Summary Examination of Chinese Sourced Imports into India

The latest on Social Media is the rising strident call for stopping imports from China, as a response to the Chinese’ increasingly aggressive border infiltrations into our country. This is an attractive thought – but, there are no real answers in this method. With an approximate 85 Billion Dollar Exim trade with China including  68.04 Billion Dollar Import Trade. , banning all Chinese products would debilitate our own capabilities, thus I dont see that happening. Neither do I foresee industries moving away immediately from China Linked Raw Material and Parts Imports.

TRADE WITH AN ENEMY?

That said, I see zero sense whatsoever in trading with an enemy nation, especially a totally skewed distribution, 3.5:1 outsized against us. This is something that needs to be done. Not because of patriotism - but as it is a very risky situation indeed if key components are sourced from an enemy. This is a major problem. So - yes, in my opinion, we have no choice. The rhetoric will help in awakening people, of that there is no doubt. And through them, the message should get to industries that they cannot anymore take Chinese trade for granted.

SMELL THE COFFEE - 1

Indian Industry HAS to smell the coffee - and look for alternative sourcing as far as possible. De-risk their own businesses. It is not about patriotism, but building resilience in the system by broadening the upstream supply chains.... this is admittedly easier said than done, given that China is a Manfacturing Powerhouse. In part, the problem is that in the mainstream discussions in Industry, Linkedin, Media – even Whatsapp, there is little being said of what exactly we import from China. So let us look at some numbers in the following charts, which should help place the problem in its entire detailed proper perspective

SOME DATA…

As can be seen, China is our topmost partner in import, leading in imports by a full 7% over the next nation – the USA. That is not going to change anytime soon – regardless of any social media pressure. It just isn’t feasible in the short term. Moving on, let us look at some of the details of exactly what we import from China:

Again, as we see above, the list is extensive and critical both. Electronic and Electrical Equipment, Machinery, Organic Chemicals, Plastics, Iron and Steel, Optical and Medical Apparatus. Let us dig deeper into the individual items, taking just the first two as an example : Electrical and Electronic Equpment and Machinery / Boilers

India Imports from China of Electrical, electronic equipment	Value	Year
Electrical Apparatus for Line Telephony or Line Telegraphy	$3.74B	2019
Electronic Integrated Circuits and Microassemblies	$3.62B	2019
Diodes, Transistors and Similar Semi-conductor Devices	$2.00B	2019
Transmission Apparatus For Radiotelephony, Tv, Cameras, Cordless Telephones	$1.67B	2019
Electric Accumulators	$966.68M	2019
Electrical Transformers, Static Converters and Inductors	$913.46M	2019
Parts for television, radio and radar apparatus	$849.57M	2019
Video recording or reproducing apparatus	$811.56M	2019
Television Receivers	$682.75M	2019
Microphones, Loudspeakers, Headphones	$555.93M	2019

India Imports from China of Machinery, nuclear reactors, boilers	Value	Year
Automatic Data Processing Machines, Magnetic or Optical Readers	$3.18B	2019
Parts, Accessories, of Typewriters, Calculating Machines	$1.21B	2019
Air or Vacuum Pumps, Air or Other Gas Compressors	$854.65M	2019
Machines and Mechanical Appliances Having Individual Functions	$628.83M	2019
Parts of Pulley Tackle, Derricks, Cranes, Lifts	$480.84M	2019
Air Conditioning Machines	$450.78M	2019
Machinery for Working Rubber or Plastics	$416.82M	2019
Ball or Roller Bearings	$412.14M	2019
Transmission Shafts, Cranks, Bearing Housings, Gears, Gearing, Clutches	$349.49M	2019
Refrigerators, Freezers, Heat Pumps	$344.51M	2019

From the above it can be seen that the interlinkage of Indian Industry with China is no small matter; it is extensive in its reach, breadth and scope.  And more to the point – the imports are in finished goods as well as in components. Our own economy and industries are dependent on these imports; in such a scenario, building a rhetoric will be self-defeating. While I do not deny that delinking is essential, it needs to be thought through. If not properly planned out, we will end up damaging our own industries.

RHETORIC… OR PROPER PLANNING?

It is not just a question of banning Tiktok,  removing apps and what-not. There is nothing wrong in doing the above – so long as alternatives are easily available at a comparable quality. If the either of these two is not met – easy availability and quality, then as an individual we can decide to trade quality for locality. This can be done in end-products; for industries, who are dependent on Raw Materials and Components – as seen above in the 3 charts / tables, the trade-off could have serious repercussions in finished product quality, cost, production timelines, inventory holdings and more. What then are we to do? Keep buying Chinese? I think not – we need to plan a bit more thoroughly.

THE WAY AHEAD

If India really is serious about the Chinese de-linking, it needs a national mission for identified Raw Material and Components sourced from China; manufacture those that can be done locally, and identify and set-up alternative supply sources for each, or at least as many as is feasible. This will reduce the dependency on China. However, this will involve some trade-offs, and these need to be analysed thoroughly.  

Given the current international anti-China atmosphere globally, this is doable; companies are looking for alternatives to broad-base their supply chains. Chinese wage costs are also escalating. Nations are analysing their China linkages, and moving to de-risk, just as we are. The time to do it is now; but this needs to be done with planning, not empty rhetoric. This will open opportunities for Indian Industry as well, as some manufacturing can graduate to India.

Stopping purchase of a few Chinese end-products isn’t the answer. More often than not, such actions will only hurt fellow citizens, as these stocks are owned locally. Removing Apps you can do – and given Data worries, you probably should too. But do remember there are any number of products in your house and office that contain Chinese sourced components or Raw Materials. Doing only rhetoric will not solve our China Problem, this is a national mission we need to undertake – in fact, Rhetoric will prove to be highly damaging to us.

IN CONCLUSION

But over and above all of this, Indian Industry now needs to wake up and smell the Coffee. The China Linkages need to be identified, sorted out and solved. The exposure to China needs to reduce – even a recent Harward research pointed out that Supply Chains need to have in-built resilience; and for that, broadening your supply chains is essential. Dependence of a high degree on one source – especially if that source is an enemy – is not smart, for sure. In fact, it is very highly risky. So, Industry leaders need to work on their sourcing, and take a long term view for long term sustenance and continued competitiveness.