#BoycottChina - Why It's Not as Easy as It Sounds
India went into a nationwide lockdown due to the Covid-19 pandemic in the last week of March, Since then there has been a rise in anti-China sentiments on social media platforms. Now with the recent intrusion by Chinese troops in Ladakh, Sonam Wangchuk, an engineer turned education reformer, is asking people to boycott everything made by China. Celebrities like Several Bollywood personalities including Arshad Warsi, Milind Soman, and Ranvir Shorey have joined the ongoing trend on social media.
While an economical boycott of this kind might look like a good option let us put things into perspective.
China's $75 billion exports to India accounted for only 3% of Chinese exports while India's $17 billion of exports to China account for a much higher 5.3% of our total exports. With a deficit like that India stands to lose much more if there are to be any retaliatory boycotts from China. The world we live in is inextricably interlinked, with supply chains of companies spanning multiple countries.
Let us take a deeper look at a few industries and find out how deeply entrenched China is in Indian markets.
Rare Earth Metals
Most people use rare earth elements every day – without knowing it, or knowing anything about what they do. Rare earth metals are a group of 17 elements found in the earth's crust. **These elements **are used in the production of everything from ceramics to renewable energy equipment.
Here’s a quick rundown of how these elements make way into our daily lives.
Rare earth metals are found in varying quantities inside displays and other electronic components of smartphones. Many rechargeable batteries are made with rare earth compound, Several pounds of rare earth compounds are in batteries that power electric vehicles. rare earths have extensive military usage in equipment like night-vision goggles,precision-guided weapons, and even GPS equipment. These elements are essential to maintaining a modern military.
In 2019 India's rare earths production output was 3,000 MT which accounted for 1.47% of the world’s production, this number pales in comparison with China which has dominated rare earths production for a long time. With a domestic output of 132,000 MT, it accounts for a whopping 61% of the world’s production. The mining industry is controlled by six state-owned miners giving the country a vice-like grip on production and distribution.
With China controlling more than half of the worldwide production, it is very likely that most, if not all electronics in your household and even the device you're reading this on have parts that were sourced from China. 90% of Indian imports of rare earths come from China, this means that even products made in India have a Chinese "element" to them.
Chinese firms have been making big investments in Indian startups. A report from Gateway House: Indian Council on Global Relations says that Chinese investors hold a major stake in 18 of India's top-30 tech unicorns (companies valued at over $1 billion). Alibaba and Tencent, have been aggressively investing in Indian startups in the last five years—and many of the firms they’ve helped fund have crossed the $1 billion thresholds to become unicorns. Alibaba and its fintech affiliate Ant Financial own the biggest single stake in India's biggest unicorn, One97 Communications the parent company of Paytm. Paytm has a network of over 7 million merchants in India and is valued at over $10 billion. Alibaba has invested in at least six Indian startups like the food delivery app Zomato, online grocer Bigbasket and e-commerce platform Snapdeal. Alongside with PayTM, Bigbasket and Zomato have also crossed the $1 billion mark.
For Tencent, the number is 12, of which seven have achieved unicorn status. Tencent has a $40 million investment in BYJU’s, another Indian unicorn which is also the biggest EdTech company valued at $5.4 billion. In July 2019, BYJU's won the sponsorship rights for the Indian cricket team jersey. Ironically having a 'China-backed' company plastered on the Indian cricket team jersey. The company also has investments in the food delivery app Swiggy and the rideshare app Ola among others.
The difference between Chinese and Indian starts to fade away as we look at this sector, with companies having multiple investors across different countries there is no decisive way of declaring a company 'Chinese'. Zomato and Swiggy between both of them corner almost 75% of the app-based food delivery market, Ola, serves over 200 million customers through a network of 2.5 million driver-partners. These are Indian startups with Chinese investments that are generating employment for Indians and providing services to Indian consumers, would these companies also be considered Chinese and deserving of a boycott?
The Smartphone Market
The Indian Smartphone market is the second-largest Smartphone market globally reaching 158 million shipments in 2019. With an ever-growing market for mobile phones and the cheapest data prices in the world, one might think the indigenous Smartphone industry would be a force to be reckoned with. In 2014, Counterpoint Research released a report that put Micromax at the helm of the booming Indian smartphone market. It shipped more phones than any other brand in India. In fact, home-grown smartphone brands such as Micromax, Lava, and Intex once cornered nearly 54% of the market share.
Fast forward to 2019, Chinese companies accounted for more than 70% of all smartphone shipments in India, BBK Electronics, which owns different smartphone brands including Vivo, Oppo, OnePlus and Realme, has a 40% market share in India's smartphone market. OnePlus has emerged as the leader in the premium smartphone segment in 2019 which was earlier dominated by the likes of Apple and Samsung.
Semiconductors, which are a critical component in mobile phones are an industry in which China holds an edge over India. Other than Intel, the other chipset makers are Asian with many Chinese devices now using the Kirin processors made by the Shenzhen based HiSilicon, a fully-owned subsidiary of Huawei.
Chinese companies decisively dominate the smartphone market in India with their aggressive pricing tactics, But things are not as cut and dry as they seem, you will be surprised to know that the government recently announced that India is now the second biggest manufacturer of smartphones in the world More than 99% of smartphones that are sold in India are manufactured locally. It is not so easy to call a company that invests millions of dollars and employs thousands of Indian workers as 'Chinese'.
Xiaomi currently has seven smartphone manufacturing plants in India in partnership with Taiwanese multinational electronics company Foxconn and Singapore-based technological manufacturer Flex Ltd. Across these seven plants, Xiaomi has employed more than 25,000 people.
In the case of Vivo India, it has announced investments to the tune of $1 billion last year. The company employes 7,500 people currently and is planning to ramp it up to 40,000 over the next7-8 years.
OnePlus had set up its first R&D Centre outside of China and the US at Hyderabad in 2019 and is committed to investing another $130 million over the next three years.
To conclude, unlike in 1905 where 'Swadeshi' was a successful movement. We live in a highly interconnected world, where even customer center calls span multiple continents. A car bought in India would have parts sourced from a dozen other countries, local economic policies of countries sometimes influence change on global levels. It is the truth that many of our countrymen fail to understand, we live in a highly globalized world and there is no going back.
Featured Image: Suzy Hazelwood (Pexels)