will become more transparent was greatly misplaced  and in fact with prosperity and technology the CCP has made China , a surveillance state with their citizens allowed only to read and see  that what the CCP wants them to see.

Europe 

Europe has set up various trade, tariff and non tariff barriers which blocks cheap and undesirable imports from China, which enables them to protect their industry and their way of life. Their populations are also not very large and as a result unemployment is not a problem 

Japan 

Japanese people by their nature are extremely nationalist. They will always patronize Japanese products.  Even when Japanese set up factories abroad they continuously promote Japanese suppliers in their supply chain.By policy, government companies and private corporations  manufacture some portion of their critical supplies in Japan no matter the cost. This, in a way protects their industry 

India’s Situation 

India, it seems has never fully understood the Chinese threat and in spite of past wars and their open adversarial behavior on various occasions, be it in Doklam, their various incursions into our territory, their blocking our entry in various international forums,  openly supporting Pakistan to the detriment of our interest, we have granted them open and unfettered access to our citizens and market and critical Infrastructure, without getting the same access in return.

Slowly and steadily our trade deficit with China has increased to almost 5,00,000 crores/ year. 

Our critical industries stand dependent on them, our industrial capacities and capabilities stand significantly diminished. 

While I did not expect much from the Dr Manmohan Singh dispensation which was more interested in the personal gain of one family rather than the country, it now seems that even the present government under Shri Narendra Modi has failed to fully grasp the severity of the problem. It has taken them 6 years of soft diplomacy (failed attempts), a full blown Pandemic and the loss of 20 of our Soldiers for the government to realise the extent of the damage caused. Hopefully, now the government will realize the singular truth that Chinese can never be trusted.

Fortunately for Mr Modi it is still not too late and there is a growing Global call to contain China. The other good thing that has happened under Xi Jingping, China has also abandoned their old doctrine and has openly started dominating and bullying weaker nations and started challenging the developed nations be it US or Australia, Norway, Canada and India. This has also forced these democracies to understand and acknowledge the threat that is China .

Also while there is no doubt that China has embedded itself deeply in the global supply chain, I believe China has greatly overestimated its importance to other countries and has greatly underestimated the threat and effects of alienating markets like India, Australia ,UK ,Vietnam , Philippines on its own economy. One must remember the fact that the Chinese people have given up their freedoms in lieu of the promise of a perpetually growing Economy and when countries like India realise the problem and step up their game, their population will not just sit by when their economy takes a hit .

What India needs to do 

  1. First Accept and acknowledge the fact that China will never, if given a choice, allow the peaceful rise of India and will do all in its power to hinder and pinch our growth .
  2. The Political class needs to publicly acknowledge that China is a hostile nation and public policy should reflect the same.
  3. We also need to understand that we are a democracy and there are certain costs that we must pay to remain a democracy. For example while running an industry there are costs of compliances to labour laws, state laws, procedures, Logistics, bureaucracy, right to rule of law, legal costs, unions  so on and so forth . Every company in India is subjected to the rule of the land (rightly so ) and there are direct and indirect costs associated with it. We are also a free nation so each owner is responsible for his own profit and losses.Hence our price of products can never be compared to that of state subsidised products which are manufactured in places which do not have transparent laws, human rights such as right to expression, freedom of speech, right to information,  right to form unions, right to criticize their government . 
  4. Also we must understand that China will never play fair in business, when push comes to shove,  if they are allowed to be in a position where they can control critical infrastructure they will use that position against us .
  5. It is the job of the government to protect its citizens and companies and protection is the most essential aspect for which we pay them taxes .The government needs to immediately ban and bar entry of Chinese companies and products which are of the following nature, Critical to Security of the country and those sectors which have the potential to employ large number of people. We cannot let our market be used to create employment in China at the expense of our people. This is more true in a post Covid world where unemployment will be a big problem. The government needs to do this in a synchronized manner and not on a ministry to ministry basis. There is more than enough capacity and capability in the country to meet our needs and wherever there may be not enough capacity the government has to trust Indian businesses to either develop those capacities here or find non-Chinese alternatives.
  6. Exit all FTAs post haste,especially with east Asian countries ,which have not yielded any benefit to us and are being used by the Chinese to round trip their products
  7. On the strategic and military front we must be prepared to take sides which are in our interest ,we must shed the hangover of the past of non-alignment and this needs to reflect in our foriegn policy. We must also, as a people, be ready to bear certain hardships and expect that in our competition with China, there will be blood. But this should not deter us from our path of self reliance .
  8. We as citizens also need to make a conscious choice as regards our buying habits and must refrain from buying Chinese products wherever possible and we also need to trust our fellow countrymen that the products that they make are good enough for us and we need to stop our fascination for all things foriegn. We also need to be ready to pay a cost of being a democracy and understand that these freedoms do not come for free. 
  9. Finally as business owners and manufacturers it is our responsibility to produce goods and products which are of equivalent quality and in the required quantity .

Finally in conclusion, our salvation as a country and as people and the solution to all our domestic issues be its bad loans, unemployment, economies of scale etc will come only and only if we shamelessly pursue our national interest and aim to replace all things Chinese not only in India but also provide the world with an alternative that they are so desperately looking for.

This Corona Pandemic has given us a golden opportunity to make our space. If we don’t do it now we might as well write our future as being subservient to the Chinese. Time to select whether we will be toads or lions. I would like to end by quoting a poem by Wahid:

कब तक बोझ संभाला जाए
द्वंद्व कहां तक पाला जाए
दूध छीन बच्चों के मुख से 
क्यों नागों को पाला जाए
दोनों ओर लिखा हो भारत 
सिक्का वही उछाला जाए
तू भी है राणा का वंशज 
फेंक जहां तक भाला जाए 
इस बिगड़ैल पड़ोसी को तो 
फिर शीशे में ढाला जाए 
कब तक बोझ संभाला जाए
युद्ध कहां तक टाला जाए 
तू भी राणा का वंशज 
फेंक जहां तक भाला जाए

JAI HIND
Abhishek K Javeri 

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