প্রকাশ: 08/12/2021
In January 1998, French monthly Le Monde Diplomatique
carried an article titled ‘China holds world trade hostage’. Set in the
backdrop of the 1997 Financial Crisis, the article by Stephen S. Cohen
postulated that China, ‘stripped of its old ideology’, was bent on ‘asserting
itself as a world power in every domain’. In this regard, Cohen believed that
the Chinese economic growth, particularly in exports, had come due to its
movement to complex manufacturing. Yet, this growth had been at the cost of
Southeast Asia, which faced the brunt of the economic crisis during that
period.
In over two decades since the article was published, Cohen’s
words seem to have manifested in the present; China is today an aspiring
hegemonic power that is wielding not just exports, but its overall economic
strength to assert itself across the globe. After China became a full member of
the World Trade Organization (WTO), its integration in the global economy has
been swift, and its growth nebulous, as it quickly rose to become the world’s
second largest economy (in terms of GDP).
According to Lowy Institute data, before 2000, the US was at
the helm of global trade, as over 80 percent of countries traded with the US
more than they did with China. However, by 2018, the number had seen a steep
decline to a mere 30 percent, as China had become the largest trading partner
for 128 of 190 countries. In 2020, China’s share in global trade was nearly 15
percent, third only to the EU and the US. Additionally, China has managed to
maintain a positive balance of trade despite its wider reach; in 2020, China
recorded a trade surplus of USD 535.37 billion with an increasing tendency over
the last five years. This was despite the global economic slowdown, which had
led to decline in trade among countries as well as the criticism of Beijing
regarding the COVID-19 issue.
However, Chinese integration in the international economy
has come with a caveat. While the country did become a member of WTO, it never
did follow the organization’s underlying values for free trade in spirit. The
Dragon nation is a country that has access to open trade across the globe due
to WTO norms, but its own economy is what can be described as a ‘black box’ due
to opaque political and economic decision making, and notoriously unreliable
data provided for the benefit of CCP.
In addition to the aforementioned internal factors acting as
a magnet to unfairly tip the scales in China’s favour, there have also been
concerns regarding its external trade policies. Chinese trade practices have
been described as mercantilist and protectionist; mercantile, due to the tendency
of manipulation of currency and higher production to oversupply markets, and
protectionist for utilization of tariff and non-tariff barriers that act as a
roadblock for foreign commodities and companies to enter and survive in China.
Due to WTO rules, trade is not subjected to tariff barriers as often,
non-tariff barriers such as import quota and licensing have acted as
instruments to restrict entry for foreign trade.
Chinese mercantile behavior also manifests in the form of
‘dumping’, i.e., selling a commodity in another country at a price lower than
its own domestic market. The US and India have been perhaps the largest victims
of China’s dumping policy, especially with regards to electric commodities,
aluminum and steel.
The rising discontent in the US regarding opacity in Chinese
trade policies and the resultant high deficits brought forth the US-China trade
war, which threw the issue of the Asian nation’s entrenchment into global
supply chains in a stark light. The scrutiny rose further due to the COVID-19
crisis, where China held bilateral trade ties ransom to deflect any questions
or allegations against it on the origins of the pandemic. This has led to
several countries reassessing their dependence on China for their supply
chains.
An example of this can be seen in a recent report that
details Indian exposure and overdependence on China. According to it, five
leading Indian companies, engaged in sectors ranging from automotive and home
appliances, to pharmaceuticals and chemical industries, have a high dependence
on China for their market activities. This may be due to dependence on market
revenue in China (Tata motors deriving 80 percent of revenue from a subsidiary
that sees China as key market), manufacturing of products or their auxiliaries
(VIP luggage having 50 per cent manufacturing in China, Voltas depending on Chinese
manufactured compressors and controllers), raw materials (India imports over 63
percent of its total pharma imports from China), or stake holding and
investments in major sectors. Yet, actual Indian presence in China is limited,
and the trade deficit runs in double digits in favor of China.
For India, the issue has major geostrategic implications due
to the border issues, but the South Asian country should also be treated as a
sobering example of how Beijing has sunk its talons in various countries with
little cost to itself. Yet, despite the rising examples of antagonism, coercion
and corruption from the Chinese government and its representative companies
during COVID pandemic, the Chinese trade with South Asian countries (including
India, despite policy attempts against it) still grew.
The Centre of Strategic and International Studies, in this
context, has urged for international players to ‘push back against Chinese
economic coercion’, including in trade relations. However, that requires that
Chinese hold on global supply chains loosened, which will require redirecting
industrial and market units to other countries with similar capacities. The US,
Japan and France have already started taking active steps to encourage their
respective companies to rely less on China to make the world's smartphones,
drugs and other products. Yet, it can be expected to be an uphill battle;
China’s size as both a global producer, as well as its market, means that
companies tend to be ambivalent to the predatory nature of Chinese trade
practices.
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