China Rising: Ministries work on action plan

The China game plan was discussed at a high-level meeting earlier this month chaired by the deputy national security advisor. The Department of Commerce presented a draft strategy in the meeting attended by senior officials from almost a dozen departments and ministries including Power,Telecom,IT and Heavy Industries.

Each ministry will now present its own strategy for their respective product areas. Broadly,they will look at two aspects: where they are not competitive,how best duties can be structured to bring more competition,and where they are dependent on China,how to leverage the domestic advantage,“Of course,all this needs to be done within the ambit of WTO since India cannot deny national treatment to China,which too is a WTO member,” said an official.

The plan will be given final shape in the coming weeks,the official said.

New Delhi’s awakening to Beijing’s manufacturing prowess and rising influence over global geo-politics is not sudden,but its import is only slowly sinking in. What has provoked departments and ministries to forget turfs and decide to work together is the skewed impact of the rapidly rising bilateral trade between the two countries. “Today,we have landed ourselves in a precarious situation where China accounts for 26 per cent of our manufacturing GDP. Our industries are intricately linked with imports from China,” another official said.

The two-way trade between the two countries last year was of the order of $60 billion. In 2010-11,China sold $40-billion worth of goods to India,and bought just $20-billion worth from India. In other words,it enjoyed a trade surplus of $20 billion. By 2017,it will have a $80-billion trade advantage.

What has raised red flags in the government is the composition of the trade basket. China sells value-added machinery and equipment to India,whereas India sells cheap raw material.

“If you look at the Chinese export basket,the top 10 items are manufactured products; there are no primary products,except some minerals like phosphorus. Of its total exports of $40 billion in 2010-11,power and telecom equipment accounted for $16 billion. In India’s export basket,you have to search for manufactured items. Iron ore made up almost 46 per cent of our total exports of $20 billion,” the official said.

More worrying is another aspect — disruption of supplies. This can result in a sharp rise in prices,even in sensitive sectors such as pharmaceuticals. “To present a good image during Beijing Olympics,China closed down units of chemical intermediates. Costs of Indian products shot up and remained at elevated levels for about six months. Given that the margins are thin in this business,procuring these from other markets makes the business unviable,” the official said.