WASHINGTON — The recent military standoff between China and India over territory in a remote area of the Himalayas has exacerbated resentment in India at the growth of Chinese imports, but India is too dependent on those imports to block trade in retaliation, experts say.
Since July 16, Chinese and India troops have been poised on a thin strip of land in the junction with Bhutan, a small country between the two behemoths; India wants to prevent China from building a road in Doklam plateau, a disputed area claimed by both China and India’s ally, Bhutan.
One of India’s largest right-wing political group has called on Indians to boycott Chinese products.
China is India’s largest trading partner. China-India bilateral trade reached $71.5 billion last year, according to the Confederation of Indian Industry. But India’s trade deficit with China widened to $51.1 billion last year from $29.3 billion in 2010.
Indian businesses are frustrated with China’ restrictive market-access practices. The Ministry of Commerce in Beijing reported that in the first half of 2016, India initiated 12 investigations against Chinese products, one case more than the U.S. is pursuing.
“Some of the places where India have comparative advantages, Indian companies face nontariff barriers in China and therefore haven’t been able to penetrate Chinese market,” said Dhruva Jaishankar, fellow of foreign policy at Brookings India. “China also has very heavy subsidies …, A lot of low-cost manufacturing that was expected to go to India now is not going to happen.”
In July, India has launched an anti-dumping probe into solar cells from China, Taiwan and Malaysia in an effort to protect Indian manufacturers from low-costs imports. China said, that the decision would “hurt India’s solar power industry and the realization of its renewable energy targets.”
Sarah Watson, an associate fellow in U.S.-India Policy Studies at Center for Strategic International Studies, said the India’s fast growing solar power industry is driven by affordable cells from China.
“If they were to manufacture panels in India, the panels will be more expensive and the power will be a lot more expensive. It will no longer be competitive with coal,” she said.
Indian Commerce Minister Nirmala Sitharaman went to Beijing last week to get the Chinese Ministry of Commerce to break down its restrictions on market access, especially for Indian technology, pharmaceuticals and agricultural products.
Chinese investment in India has soared in recent years, with $1 billion of Chinese FDI coming to India last year compared with only $102 million in 2011, according to India’s Department of Industrial Policy and Promotion. But India, like other countries that have significant Chinese investment, is concerned about the influence that investment could give the Chinese over domestic issues in India, Jaishankar said. In fact, India is poised to reject Shanghai Fosun Pharmaceutical Group Co.’s proposed $1.3 billion takeover of an Indian drug maker Gland Pharma, the biggest-ever Chinese acquisition in the country if it succeeds, over alleged security concerns.
China needs India’s strategic position to expand its diplomatic and economic influence beyond the Asia-Pacific region with its “Belt and Road Initiative,” so the military standoff is not in China’s best interest, said Liu Yawei, director of the China Program at the Carter Center.
“Without India’s participation, China couldn’t employ its westward development strategy to ease pressure imposed from the east,” Liu said. “China and India are both developing countries and share many similarities in national conditions, so there is no reason that they couldn’t cooperate.”