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India poised at the Great
Wall
By Sultan Shahin
NEW
DELHI - The huge success enjoyed by Chinese businesses
in the just-concluded fortnight-long international trade
fair held in New Delhi has heightened the admiration of
Indian consumers for good-quality, reasonably priced
Chinese goods. Indian industry, however, is concerned at
their growing presence in the Indian market. Even Prime
Minister Atal Bihari Vajpayee has admitted for the first
time that there was a "healthy competition" between
India and China.
Up to this comment, India's
stand has been that its "Look East" policy had nothing
to do with any threat or competition from China. Thus,
there appears to be a major change in India's foreign
policy plank, and Vajpayee's statement assumes
significance in the context of External Affairs Minister
Yashwant Sinha having categorically said on several
occasions that India was not competing with China, but
rather was trying to develop its own relations in the
East. This was in the context of India's "me-too" policy
of offering to set up a free trade area with the
Association of Southeast Asian Nations (ASEAN) over the
next 10 years, a day after China signed up for the same.
Vajpayee's statement is thus being seen as an indication
that India may go in for an aggressive strategy to match
Chinese competition in the ASEAN region.
This
changed stance is echoed by a member of the Twelfth
Finance Commission and former union cabinet secretary T
R Prasad. India could no longer "wish away" the
competition from China, and hence a national commitment
at every level to effectively face such competition was
essential, he said earlier. Competition between India
and China must be "seen in its reality", he said,
inaugurating the 10th "quality summit" of Confederation
of Indian Industry (CII) in Bangalore this week.
Chinese goods were 20 percent to 40 percent
cheaper, Prasad pointed out, noting, however, that it
could not be said that productivity was low in India.
Rather, the government placed more taxes on goods in
India. Also, for China, domestic demand was driving
competition. He pointed out that China had successfully
following a one-child policy, which left more resources
available for families to spend. India, Prasad said,
should at least adopt a two-child norm. He stressed that
quality was a pre-condition for competition, and quality
was basic, whether it was for manufacturing, governance,
education or services. "Unless we change and bring in
quality, we will be out of the international market," he
warned.
The threat is very real as cheaper but
feature-rich and fancy Chinese goods imported by Indian
traders are already giving sleepless nights to several
small- and medium-scale industrial units, be it toys or
lighting. One popular item at the fair, for instance,
was washing machines from Guangdong Wanjiada Home
Appliances: a dustbin-like machine with a mixer-grinder
like a heart inside designed to tackle nappies and
frocks.
Commenting on the threat from China, CII
institute of quality chairman K N Shenoy said that
Indian industry and the Indian economy had been caught
in "turbulent waters ... the going has been tough, as
has been the case across the globe". Domestic
competition, globalization and heightened consumer
awareness and expectations were among the challenges
faced by Indian industry, he said.
"As we look
ahead, there is one reality we need to cope with. Indian
industry is only going to find the challenges increasing
and the world becoming even more complex," he said. The
22nd India International Trade Fair marked the biggest
ever display of Chinese products at an Indian fair. This
was made possible by the participation of 130 companies
and top businesses from China. A full 40 percent of the
pavilions at the fair were occupied by the Chinese.
Indian metros already have their exclusive Chinese
corners called "China Bazaars", selling a large number
of Chinese items. Yet consumers were eager to see those
goods that are so far not available on the Indian
market.
About 200 Chinese products, ranging from
motorcycles and consumer electronics to textiles and
garments, were displayed for the more than 2.5 million
visitors - 140,000 of them trade representatives from 40
countries. Billed as Asia's largest exposition, the
two-week fair attracted more than 7,000 Indian and
foreign companies. The range of products on display
included home appliances, large passenger vehicles,
machine tools, telecommunications and Internet products.
Maximum consumer interest, though, was directed towards
the stalls where half-a-dozen Chinese two-wheeler
companies were located.
Many Chinese
manufacturers were on the lookout for dealers and
distributors for Indian cities and towns. They were also
looking for importers capable of appointing
sub-distributors and offering after-sales service where
required. One Indian businessman in the motorcycle
industry said, "Their prices are going to be highly
competitive over the present Indian vehicles. And the
reliability is also growing high and you can see the
invasion in electronic goods."
It was not
difficult even for the average consumer to see the
plight of local producers if these quality Chinese goods
flood the market. Over the past decade, while China has
managed to increase its share of world trade from 1.8
percent to 3.9 percent, India's pie has increased from
just 0.2 percent to 0.7 percent.
While Indian
industry is jittery about inexpensive Chinese goods
flooding local markets, in the northern tourist state of
Himachal Pradesh, Chinese tea, herbs and crockery were
the main draws at an annual rural trade fair. The
traditional Rampur Bushahr fair every year in November
attracts merchants from all over the state who bring
wool, dried fruits and home-spun blankets and shawls.
But over the past five years, Chinese handcrafted
jewelry, herbs and tea have also begun to arrive at the
fair.
"As always, there is wool in plenty, but
it is the Chinese goods that are drawing the crowds now.
Not the cheap electronic and plastic goods that have
flooded world markets, but the lesser-known Chinese
artifacts," said Arvind Shukla, a Himachal Pradesh state
government official associated with the fair. He said
that Chinese products made their way into Rampur
primarily through "Tibetan refugees in India and tribal
Kinnauri folk".
The Tibetans and Kinnauri
tribals make their way across the border through
high-altitude Himalayan passes, which were reopened by
the Indian government in the mid-1990s. The passes had
been closed after the India-China border war in 1962.
"As the Chinese do not come to the Indian side, it is
the Tibetan refugees and local Kinnauri tribals who trek
across the Shipki-la pass and often even enter China to
procure the goods, which are in great demand at the
fair," Shukla said. "Chinese artifacts, such as jewelry,
crockery, handicrafts, tea, herbs, heavy woolens and
even 'bushy yak tails' are displayed on the Tibetan and
Kinnauri stalls," he said.
The fair is believed
to have started during the reign of a local king, Kehar
Singh, in the 17th century. Singh went on a pilgrimage
to the holy Mansarovar lake in Tibet, where he met some
Tibetan officials and signed a treaty enabling merchants
from both sides to trade without paying taxes. Business
soon soared and a fair was organized at Rampur Bushahr.
This fair attracted merchants from China, Tibet and
Central Asia, and once again this tradition is being
revived.
Indian industry's fears about
competition from China were heightened recently by
comments by the Asian Development Bank's (ADB) new chief
economist Ifzal Ali. "Asian firms must learn to boost
their productivity or perish at the hands of the
manufacturing juggernaut that is China," he said in an
interview. Ali said that China's expanding role as an
intra-regional trade hub was one reason why the ADB was
optimistic that Asia would continue to be the
fastest-growing region in the world despite clouds over
the global economy.
"In an increasingly
globalized economy, I don't think any region is going to
be autonomous. The only thing is that now Asia isn't
going to catch pneumonia every time America sneezes,"
said Ali, who is Indian. China's exports, which were
31.5 percent higher in October than a year earlier, had
held up strongly despite slowing growth in the
industrial world because it produced basic consumer
goods that people needed to keep buying, Ali argued.
He said the tide of cheap Chinese goods of
increasingly high quality was great news for Asian
consumers who had long been at the mercy of sheltered
local industries, which now find that they must rapidly
raise their game. China was forecast to grab an
especially large share of the garment market once global
quotas were scrapped, posing acute challenges for a big
textile producer like Bangladesh, Ali said. "In the next
three to five years they have to change or they will
perish," he said. "The whole world will benefit from a
cheap manufacturing platform."
The answer is for
China's neighbors to put the emphasis on productivity.
"It is firms that export and it is the creation of
enabling conditions for these firms to operate, to
advance and grow that will really decide who will be
able to compete with this juggernaut and who won't," Ali
said.
The CII, too, is advising India to stop
looking over its shoulders at China and work towards a
partnership. The key message from a session on
"India-China: A Win-Win Partnership?" in a recent
meeting of the India Economic Forum in New Delhi was for
India to stop comparing itself with China and to work on
areas of commonality between the two countries.
This was said by Carole Basri, executive
director and program chair, of the greater New York
chapter of the American Corporate Counsel Association.
In her opinion, while China treats India as yet another
trading partner, India is wasting time by making
constant comparisons or "looking over its shoulder". On
India's part, this shows a lack of confidence in doing
business with China.
Lord Charles Powell of
Baywater - co-chair of the summit and chairman, Sagitta
Asset Management, UK - said that the constant
India-China comparison was not necessarily a fair one.
"China is a dictatorship. In this sense it is an unfair
battle. But we do believe that democracy is the best
stimulus for economic growth." A sentiment many others,
including Nalin Surie, joint secretary for East Asia in
the Ministry of External Affairs, also voiced.
Surie pointed out that this was not a question
of whether the partnership would take place or not. It
already does, especially given that by December this
year Indo-China trade will reach US$4 billion. Also, a
commitment at the highest political level in both
countries has already been made to take this to $10
billion in the next few years. Surie said that China's
entry into the World Trade Organization was a very
positive step for India and open up huge economic
opportunities.
On a positive note,
Jean-Christophe Iseux, professor at the Renmin
University in China and a special member of the China
People's Political Consultative Committee, echoed
External Affairs Minister Sinha's words, that in the
short term the best way to take this partnership to a
different level was through Indian businesses investing
in China. And in the long term by collaborating with
China to advocate common causes in forums such as the
WTO and the United Nations. He felt that in
international diplomacy "India should be a leader of
developing countries and China is still a developing
country".
Businessmen point to areas that India
could capitalize on as China needed help, such as
shipbuilding and large IT system integration projects,
and in banking and insurance. They can also cooperate in
the areas of tourism, automobiles, pharmaceuticals,
steel and chemicals.
It is in this context that
Vajpayee's forthcoming visit to China assumes great
significance. It is an opportunity for him to transform
the Himalayas from the present region of border dispute
and distrust between the world's two biggest
civilizations into a zone of "trade and prosperity".
From the time of Rajiv Gandhi's prime ministership to
that of Narasimha Rao, the level of distrust has been
steadily coming down amid promises of growing
cooperation. Vajpayee has a chance to further cement
these ties and to lead to a real breakthrough in
Sino-Indian relations.
The stumbling blocks look
formidable, but given the growing admiration in India
for China, a slightly better appreciation of what
actually led to the 1962 border war, and the popular
desire for improved relations, it should not be such a
difficult task now to proceed further in a more
meaningful way. Vajpayee could opt for a substantial
summit that goes beyond feel-good rhetoric and which
seeks to solve some of the outstanding problems that
have bedeviled the India-China relationship for too
long.
And the time could be just right, thanks
to the impressive Chinese performance at the trade fair
and the massive Indian goodwill it has earned.
(©2002 Asia Times Online Co, Ltd. All rights
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