BOYCOTTING CHINA - A CHALLENGE OR AN OPPORTUNITY?

China backstabbing India at the UN! China responsible for Covid-19..! China nibbling North-East frontier! BOYCOTT CHINA!

Social media is literally painted red with avid pro-India chanting. But remember one thing- Promises made in adversity are forgotten in prosperity. Even otherwise, boycotting China is easier said than done.

India is the 17th largest export economy in the world but stands 45th rung apropos complexity according to the Economic Complexity Index (ECI). Indian import from China amounts to $ 70.39 billion while our export is only $16.5 billion. A cursory glance would explain the reason for this huge trade deficit and also expose the MISNOMER OF BOYCOTTING CHINESE GOODS AND SERVICES BY INDIANS.

India exports cotton yarn, iron ores, copper alloys, granite, basalt, sandstone, nuts, tanned leather, etc. whereas our imports from China include telephone sets, cellular networks, transmission/reception of voice/images/data in a wired/wireless network account nearly half of total imports from China followed by diodes, transistors, semiconductor devices; photo-voltaic cells, Piezo-electric crystal, automatic data processing machines, magnetic/optical readers, machines for transcribing and processing data, storage water heaters, soil thermal apparatus; antibiotics, chemical fertilizers. From mobile phones to printers, from PCs to set-up boxes and inverters, from hairdryer to curler, literally, anything and everything is being sourced from China. 

For electronics manufacturers, it is easier and economical to import the Semi Knocked Down (SKD) or Completely Knocked Down (CKD) equipment from China. Watches, laptops, toys, headphones, pen drives, charger, camera, drone, Bluetooth, tablet, e-vehicles ad infinitum. The dependence is so alarming that there is a possibility of a near collapse across various manufacturing plants in India if the Covid calamity continues. Other suppliers like Japan, Taiwan or South Korea are not ready to entertain Indian importers because they know the new demands are COVID -19 generated. Indians, be ready to pay a higher amount for all electronic equipment in days to come. Indian Leather industry too depends on Chinese imports. There are many global buyers who strictly adopt the practice of nominating China-based suppliers for their final orders that are made here in India. Saying ‘No to China’ will negatively impact our exports. 

Opportunity- Don’t put all your eggs in one basket. Diversify and don’t depend on one single market to meet 70-80% of sourcing demands. We must explore other markets, even if a little dearer, to tackle any such exigency in the supply chains and ensure uninterrupted production. Alternate sources would magnify Indian bargaining power as well vis-à-vis competitors.

According to the Trade Promotion Council of India, approximately 85% of active pharmaceutical ingredients (API) imported by India are from China. India's over-dependence on China for APIs exposes it to raw material supply disruption and price volatility in antibiotics and vitamins. 

Opportunity- India is the largest producer of Hydroxychloroquine (the Covid game changer) but again the API is sourced from China. For API, India must develop its own sources within the country. Consistent government support and incentive is required to turn this challenge into an opportunity. As buyers are thinking about an alternative supply source, let companies like Lupin, Alkem, Sanofi, Cadila, IPCA, Dr. Reddy, Sun Pharma, etc. be the first movers. Already India has had a big deal from the Trump administration for getting FDA approval allowing Indian pharmaceutical companies to operate in the US market without any discrimination. This single diplomatic triumph would alone be generating immense employment opportunities besides bringing much-needed forex. 

Lamps, toys, batteries, small home appliances; anyone can see how Chinese products are indispensable to Indian life. Most of the Chinese products Indians rely on in their daily life are actually cheaper, low-end products that Indians could easily manufacture. The imbalance in India's manufacturing industry justifies the country's huge trade deficit with China and subsequent unemployment in India. Every year about 17 million people pour out onto the labor market to compete for 5.5 million jobs. Manufacturing is essential to addressing unemployment but the government has no real plans to attract foreign capital. 

Opportunity- India can pick up some sunset industries like chemicals, leather, and textile off China and use them to form a foundation for development.  India must offer preferential policies to foreign investors to integrate its low-end manufacturing industry to address unemployment and lay the foundations for a truly competitive high-end industry. With the loss of credibility of China in the global market, already more than twenty European and American companies have shown their willingness to have an alternative manufacturing hub in India. We must avail ourselves of this opportunity.

Differential Response- a case study- Indian mask factory Orthosut Biomedical and Engineering Co was producing 100,000 surgical masks a day, but has been unable to follow up on increased demand due to the lockdown. Now compare this with the reaction of the so-called "the world's factory"- China's energy giant Sinopec was able to build a melt-blown fabric plant in just 12 days, with overall output to hit 10 billion masks per year. Another classic example is mosquito swatter- such a low-end product has been imported from China for more than a decade. 

China became a world factory through the sacrifice of millions of migrant workers on the rigors of 9-9-6 work culture (12 hours a day for 6 days) building China's tech giants like Alibaba and Huawei that employ millions and make billions. Ant Financial, an affiliate of Alibaba, is listed as having a “9-10-6” work culture– starting at 9am, ending at 10pm, for six days a week. Huawei promotes an aggressive, cut-throat wolf culture. “If you join Alibaba, you should get ready to work 12 hours a day. Otherwise, why did you come to Alibaba?” asks the iconic Jack Maa. Due to such brute professionalism, China has multiplied its stake in global GDP four times during the last 15 years from 4% to 17%. Rather than boycotting Chinese, we must work long hours to catch up with them. This will help India improve its business environment, attract foreign investment and eventually enhance competitiveness in the manufacturing sector. But are we ready? China has surpassed the U.S economy. In 2019, the U.S. economy, in terms of GDP (PPP), was at $21.44 trillion, while the Chinese economy was measured at $27.31 trillion which was achieved by the model they follow.  In my view, a better work model would be 24 hours run of every city like Mumbai. 24 hours run means establishments running 24 hours which engages employees to shift wise just not in Tier-1 cities but Tier-2 & Tier-3. Because of deferment in growth, we cannot put ourselves on the same channel as China as it is a Communist country where, if compelled, the employees even have to work 7 days a week. However, with India being a democratic country, the labor laws are very strict to make such compulsion. Every country is in a different boat altogether, however, the destination is a 'huge economy'.

Many Conglomerates were not designed in a way that its work could be done from home, however, amidst the global crisis, everyone has deployed their WFH model with the same workflow. This brings to the idea, if the company is asked or pressurized to engage 120-150 hours of work a week, it would help increase employment and max input efforts resulting in a speedy acceleration. Now with that being implemented, every on-boarded company needs to invest in R&D and present new theories, inventions, ideas, models every quarter lest being penalized for slow growth. There are pre-requisites before implementing such a model. If taken care of that, we'll boom high.

Opportunity- The same left parties trying to emulate China go for lockouts and unionism when it comes to implementing 9-9-6 in India. Only if India's youth are willing to endure hardship, obey discipline and work hard, can the nation join in the global production chain. Long hours apart, the Indian education system must be geared up to produce skilled labor to gear up for mass production. We lack the well-educated, healthy, and disciplined workforce that the industry needs.

India has no long-term vision for providing quality education, healthcare, infrastructure and employment because all these call for meticulous planning and imaginative leadership.  Economics has never been our priority; winning of elections is. Every year, one or the other state faces election and the political leaders remain busy electioneering and with change in government, the economic priorities also change. The shelving of Bullet train in Mumbai is a case in point. Our politicians can stoop to any extent to conquer. 

Opportunity- One country; one election; both for the nation and the states. Amend the constitution if required but once a government is elected, let it focus on economic development for the next five years without any distraction. Party leanings must never come in way of economic perestroika.

Singapore has the best education in science and math in the world, followed by Finland and Switzerland according to the World Economic Forum. India stands 37th rung. Our education system gives more stress on marks and grades rather than quality. Don’t expect any change in the rankings until the teaching methodology undergoes a metamorphosis. Evaluation methods ought to measure a student's creativity and problem solving ability. With teachers busy finishing the syllabus, parents worried about marks and students having the pipe dream of white collar jobs, the basic wh-questions are often ignored.  

India's higher education system is the world's third-largest in terms of students, next to China and the United States. But sadly enough, in World University Rankings 2020, only three Indian institutions IIT-Bombay, IIT-Delhi and IIS-Bangalore have been included in the top 500 list. Higher Education in India is plagued with rote learning, lack of employment and skill development. Corruption and lobbying have vitiated the necessary infrastructure. Faculty shortage has further aggravated the scenario. Take for example, the Pupil-teacher ratio- India (30:1), China (19:1) and USA (12:1). There is a wide gap between industry requirements and universities’ curriculum that is the main reason for the low employment of graduates in India.

India has never had a large and competitive manufacturing sector. Scalability of production is a little chimerical with too many small enterprises and poorly educated work force. And there’s a problem with attitudes. Young Indians have high expectations about the kinds of jobs they are seeking. According to MIT Economics Professor Abhijit Banerjee "Our job seekers want a particular kind of job. With job security, good pay, benefits. Ideally a desk job.” But cozy desk jobs won’t help India develop a strong manufacturing hub. In the silent movie “Modern Times,” Charlie Chaplin plays a factory worker turning bolts at such a frantic pace that he suffers a nervous breakdown.

ARE WE INDIANS READY TO GO TO THAT EXTENT TO BRING SMILE ON BILLION OF FACES?

Opportunity- The government has recently launched the Education Quality Upgradation and Inclusion Programme (EQUIP). This is a five-year vision plan to improve the quality and accessibility of higher education by doubling the Gross Enrolment Ratio (GER), addressing regional imbalances and positioning at least 50 Indian institutions among the top ranking global universities.

India is the second largest smartphone market in the world after China. Out of the 158 million units available in the Indian market, around 114 million, or 72%, are Chinese brands  led by Xiaomi, Vivo, Realme and Oppo figuring among the top five. Lenovo is a heavyweight in computers; Haier is diversifying in white goods. Huawei’s domination in telecom equipment is strong and its leadership in 5G technology absolute. 2019 saw a blockbuster entry for Hector SUV. Digital segments are equally pregnant. TikTok, PUBG and UC Browser have already become a byword with millions of Indians.  Ant Financials headed by Jack Maa and WeChat owner Tencent have picked up stakes in Paytm, Phonepe, Byjus, Oyo and Zomato. Indian software professionals have undoubtedly created a niche for themselves in the global IT market but when it comes down to entrepreneurship, we are meek followers with notable exception of Sabeer Bhatia. You just can’t say NO TO CHINESE PRODUCTS AND SERVICES for another decade or so unless and until WE INDIANS are ready to REWRITE our ECONOMY with our own SWEAT and BLOOD. 

We lack a 'culture of manufacturing' prevalent in Germany and South Korea. Our best brains do not want to join this sector. The lack of a vocational training system like Berufsausbildung in Germany means lack of skilled labor. There is no linkage between manufacturers and universities as in China. Doing what China did will be demanding as India has to grapple with structural bottlenecks, bureaucratic apathy, corruption, regular power supply, dated technology, stringent labor, legal and land rules and labor force quality e.g. Tata Nano- Singur case. 

Opportunity- Hopefully, with better ease of doing business and liberal FDI norms, nearly 200 US companies are seeking to move their manufacturing bases from China to India. With focus on cost (cheap labor), quality (skilled workforce), and supply chain (robust infrastructure), India can play a critical role in the global supply chains.

Both India and China began rebuilding in 1950- China under Mao Zedong and India under Pandit Nehru. Today at 70, China is way ahead of India in respect of the economy, military power and technological progress to become a colossal force while India is still lagging behind. Nothing wrong in learning a few tricks from China as they have got open sesame to economic resurgence.

Covid or no Covid, China continues to be the most important trading partner for Indian businesses today. The robust $ 87 billion in trade goes on despite aggressive border disputes, memories of 1962 war and China’s open support for Pakistan. Perhaps nowhere in the world do two countries with so much of geopolitical disparity and doubt share such deep trade links. Boycotting China is just a misnomer and the aim of becoming a $ 5 trillion economy by 2025 another misnomer if the Covid challenge is not transformed into an opportunity. It is indeed ironic that India gave yoga to the world but couldn't supply yoga mats; it is such a lame product and now we all use Chinese Yoga mats.