Trade Vs Terror: Time For China To Choose – Analysis


By Sanjay Kumar Kar*

India-China relations have been severely impacted by China’s open support for Pakistan on many fronts. One of the important areas where China seems to be least worried is cross-border terrorism affecting countries like India and Afghanistan. India has been a victim of cross-border terrorism for many years — the most recent being the September 18, 2016 Uri attack sponsored by its neighbouring country Pakistan.

China’s stand on terrorism is baffling and it pains India more than any other country. New Delhi has been pressing the United Nations (UN) to declare Jaish-e-Mohammed chief Masood Azhar — operating from Pakistan — as an international terrorist who poses serious threat to humanity and disrupts peace and tranquility in the subcontinent. Unfortunately, Beijing has consistently blocked the Indian move. On technical ground, China has succeeded twice in delaying the UN’s decision on Masood Azhar.

China’s deliberate tactics of blocking India’s progress in international fora is quite evident. In June 2016 at Seoul, Beijing successfully blocked New Delhi’s bid for membership of the Nuclear Suppliers Group (NSG).

Pakistan may be China’s natural ally but India is one of the biggest trade partners of China. While China-Pakistan total trade stood at $12 billion in 2014-15, China-India trade was valued at $72 billion in the same year. During the period under consideration, China’s export value to Pakistan reached just $10 billion compared to export value of $60.4 billion to India. In short, for all practical purposes, India is 6 times valuable for the Chinese economy than Pakistan.

India’s trade deficit with China has been widening. It reached a high of $52.7 billion in 2015-16 and the April-July 2016 figure has already reached $15.9 billion. China’s ability to produce low-cost products addresses affordability issues of Indian consumers. As a result, the market in India is flooded with Chinese products.

Prime Minister Narendra Modi has time and gain emphasised that terrorism has no boundary and religion. Beijing must realise that the global community rejects any form of terrorism.

All members of SAARC, except Pakistan, extended solidarity to the victims of the Uri attack and took a strong position against terrorism. Now Beijing should accept that any form of support, including diplomatic and moral support to any country promoting factories of terror to breed terrorist for export purpose, must be stopped.

During the 8th BRICS Summit in Goa (October 15-16, 2016), Prime Minister Narendra Modi’s message on cross-border terror was loud and clear, which is clearly reflected in the Goa Declaration, Point Nos. 57-59.

Hopefully, Beijing will take the Goa declaration very seriously and acts against terror-harbouring countries.

It is in China’s interest to carefully choose between support for free trade or cross-border terror in the region. For the time being, its actions suggest that Beijing is interested in both. On the one hand, China is pressing for free trade area between BRICS nations and, on the other, it is protecting Pakistan for many wrong reasons.

China generates trade surplus through exporting a wide variety of products to India and reinvests some part of the surplus in Pakistan. Some of the major products categories that China exports to India include telecom instruments, computer hardware, fertilizers, organic chemicals and pharmaceuticals, plastic, iron & steel and ceramic.

In a sense, India indirectly funds Chinese projects in Pakistan, including the China-Pak Economic Corridor passing through Pakistan-occupied Kashmir.

The presence of China-made products in India is growing day by day. During the festive season, one could easily find China-made Indian idols and firecrackers dominating local markets. Often these China-made products offer cost advantage to traders, retailers and customers — resulting in high demand for Chinese products.

Many favour a blanket ban on Chinese products to reduce the Chinese trade invasion impacting small and medium-scale enterprises (SMEs) in India. However, with India being a member of WTO, such a ban is technically not permissible and feasible.

The government is equally concerned about widening the trade deficit with China and impact of Chinese goods on domestic SMEs.

Some of the best possible solutions include:
(a) Strengthening domestic manufacturing,
(b) Making domestic manufacturing globally competitive,
(c) Promoting innovations & start-up culture, and
(d) Creating manufacturing-cum-trading hubs.

The Modi government has already started many path-breaking initiatives like Make in India, Start-up & Stand-up India and Skill India to address the anomalies to make India a manufacturing hub.

These collective initiatives are going to strengthen the manufacturing sector and enhance global competitiveness of Indian firms. And, within a decade, India would likely emerge as a major global trading hub which may push China to revisit its own stand on terror.

*Sanjay Kumar Kar is Head, Department of Management Studies, Rajiv Gandhi Institute of Petroleum Technology, Rae Bareli, Uttar Pradesh, India.

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3 thoughts on “Trade Vs Terror: Time For China To Choose – Analysis

  • November 7, 2016 at 7:29 am

    A lot of ifs and buts. India has nowhere near China’s manufacturing ability coupled with its inability to get Provincial Governments to agree on trade and manufacturing tariffs means India can boycott Chinese goods but will its consumers agree to paying higher prices over the medium to long term? Even in the short run, India hasn’t been able to get a full blanket ban off the ground. Is this a case of wishful thinking?

  • November 7, 2016 at 2:02 pm

    There is another method of tackling Chinese imports that is outside the purview of the WTO: public refusal to buy Chinese products directly or refuse to use products or services that include Chinese input. Granted this is difficult but it is not impossible. In fact it is possible to make a dent, however small, on the volume of Chinese imports almost immediately this way. Nothing in the WTO covers such boycotts based on public sentiment that don’t have the sanction of the government which, on the other hand, cannot make it mandatory for anyone to buy or use products.

  • November 7, 2016 at 10:51 pm

    A lot of the present Indian government’s initiatives like Skill India will take a decade to fully bear fruit. In the interim, India must take a series of steps to make sure that any future reduction in the dependence on Chinese goods will be permanent and irreversible.

    1) First and foremost, bash out negotiated Free Trade Agreements with friendly countries such as the US, Japan, and Australia at the earliest (I know it’s easier said than done, but it is necessary).

    2) Actively promote railways and ports as the preferred medium for transporting goods wherever possible. This will spur growth in other directions such as construction and engineering.

    3) Persuade foreign, particularly US companies that manufacture goods in China that India imports (like Seagate, Dell etc.,) to gradually shift manufacturing operations to India specifically for the Indian market.

    4) Encourage placements and apprenticeships from polytechnics/ITI’s in these new manufacturing facilities as part of their training.

    5) In some cases, if the imported product from China is also manufactured in a third country, import from there instead. Similarly import raw products for manufacture from other sources. As far as I’m aware, apart from a handful of products, most raw materials can be procured from elsewhere.

    6) Instruct all product packaging to include a recognisable symbol for wholly Made in India goods (like an Ashoka Chakra). All products (new or used) listed in online portals should also include their country of origin. Encourage companies to use these symbols as marketing tools.

    This is a process we need to go through, but it will be worthwhile in the end.


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