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The Rising Tide of Chinese Exports and Its Implications for India
Introduction:
China’s good and trade surplus has tripled since the pandemic, reflecting China’s dominance in both high-end and basic manufacturing. China has established itself as the world’s manufacturing and trade powerhouse, running a goods trade surplus of $1 trillion. As trade barriers rise in the West, China is likely to redirect its exports to the Global South, including India, raising concerns about deindustrialisation and economic imbalance.
China’s Trade Surplus and Global Impact
- China runs a trade surplus of over $300 billion with the US, over $500 billion with the EU, and nearly $500 billion with the Global South.
- The only nations with which China has a trade deficit are Taiwan, South Korea (due to chip and electronics imports), and Australia (due to commodity imports).
- China accounts for 32% of global manufacturing value-added, compared to 15% for the US, 6.5% for Japan, and 4.5% for Germany.
- Structural Dependence on Exports
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- Despite producing 22% of global manufactured goods, China contributes only 12% to global consumption.
- Chinese manufacturing is heavily export-driven, with domestic demand unable to absorb its production excess.
- With manufacturing employing over 22% of the Chinese labor force and contributing 26% to GDP, China cannot afford to scale down production significantly.
Western Trade Barriers and Their Impact
- The return of Donald Trump and rising protectionism in the US and EU have intensified discussions on manufacturing competitiveness and supply chain resilience.
- The US and EU are imposing tariffs and trade restrictions to counter China’s export dominance, especially in high-tech and strategic sectors.
- China has countered these restrictions by rerouting exports through the Global South, but the West is now cracking down on this practice.
India as a Key Market for Chinese Exports
- As Western markets become less accessible, China will seek to expand exports to the Global South, especially India.
- The Global South accounts for 30% of global consumption and represents a growing middle class, making it a lucrative market.
- India, with its large consumer base and growing economy, is a prime target for Chinese exports, particularly in high-value industrial goods.
- Threats to India’s Industrial Base
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- China’s hyper-competitive manufacturing ecosystem can overwhelm Indian industries due to:
- Scale – Chinese industries operate at a much larger scale.
- Cost advantages – Lower production costs make Chinese goods cheaper.
- Technological superiority – China leads in key sectors like EV batteries, solar panels, and electrical equipment.
- India already has a trade deficit of over $100 billion with China, constituting 10% of China’s total trade surplus.
- This surge in Chinese exports could lead to deindustrialisation in India, discouraging domestic manufacturing investment and job creation.
- China’s hyper-competitive manufacturing ecosystem can overwhelm Indian industries due to:
Challenges in India’s Response
- Slow Anti-Dumping Actions – Indian administrative machinery is slow in responding to the threat of Chinese dumping.
- Lack of Non-Tariff Barriers – India lags in agility and coordination in implementing non-tariff trade restrictions.
- Structural Cost Inefficiencies – Indian manufacturers struggle with high logistics costs, regulatory burdens, and inefficiencies in factor markets.
Policy Measures India Must Adopt
- Strengthen Trade Barriers
- Expedite anti-dumping investigations and impose higher duties on unfairly priced imports.
- Implement non-tariff barriers such as stricter quality control standards.
- Boost Domestic Manufacturing
- Increase support for the Production-Linked Incentive (PLI) scheme.
- Invest in infrastructure, skill development, and R&D to enhance competitiveness.
- Diversify Supply Chains
- Reduce dependence on Chinese imports by strengthening domestic industries.
- Encourage trade agreements with alternative manufacturing hubs.
- Encourage Foreign Investments
- Attract global firms to set up production in India, reducing reliance on Chinese imports.
