Six Things To Know About India-China Economic Relations

China is India’s second-biggest trading partner.

Prime Minister Narendra Modi with Chinese President Xi Jinping. (Source: PTI)
Prime Minister Narendra Modi with Chinese President Xi Jinping. (Source: PTI)

As border tensions between India and China flared up with the deadliest clash in more than four decades, leaving at least 20 Indian soldiers dead, there have been calls for boycotting goods imported from the neighbouring nation. That, however, won’t be easy because the two economies are intertwined.

China is Asia’s largest economy and the world’s second-biggest with a GDP of about $13.6 trillion. India is No. 3 in Asia at $2.7 trillion. From supplying industrial components and raw materials to investments in India’s startups and technology firms, China is India’s biggest trading partner after the U.S.

BloombergQuint takes a look at the bilateral economic ties:

India-China Trade

China accounted for over 5% of India’s total exports in financial year 2019-20 and more than 14% of imports. Meaning, India runs a huge trade deficit with China, the biggest exporter to India.

While the absolute value of imports from our neighbour may have fallen, their share in the overall pie rose from 13.68% in the previous fiscal. India, according to state-backed Invest India data, is the seventh largest export destination for Chinese products.

Chinese exports to India comprise smartphones, electrical appliances, power plant inputs, fertilisers, auto components, finished steel products, capital goods like power plants, telecom equipment, metro rail coaches, iron and steel products, pharmaceutical ingredients, chemicals and plastics and engineering goods, among other things, according to the Ministry of Commerce.

India’s imports from China jumped 45 times since 2000 to reach over $70 billion in 2018-19, according to Invest India.

Chinese Investments In India

Foreign direct investments from China come to metallurgical industries, renewable energy (solar panels), electrical equipment, automotive and chemicals.

Data compiled by BloombergQuint from China Global Investment Tracker showed Chinese FDI into India at $4.14 billion in 2019. China’s commerce ministry, however, pegs the figure at at $8 billion for 2018-19.

According to Invest India, there are roughly 800 Chinese companies in the domestic market.

They have roughly 75 manufacturing facilities for smartphones, consumer appliances, construction equipment, power gear, automobiles, optical fibre, and chemicals.

Oppo, Vivo, Fosun International, Haier, SAIC and Midea are some of the largest Chinese brands and manufacturers in India. Adani Global Ltd., Dr. Reddy's Laboratories Ltd., Jindal Steel & Power Ltd., BEML Ltd, Bharat Heavy Electricals Ltd., Godrej & Boyce Manufacturing Co. and Aurobinda Pharma Ltd. are some of the Indian firms present in China.

The FDI numbers, however, don’t present a complete picture of China’s business reach in India.

Chinese Hooks In India’s Startups

Chinese funds and companies often route their investments in India through offices located in Singapore, Hong Kong, and Mauritius, a Gateway House report said.

For example, Alibaba Group’s investment in Paytm came via Alibaba Singapore Holdings Pvt. These don’t get recorded in India’s government data as Chinese investments, the report said. “In several cases, the investment in India hasn’t been made in the name of the Chinese entity/investor, and is, therefore, difficult to trace.”

Chinese tech investors have put an estimated $4 billion into Indian startups, according to the report. As of March 2020, 18 of India’s 30 unicorns are Chinese-funded.

Six Things To Know About India-China Economic Relations

The Smartphone Dominance

Chinese smartphones brands, led by Xiaomi, Vivo and Oppo, are market leaders in India with an estimated 72% share put together, leaving Samsung and Apple behind, according to a report by Gateway House. Quarterly data by Counterpoint corroborates this.

Six Things To Know About India-China Economic Relations

TikTok isn’t the only China-backed mobile application with a huge following in India. According to App Annie’s The State of Mobile in 2019 report, India saw a 165% increase in app downloads between 2016 and 2018. Half of these downloads on both IOS and Google Play Store were for apps with Chinese investments, including UC Browser, SHAREit, and Vigo Video.

“Such Chinese apps harvest more than normal amounts of data as compared to other social media apps, posing security concerns for India,” the Gateway House said.

India’s Dependence On China For Bulk Drugs

India's pharmaceutical industry is the third largest in the world in by volume and ranks 14 by value. The country exported medicines worth over $14 billion to the U.S. in 2018-19, according to a response to a query in the Rajya Sabha in March.

But, according to the same reply, India imports two-thirds of its active pharamaceutical ingredients, or key ingredients of drugs, from China.

India-China Tourism

Travel between India and China has been growing. Or at least it was before the Covid-19 pandemic.

Mainland China was the eighth-largest market for India in 2018 with nearly 3% share in total arrivals. From just 1,371 arrivals in 1981, the number rose to 2.8 lakh in 2018, growing at an annualised rate of 32.4%, according to data available with the Tourism Ministry of India.

Nearly 48% of the arrivals were for business purposes, and another 48% for leisure.

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