Trade tensions escalate between India and China after border dispute

Industry News | | MIC Customs Solutions |

India is threatening to boycott Chinese products, but could this stance backfire and harm India's economy?

Trade tensions are continuing to escalate between India and China, with the former now having discouraged the purchase of Chinese products from certain sectors.

The animosity began when the two neighboring nations became embroiled in a border dispute in the Himalayan Galwan Valley, with 20 Indian soldiers subsequently killed in the fighting.

As a result, a raft of anti-Chinese sentiment broke out in India, with state and public sector companies reportedly asked to stop issuing new contracts to Chinese firms.

Today (July 3rd 2020), Indian power minister RK Singh has said no more energy equipment will be imported from China, with India instead planning to manufacture products such as solar panels within the domestic market.

He also banned the import of 59 Chinese-owned apps, calling them a threat to national security and stating that China could put malware within them that would allow the country to cripple India's power grid.

Additional reports suggest e-commerce companies are also now being asked to display the country of origin for the products they sell to ensure none are from China.

The tension could seriously affect bilateral trade between the two Asian nations as India contemplates tariffs and anti-dumping duties on Chinese imports, with figures already down by 15 per cent compared to 2018.

Meanwhile, industry associations are warning against emotional responses that could inadvertently harm the Indian economy.

Indeed, China is India's second-largest trade partner after the US and the third-largest destination for Indian shipments.

The smartphone market in India also depends heavily on cheap Chinese handsets, with most electronics manufacturers saying they could be devastated without crucial parts from China.

Although India insists it could partner with Vietnam, Japan and some European nations to replace Chinese custom, it would undoubtedly take time to replace supply chains.

China remains apparently unperturbed by the threats, with India accounting for only three per cent of its exports. 

However, its Global Times newspaper did print an article warning that "China's restraint is not weak", adding it would "be extremely dangerous for India to allow anti-China groups to stir public opinion, thus escalating tensions".