China: The Doors Are Opening

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TOPIC: General Studies 2:

• Effect of policies and politics of developed and developing countries on India’s interests

In News: China has announced that they will open the country’s economy further and lower import tariffs on products including cars – struck a conciliatory tone on the rising trade tensions between China and the United States. China would also be raising the foreign ownership limit in the automobile sector and push previously announced measures to open the financial sector. Xi’s comments sent stock markets and the U.S. dollar higher on hopes of a compromise that could avert a trade war.

Background: This comes amid rising trade tensions between China and United States following a week of escalating tariff threats, popped by US frustration with China’s trade and intellectual property policies.

Why:

• After Russian diplomats were asked to leave, there has been a sharp decline in the Russian ruble
• The Trump administration had imposed tariffs on nearly 1,300 items in the Chinese market to reduce the trade deficits.
• There is a worry that some of the other Western allies of the United States and Trump might follow suit and impose additional tariffs on Chinese goods.
• The recent 19 Party Congress and the two sessions – NPC as well as CPPCC sessions which reiterated the domestic consumption innovation as well as restructuring of the economy from manufacturing to the services
• There is a need for Chinese economy to reinvent itself. With the global financial crisis, the China model of export orientation is no longer the answer, so they have shifted in their plans towards domestic consumption.
• They’re projecting themselves as a leading technological power. And so there is a need for heavy investments and artificial intelligence, for which China will have to become much more open in terms of ideas and competition.

Impact on India:

• There will be some positive impact for Indian exporters as there’ll be space created for them in China. The investment proportion needs to be increased. This will boost our Make in India programme.
• Tourism has been partly increased from roughly about one lakh to about nine lakhs after the e-visas have been instituted. So this is one area that the opening of the Chinese economy towards the Indian side could also probably contribute.
• Chinese company have come and put up shop in in the manufacturing sector. For example Pune and Ahmedabad, who have been identified in 2014, but not much progress has actually taken place. The Chinese labor costs are also increasing.
• Any move to offer better access in pharmaceuticals, agriculture, marine items and information technology would help India, which has been able to supply mostly raw inputs to the giant neighbour. China’s plan to better protect intellectual property rights could encourage Indian pharma companies to set up shop there.

Conclusion

We have to have some incremental approach in our production where we need to increase our export basket. We must look at trade in a much more coherent fashion.

If people mentioned pharmaceuticals, practically all the precursor materials for Indian pharmaceuticals come from China. So the active ingredients in the antibiotics, the chemicals, they all come from China and in fact we are the gainers because we are getting the source material from manufacturing the high-value products and exporting them to the United States elsewhere.

We should look at this as an opportunity rather than as a threat.

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