‘China-proofing’: Knee-jerk reaction will end in failure

China became a member of the World Trade Organisation (WTO) in 2001 and a couple of years thereafter, Indian industry redflagged massive dumping of Chinese goods, which was having a deleterious impact on small and medium enterprises. The signals were ignored and over the next two decades, Chinese products and companies became well-entrenched. It has taken a seismic shift in geopolitics and the death of 20 Indian soldiers to prompt the government to act.

Long before the COVID-19 pandemic and blatant Chinese aggression on the border, the Swadeshi Jagran Manch (SJM) – an RSS affiliate noted for challenging government policy – had been hammering away at the necessity of 'China-proofing' the economy. In 2019, it had raised the issue of Chinese companies participating in government tenders. Ashwini Mahajan, SJM convenor, had observed: “Chinese companies are a security threat to India especially in telecom...their companies have massive support from the state, are allowed to vastly underbid Indian companies and win tenders for critical infrastructure.”

Despite the lack of reciprocal market access, the ability of Chinese companies to submit L-1 (lowest) bids, won them numerous contracts for telecom equipment. The absence of a level playing field led to repeated demands for a separate framework for Chinese companies, especially in the backdrop of many countries expressing reservations about Chinese telecom gear, data breaches and IPR theft.

In private forums, pro-Swadeshi activists pointed out that bureaucrats were increasingly rigging government tenders to favour Chinese companies, by introducing technical specifications which ruled out participation by domestic bidders. This modus operandi applied across all sectors, not just telecom. Bureaucrats and opinion makers were wooed by any and all means, including junkets to China in the guise of conferences. Sinophilic behaviour was apparent at all levels of government.

The efforts of the SJM and various think-tanks bore some fruit: India walked out of the RCEP (Regional Comprehensive Economic Partnership) negotiations, scores of tenders were cancelled, non-tariff barriers were erected against finished goods and the trade deficit began narrowing after 2017. But overall, the government's response was lackadaisical and Chinese companies like Huawei and ZTE continued to take the project route into India.

Only now have barriers been erected: a ban on participation by Chineseowned companies in government tenders in the telecom sector and prioritising Made-in-India products on the Government e-Marketplace (GeM), an Amazon-style procurement portal. State governments are looking to cancel tenders. Chinese companies and sovereign funds can no longer avail of the automatic route for investment. Stronger tariff and non-tariff barriers are contemplated.

Dependence on China for pharmaceutical intermediates and heavy machinery will prove hard to cut down and there is no gainsaying the fact that Chinese funds have come to power and dominate e-commerce. Aspiring fashionistas are familiar with sites like Shein and Club Factory (one of the top 10 shopping apps in India), some of which are affiliated to the mega-platform Alibaba. The prices are unbelievably low and even designers would be hard-put to tell a knock-off from the real thing.

Last year, the SJM alerted the government to the use of the “gift” route to export Chinese products to India via ecommerce sites without paying customs duty. This led to a notification by the Directorate General of Foreign Trade (DGFT), to the effect that "Import of goods, including those purchased from e-commerce portals, through post or courier, where Customs clearance is sought as gifts, is prohibited except for life-saving drugs/medicines”.

The question of whether the #BoycottChineseGoods campaign will gain traction can be posed as follows: are you prepared to bite the bullet and pay more for your smart TV, mobile phones, car, air-conditioner and so on? This is not the first time that such a campaign has been proposed; in 2014, RSS sarsanghchalak Mohan Rao Bhagwat called on consumers to stop buying Chinese products and in 2016, vendors were asked to boycott Chinese firecrackers and other Diwali-related goods. These efforts were prompted by China's provocative behaviour, notably its refusal to allow India into the Nuclear

Suppliers Group and support to Pakistan.

The trouble is that supply chains tend to originate in China, the “factory of the world” which supplies components for a vast range of products. Recently, the new OnePlus 8 Pro sold out within minutes of its launch in India. And it was to Chinese products that India turned in the fight against COVID-19! When it comes to free market competition, beating China is virtually impossible at the moment.

A knee-jerk response is likely to meet with failure. After all, China is a significant trade partner, second only to the US. A long-term strategy of indigenisation, coupled with an awareness campaign, is the way forward.

The trouble is that supply chains tend to originate in China, the “factor y of the world” which supplies components for a vast range of products. Recently, the new OnePlus 8 Pro sold out within minutes of its launch in India.