A Study on being real about ‘Boycott China’: Last week, the internet has blown up with #BoycottChina trends. This comes after Sonam Wangchuk released a video calling all Indians to boycott Chinese products. This has been due to the aggression shown by the Chinese Army in the Indian territory. But India has not been alone to call for such boycotts in the recent past against China, other countries like the Philippines, Vietnam, and even separatist movements within China have started too.
My patriotic sentiments (which mean good) inspire me towards this call for a few minutes. But the reality where I type these words on a Chinese branded computer keeps me grounded. It goes without saying that none of us want to fund Chinese bullets that may be fired at Indian soldiers. Hence, today we have a deeper look at facts that may help clear this dilemma and also offer possible solutions.
Why boycotting China sounds right?
In the past, boycotting China has not only been called for because of Chinese military aggression towards its neighbors but also because of its human rights violations of its own citizens. Open firing at peaceful protestors in Tiananmen Square, the Chinese government has even been accused of illegally harvesting organs from Falun Gong (religious movement practitioner) and other political prisoners. This led to activists around the world calling for a boycott of Chinese products.
Sonam Wangchuk (whose role was popularly played by Amir Khan in 3 Idiots movie) has claimed that the aggression from China is only a means for the ruling communist party to divert the attention of the people away from its internal problems.
A Trade where Chinese products and services are bought by Indian consumers to finance aggression by the Chinese troops not only on its own citizens but also towards Indian soldiers is as far as it gets from being fair.
Have boycott movements been successful?
There have been various boycott movements throughout history. The US consumer forum tried to boycott French goods in 2003 in protest of France dissuading attacks on Iran. India too has had similar Boycott China movements in the past. #BoycottChina was trending in 2016 too after China supported Pakistan post the URI attacks.
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A similar fact in all these boycott movements is that they have achieved nothing. After a few weeks, people lose interest or are caught up with the next most interesting issue. In other words, these movements eventually lose momentum.
Another important factor why the Indian Boycott China movement does not follow up with greater action is economics. When a consumer goes to buy a product he would find that Chinese products are not only cheaper but also of superior quality in comparison to their Indian counterparts. In such a situation a choice made to purchase a product which is expensive and at the same time of inferior quality in comparison to the Chinese is only self-destructive.
Why an immediate boycott of China doesn’t make sense?
Trade Deficit occurs when the country’s imports are more than its exports. One of the major consequences of a large trade deficit is the weakening of one’s currency. This is precisely the case with India. In the years 2018-2019, the imports from China were at 70,319.64 Million. During the same period, the exports to China stood at 16,752.20 Million leading to a deficit of 53,567.44 Million.
But India is not the only country that has suffered this fate when dealing with China. Numerous countries around the world have faced this resulting in China becoming one of the countries with the largest trade surplus.
The trade deficit not only shows the dependence of Indian consumers but also of Indian industries on Chinese exports. Indian market leaders like Bajaj, TVS Motors, Mahindra, and Tata get their parts from China. Even pesticide and fertilizer companies based in India are overtly dependant on China. Take the example of United Phosphorous where over 55% of its products are sourced from China.
China currently has an investment of 8 billion in the Indian markets. The year 2019 alone saw investments of $3.9 billion by Chinese firms in Indian startups.
BigBasket, Byju’s, Delhivery, Dream11, Flipkart, Hike, Ola, Oyo, Paytm, Quickr, Snapdeal all these startups have secured funding from China. Even banks like HDFC have received investment from China. Although it may seem as if even though we are naming all renowned Indian companies it is apparent that there is no escaping China.
Almost every company has links to China, through ownership or have raw material sourced from China to make finished products. From our food that we consume, means to travel, our access to technology all can somehow be webbed back to China.
Let’s talk about “Aathma Nirbhar”
The Prime Minister in his most recent address has pushed for an Aatma Nirbhar Bharat. Say due to this influence Indians strictly buy only Indian products. If we are to look at the 1947 -1991 environment where due to the protectionist views of the government the consumers were forced to buy only Indian. This led to the producers producing low-quality products.
This was because they were certain of receiving a market share irrespective of the quality. The 1947-91 period ended up doing more harm than good. The same period also saw the Chinese producers preparing their markets for global competition. This gave the Chinese a 40-year head start over their Indian competitors.
What would Adam Smith the father of modern economics say?
Adam Smith speaks about competitive advantage in his book the Wealth of Nations published in the year 1776. He takes the example of two countries England and Portugal and also of two products, wine, and cloth. Here, Portuguese are the best in producing wine and England in producing cloth. According to Adam Smith, Portugal should focus on creating wine instead of focussing on both wine and cloth. This would only lead to substandard products. England should focus on cloth and both countries should reduce the scarcity of cloth or wine respectively through trade.
Let us take the example of TVS Motors. They are known for producing good two-wheelers in the mid and low-priced segments. An attempt to produce the two-wheeler 100% in India would only result in more expensive vehicles of poorer quality. Hence TVS Motors taking materials manufactured in China that are of high quality and lower cost has resulted in them suiting the Indian markets today. We may be ready to purchase the more expensive Indian alternative if available in the future.
Our current situation
But if we are still are not convinced and before we decide conclusively let us take a moment and come out of our privileged shells. The recent pandemic has shed light on the poverty plights of our nation. The first relief package of Rs. 1.7 lakh crore aimed at feeding 800 million poor people. The increased price alternatives would only shove two-thirds of a section further down the wealth ladder.
Also read: The 20 Lakh Crore Relief Package – Overview!
What about “Retaliation”?
So far we have considered retaliation only from our end. Boycott China and dumping Chinese products will definitely have a two-factor effect when done on a large scale. A similar retaliation from China will further the consequences on the Indian producers and companies.
Role of the Indian Government
Why doesn’t the Indian government simply put trade restrictions on Chinese goods? India being a member of WTO is required to abide by its rules. As per the WTO, countries are not allowed to discriminate amongst their trading partners.
When it comes to investments the government of India has allowed investors from neighboring countries to invest only up to 10% in an Indian company. Despite this Chinese companies have found loopholes to invest in the Indian markets. Chinese giant Alibaba gained a stake in Paytm by investing through its non-Chinese subsidiary ‘Alibaba Singapore Holdings Pvt Ltd’.
What’s the Solution?
From all the arguments made above, it becomes clear to us than an outright boycott of China is not possible. Boycotting China would only cause the Indian industries that have received funding or use Chinese materials more harm.
An alternative here is to look for products from other countries as and when the need arises to replace the Chinese products we have in our homes over time. A long term solution would be to steadily keep improving Indian quality. The best solution for the current issue which involves a standoff would be diplomatic talks. A war waged by consumers would only be self-destructive.
Aron, Bachelors in Commerce from Mangalore University, entered the world of Equity research to explore his interests in financial markets. Outside of work, you can catch him binging on a show, supporting RCB, and dreaming of visiting Kasol soon. He also believes that eating kid’s ice-cream is the best way to teach them taxes.