Incidentally, narrowing trade deficit between India and China was not sudden after COVID 19 outbreak. It started since past two years and heightened since January 2020. During five month period from January to May 2020, India’s imports from China dipped by over 22 percent. In general, the main characteristic of the trade between the two countries was China’s gushing export to India, vis-à-vis India’s nominal export to China. This caused wide trade deficit. Imports from China made a somersault in 2019-20. It declined by 6.6 percent due to pandemic China lost the significance as a stable source for supply chain. Factories were closed and the foreign investors were encouraged to shift their production bases. India’s hunt for alternative to China and focus on protectionism intensified.
How is then Chinese claim for unsustainable shrinking trade deficit exemplified by the bounce back in one month trade deficit, while the shrinking trade deficit began since past one year? China’s strong belief for India’s over dependence is a gaffe. India is already in the hunt for alternative to China. Much successes were made when India’s imports greatly diversified. The simultaneous increase in imports from Vietnam has become a major challenge to imports from China. During 2017-18 to 2019-20, imports from Vietnam surged by over 45 percent. The major components of the import surge were electronic and telecommunication items. Incidentally they were akin to imports from China. These items were responsible for widening trade deficit between India and China. Eventually, Imports of these items from China witnessed a steep fall between 2017-18 and 2019-20.
Nevertheless, Chinese outburst surprised many. This is because India’s role in China’s global trade is miniscule. India’s share in China’s global trade is 2 percent only . Even though China is the biggest source of imports for India, but it is not vice versa. India accounts for 3 percent of China’s global exports. Why is it then shrinking trade deficit with India sent China in jittery?
Real reasons lie somewhere else. It is not trade factor only. There may be other issues which made China perturbed . China is known for its ethnocentric chauvinism for seizing global power. After losing the low cost hub for world’s workshop, China pitched for global projects as a new strategy to recoup its global economic power. BRI (Belt and Road Initiative) and RCEP (Regional Comprehensive Economic Partnership) are the cases in point. BRI manifests the tenet of its global political and economic outreach through development of infrastructure and RCEP is a ploy to seize trade power in Asia.
India has always been opponent to China’s global projects like BRI and RCEP. It argued that they represent Chinese economic expansionism in the emerging economies. It decoded that BRI was China’s domestic challenge, and not the global issue. China had overcapacity and was engulfed by rising unemployment. To revive exports, BRI was the noble strategy to expand export by developing infrastructure with the help of Chinese loan. Similar was the objective behind RCEP. China had FTA with ASEAN. China targeted India market through ASEAN. India is not participant in both BRI and RCEP.
India played a key role in sending a caution message to the participants to BRI and RCEP. It spook concern on debt distress after Sri Lanka lost Hambantota port. China-Pakistan Economic Corridor (CPEC) project is another case in point. Eventually, the BRI turned curse on developing nations. A number of developing nations inched towards debt distress and some of them slipped into debt trap. According to Centre for Global Development report, eight countries are on the edge for debt trap. BRI is now known as predatory Chinese loan. Several countries have woken up to the risks of BRI loan. In an warning message, Malaysian Prime Minister Mahathir said, “BRI has become new version of colonialism”.
India’s thrust on protectionism and self-reliance strongly influenced USA and EU after COVID 19 outbreak – the major trading partners of China. This led to the retreat of GVC (global value chain) , according to Peterson Institute of International Studies. It led the countries to have a second thought on import dependence in GVC model and turn inward for development of domestic supply chain. China has been at the hegemony in GVC.
India’s opposition to BRI is now becoming a lesson for participant countries, who are slipping into the clutches of debt trap. India’s refusal to RCEP evoked second thought among the members on China’s genuine aim for trade expansion in the block. It irked China when Japan followed suit, the third biggest export destination of China. Arguments were labelled against RCEP, depicting It a political goal of China through economic expansionism.
This created concern in China against India’s continuous drubbing to its global economic projects. Hence, narrowing trade deficit was not the main reason for China’s outrage.
(IPA Service)
CHINA IS GETTING OPPOSITION FROM INDIA TO ITS ECONOMIC DOMINATION AIM
BEIJING IS JITTERY AS RCEP MEMBERS ARE HAVING SECOND THOUGHTS
Subrata Majumder - 2020-09-07 11:03
Global Times – the Chinese official English daily – was irked by the narrowing down of trade deficit with India. Opposing it a trend setter, it was emphatic that the trend was unsustainable. It exemplified that the the bounce back of declining trade deficit in July 2020 was a case in point. It increased by US $ 3.34 billion. This manifested India’s dependence on China was irreversible, it argued. The Chinese media threatened India’s challenge for decoupling from China and warned for opening a Pandora box. It accused India for triggering economic tension by blocking Chinese Apps, denying Chinese FDI approval through automatic route , imposed stricter regulations for Government procurement, restricted import of colour TV and so on.