Friday, June 19, 2020

Covid 19 - Boycott of Chinese Products

Covid 19 Saga – III
Boycott of Chinese Products

The stand off between India and China has now brought us face to face with a reality of India having to take a hard stance on the rhetoric of ‘Boycott Chinese products’.  While an analysis of on the ground reaction and related economic fallout is a complex theme in itself.  A primary look into the investment pattern of China in India through its own companies or Indian subsidiaries throws up important statistics.
While it goes without saying the China has been slowly and steadily increasing investments all around the world, In India it has stealthily forged strategic alliances to make a build up despite tight monitoring and control.  If we go by figures quoted by prominent institutions in respect of Chinese investments in India Sectors it could be see the following:
% of Investment
Automobile Industry
Metallurgical Industry

A list of Chinese Companies in India is given below:

Mobile Companies in India include Xiaomi (MI), Oppo, Vivo, One Plus, Huawei, Coolpad, Motorola, LeEco, Lenovo, Meizu, Tecno, , Honor, Gionee, Gfive, Hair, TCL etc.   A number of Chinese software companies have also made inroads into India these include Alibaba Group with UC Browser, Bytedance with applications like Tik Tok, Vigo Video, News Republic, Tencent holding with popular games like Pubg ad WeChat, Cheetah mobile with apps like Whatscall, Cheetah keyboard, CM Browser, Tap Tap Dash, Huwei and ZTE.

Other Chinese majors in India includes, Haier, Volvo (owned by Geely), MG (owned by SAIC Motors), Nippon Paint (India) Pvt. Ltd, Shanghai Electric India Pvt. Ltd., Beijing Automotive, WISCO (I) Pvt. Ltd., ZTE Kangun Telecom company (I) Pvt. Ltd, China Dongfang International, Baoshan Iron and Steel Ltd., Dongfang Electric, Sany Heavy Industry Ltd, Cheetah Multitrade P. Ltd., YAPP India Automotive Systems Pvt. Ltd.

It has been reported that Investments of China in Technology for Indian Startups exceed $ 4 billion!. India’s top 30 companies which are each worth over $ 1 bn (Unicorns)m 18 are funded and technology driven by the Chinese. Paytm, Hike Messenger, Ola, Bigbasket, Byjus, Dream 11, IBIBO, Make my Trip, Snapdeal, Flipkart, Mydermacy etc are other majors operating doing well in India.
Chinese investments in India stood at $.6 billion in 2014 which have now risen to $ 8 billion in last few years.  In fact 4 out of 5 top mobile Chinese brands have heavy presence in India these include Xiomi with 7 factories in India besides several others who have planned to invest more than $500 million in this country.

Considering the fact that, any fresh investment would require Indian government’s approval, the move could in reality lengthen the transaction time which is most likely to impact fresh investments in Indian companies by Chinese investors, translating to the fact that many Indian startups in India and others looking out for investments could be staring into the blank for an undefined time into the future.

From a consumer’s point of view the options of products and price tags on individual products could see an upsurge. With tightening up of imports from China and non viable options from other markets local vendors could be in a spot unless they tie up with bigger vendors like Amazon who deal in global sourcing of products.  This would anyway be detrimental to the Indian dream of seeking self reliance in production of such items as challenges of quality, price and international competition would hamper quick growth without proper R&D.

In the short term several small items may go out of market on persistent demand and others may see a rising price graph.  The hay days of Indian consumers may be vanish and India would be a humble buyer’s destination in the absence of robust and consistent growth of its employment and economy.
 Imagining a quick boycott of Chinese products could be easy but to strictly implement a policy  in this direction could be bitter pill for all.  While on one hand government may seek to snap ties with Chinese contractors, legal parameters will allow the companies having exposure to Chinese investments to downplay the boycott and continue with their operations if no legal strictures are issued against them in this regard.  As regards boycott by citizens of India, in the absence of a clear understanding of which companies are peddling which Chinese products, it would be difficult to screen and personalize buying or usage preferences by them.

While it would be premature to comment on how an average Indian on the street would feel the pinch on account of such a boycott but the complete story would certainly need an elaborate mechanism right from the policy level to the implantation stage for a smooth transition.  However in the wake of Covid 19 pandemic and constraints on account of a global shrinkage in investments and supply, a stage has come for the Indian markets to revert back to times of rationing, shortages and maintaining essential supply chain processes.

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