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CHINESE MARKET IN INDIA

As a wide range of cheap Chinese products flooded the Indian market, some local industries were adversely affected, while others benefitted by using these products as raw materials. 1. Discuss the advantages and disadvantages of allowing Chinese products into India. 2. Providing trade data, give examples of industries that benefit and those that are affected by Chinese imports. 3. How can the Indian industries that are threatened by cheap Chinese imports deal with the threat?

While international trade has been growing at around 15% on an average, India-China trade has increased by more than 50% annually in the last five years. In 2008, China became India's largest trading partner and the bilateral trade between the two countries touched US$ 51.8 billion. India has emerged as the 7th largest export market of China and 10th largest trade partner. Well trading with china has its own advantages and disadvantages as well. Advantages: (1) Cheaper price benefits the consumer (2) Cheaper raw materials are beneficial for industries (3) Importer and trader makes money by selling goods. (4) Import business leads to some employment generation (5) Government collects tax by way of customs duty. (6) With Haier and Lenovo emerging as top Chinese brands in the Indian market. It may lead to competition which in turn may lead to better quality products. Disadvantages: (1) Cheap imported Chinese products kill competition and local small scale industries suffer. Sometimes, may close down. (2) Closure of local industries due to Chinese imported goods, may lead to unemployment. (3) It may also

lead to loss of revenue due to the closure of local industries. (4) Closure of local industries may also lead to social unrest arising out of unemployment of staff and employees. (5) Cheaper goods means cheap quality and consumers may suffer on account of both inferior quality as well as lack of after sales service. A very unclear disadvantage is that both local people and tourists flock to the Chinese markets in India to buy the desired products at lower prices. Low prices and attractive packaging are the major reasons behind the growing popularity of Chinese goods in India. Industries affected by Chinese imports InfodriveIndia statistics show trade volumes have grown fastest in Valves with imports up by a whopping 565 per cent. A runner-up in the fastest-growing import category is tiles and refractories, which grew at 292 per cent, machinery imports grew at 146 per cent, wires and cables at 124 per cent, tyres imports were at 101 per cent. Out of the 110 small and medium enterprises (SMEs) units surveyed, about two-thirds reported that they have been seriously affected because of competition from Chinese products, whose landed price in the Indian market was lower by 10-70% as compared to prices of similar Indian products
India-China trade (2001-2008)
Unit: Amount in US$ million

Year Indian Imports Indian Exports 2004 5925.58 7672.51 Growth 77.15% 80.41% 2005 8934.64 9768.34 Growth 50.5% 27.2% 2006 14588.04 10469.18 Growth 63.23% 7.05%

Trade Balance +1746.94 +834 -4118.86

Trade Volume 13,598.09 78.99% 18702.98 37.4% 25057.22 33.87%

24036.44 14658.79 -9377.64 38695.64 64.7% 40.02% 54.42% Growth 31500 (Approx) 20300 (Approx) 51800 (Approx) 2008 -11200 (Approx) 31% 39% 34%

2007

India's top 10 imports from China (2007-2007)

1. Electrical Machinery 2. Machinery 3. Organic Chemicals 4. Iron And Steel 5. Iron/Steel Products 6. Fertilizers 7. Plastic 8. Impregnatd Text Fabrics 9. Silk; Silk Yarn, Fabric 10. Vehicles, Not Railway

Electrical products, electronic products and machineries occupy 47% of the total imports from China.

Majority of the products imported from China are high end or value added products. If the current growth rate continues the bilateral trade between the two most populous countries may cross US$ 100 billion by 2010. Even if the growth rate in India-China trade slows down to 25% annually (a conservative projection) from the current rate of over 50%, bilateral trade between them is expected to be almost US $75 billion in 2010. Many of Indias small-scale industries are either under threat or facing stiff competition of cheap imports from China . These industries manufacture a wide range of consumer products (electrical goods, batteries, toys, watches, pharmaceuticals)and intermediates (chemicals.) All these goods are allegedly dumped by China in India and other

countries, who are initiating investigations in terms of the antidumping legislation of the WTO. Chinese Companies in India Many large Chinese State-owned companies in the field of machinery and infrastructure construction have won projects in India and most of these companies also have a presence in India. These include Sinosteel, Shougang International, Baoshan Iron & Steel Ltd, Sany Heavy Industry Ltd, Chongqing Lifan Industry Ltd, China Dongfang International, SinoHydro Corporation etc. Many Chinese companies into electronics, IT and hardware manufacturing are also based in India. These include Huawei Technologies, ZTE, TCL, Haier etc. Major Chinese projects in India are in the field of infrastructure construction, including roads and bridges, power projects, including EPC and also supply of heavy equipment, industrial projects mainly in the iron and steel sector, including boilers, turbines and pelletization plants, as well as telecommunications. Some producers benefiting from cheaper Chinese imports. These producers have been obtaining considerable efficiency gains from cheaper Chinese raw materials and intermediates, and are positively inclined to such imports. Dealing with Chinese Imports.
To deal with export subsidies that Chinese manufacturers enjoy, India should fasten the anti-dumping investigations for imports from China. According to the Reserve Bank of India, Indias imports from China has almost doubled to $24.16 billion in April- December 2008-09 from $12.64 billion in the comparable period of 2006-07.

Note:

The WTO agreement defines dumping as export of a product, whose export price is either below the price charged in the exporting countrys home market or the average cost of production. Such dumping may be done with a predatory motive to drive, where the importing countrys industries of the market to raise the market share of the dumping firms. WTO antidumping legislation prohibits such unfair trade practices. The importing country is also permitted to impose an antidumping duty or get a price undertaking from the dumping firm to raise the import price and reduce competition for domestic competing firms. But dumping has first to be proved with evidence.

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