{"id":42703,"date":"2024-09-28T05:50:45","date_gmt":"2024-09-28T00:20:45","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=42703"},"modified":"2025-05-05T19:41:41","modified_gmt":"2025-05-05T14:11:41","slug":"india-faces-trade-challenges-amid-china-shock-2-0","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/india-faces-trade-challenges-amid-china-shock-2-0\/","title":{"rendered":"India Faces Trade Challenges Amid China Shock 2.0"},"content":{"rendered":"<h2><strong>What\u2019s in today\u2019s article?<\/strong><\/h2>\n<ul>\n<li>Why in News?<\/li>\n<li>What is China Shock 1.0?<\/li>\n<li>China\u2019s increasing share of global export<\/li>\n<li>India \u2013 China Trade Relation<\/li>\n<\/ul>\n<h2><strong>Why in News?<\/strong><\/h2>\n<p>Global markets are facing a surge in Chinese exports, referred to as &#8220;China Shock 2.0,&#8221; which has intensified trade tensions. Major economies like the US, India, and others are responding with heightened tariffs to counter the influx of Chinese goods.<\/p>\n<h2><strong>What is China Shock 1.0?<\/strong><\/h2>\n<ul>\n<li>In the 2000s, there was a debate on whether China would become a capitalist powerhouse or retain its communist ideology.<\/li>\n<li>US President Bill Clinton supported China\u2019s accession to the WTO, believing that economic integration would lead to political reform in Beijing and align it with values like economic freedom.\n<ul>\n<li>Clinton argued that China\u2019s WTO membership would not only increase imports of American products but also foster democratic principles.<\/li>\n<\/ul>\n<\/li>\n<li>However, the years following China\u2019s entry into the WTO became known as the &#8220;China Shock&#8221;.<\/li>\n<li>Cheap Chinese goods, driven by a large, inexpensive labor force, flooded global markets, leading to widespread manufacturing job losses internationally.<\/li>\n<li>This shock disrupted Western economies and had a detrimental impact on Indian manufacturing and trade as well.<\/li>\n<\/ul>\n<h2><strong>China\u2019s increasing share of global export<\/strong><\/h2>\n<ul>\n<li><strong>Statistics<\/strong>\n<ul>\n<li>China\u2019s share in global export market has increased by 1-7% in the last five years. From sub 14%, it has moved beyond 15.5% in last five years.<\/li>\n<li>Between July 2023 and July 2024 the exports of China have increased by $18.8B (6.67%) from $282B to $301B, while imports increased by $14.8B (7.33%) from $201B to $216B.<\/li>\n<li>Hence, it can be said that China&#8217;s share of global exports has been increasing. <strong>It is now the world&#8217;s largest exporter and trading nation<\/strong>.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Factors driving the renewed wave of goods exports by China<\/strong>\n<ul>\n<li>China\u2019s ambition to move up the export value chain to high-tech sectors such as solar equipment, electric vehicles, and semiconductors.<\/li>\n<li>Domestic demand slump, forcing China to export more aggressively.<\/li>\n<li>Other supporting factors include:\n<ul>\n<li>China\u2019s supporting industrial policies which revolve around tax incentives, subsidies and greater access to funds.<\/li>\n<li>Increased focus on R&amp;D also forms part of China\u2019s Industrial Policy.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li><strong>Made in China 2025 strategy<\/strong>\n<ul>\n<li>Beijing\u2019s <strong>&#8216;Made in China 2025&#8217;<\/strong> strategy is a long-term plan to transform China into a global high-tech manufacturing leader by <strong>2049<\/strong>.<\/li>\n<li>Introduced in 2015, this strategy is aimed at:<\/li>\n<li>achieving 70% self-sufficiency in hi-tech industries by 2025,<\/li>\n<li>competing with other manufacturing rivals by 2035, and<\/li>\n<li>transforming the country into a global manufacturing powerhouse by 2049.<\/li>\n<li>This involves promoting advanced sectors such as <strong>electric vehicles, semiconductors<\/strong>, and <strong>renewable energy<\/strong>.<\/li>\n<li>Under this strategy, the government provides subsidies, including low-interest loans and tax breaks, to hi-tech companies.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Impact on India and Other Economies<\/strong>\n<ul>\n<li>IMF recently highlighted concerns about <strong>China&#8217;s external surpluses<\/strong>, driven by industrial policies aimed at boosting exports amidst weak domestic demand.<\/li>\n<li>The IMF warned that this could lead to <strong>&#8220;China Shock 2.0&#8221;<\/strong>, displacing workers and harming industrial activity in other countries.<\/li>\n<li>The rise in exports threatens local industries and global trade stability, escalating international trade tensions.<\/li>\n<li>In order to counter this surge, recently, the US has imposed significant tariff hikes on Chinese imports, aiming to curb the flood of products:<\/li>\n<\/ul>\n<\/li>\n<li>100% duty on electric vehicles (EVs)<\/li>\n<li>50% duty on solar cells<\/li>\n<li>25% duty on steel, aluminum, EV batteries, and certain minerals<\/li>\n<\/ul>\n<h2><strong>India \u2013 China Trade Relation<\/strong><\/h2>\n<ul>\n<li><strong>Statistics<\/strong>\n<ul>\n<li>China was the top supplier of goods to India in 2023-24, accounting for imports valued at $101 billion, while India exported goods worth $16.65 billion.<\/li>\n<li>India\u2019s imports from China grew at a much faster pace than from the rest of the world.<\/li>\n<li>Goods imports from China surged from $10.87 billion in 2005-06 to $61.71 billion in 2015-16.<\/li>\n<li>This dependence grew so much that despite many economic restrictions on Chinese businesses following the Galwan clash in June 2020, imports from China surpassed a record $100 billion in 2023-24.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Impact<\/strong>\n<ul>\n<li>For <strong>India<\/strong>, the impact is already evident, with <strong>imports from China<\/strong> rising by nearly <strong>60%<\/strong>\u2014from <strong>$70 billion in FY19<\/strong> to <strong>$101 billion in FY24<\/strong>, according to official data.<\/li>\n<li>This surge could further strain India&#8217;s manufacturing sector, trade balance and ultimately hurt India\u2019s ambition to become global power.<\/li>\n<li><strong>Steel Industry Struggles with Chinese Influx<\/strong>\n<ul>\n<li>Despite slowing exports, <strong>Chinese steel imports<\/strong> have surged globally, including in India. Key statistics include:<\/li>\n<li>India&#8217;s <strong>iron and steel exports<\/strong> dropped nearly <strong>19% year-on-year in August 2024<\/strong> and <strong>29.4%<\/strong> during April-August 2024-25.<\/li>\n<li><strong>Finished steel imports<\/strong> from China to India hit a <strong>seven-year high<\/strong> in the first five months of FY24-25.<\/li>\n<li>India\u2019s overall <strong>finished steel imports<\/strong> reached a <strong>six-year high<\/strong> of <strong>3.7 million metric tons<\/strong> between April and August 2024.<\/li>\n<li>The surge in Chinese steel is eroding profits and threatening the stability of steel industries globally, particularly in Europe and India.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li><strong>China\u2019s dominance in electronics<\/strong>\n<ul>\n<li>India&#8217;s <strong>mobile phone exports<\/strong> have surged over the past two years, driven by investments from global tech companies like <strong>Apple<\/strong>, which has expanded manufacturing in the country.<\/li>\n<li>However, <strong>India\u2019s reliance on Chinese imports<\/strong> for electronic components remains largely unchanged.<\/li>\n<li>In <strong>FY24<\/strong>, India imported:\n<ul>\n<li>Over <strong>$12 billion<\/strong> worth of electronic components from <strong>China<\/strong>,<\/li>\n<li><strong>$6 billion<\/strong> from <strong>Hong Kong<\/strong>, together accounting for more than half of India\u2019s total electronic component imports.<\/li>\n<\/ul>\n<\/li>\n<li>Despite growth in <strong>electronics manufacturing<\/strong>, India&#8217;s dependence on China persists.<\/li>\n<li><strong>Electronic components<\/strong> import, valued at <strong>$34.4 billion<\/strong>, were the <strong>fifth-largest commodity<\/strong> imported, following <strong>crude oil, gold, petroleum products<\/strong>, and <strong>coal<\/strong>, according to Ministry of Commerce data.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Strategy employed by India<\/strong>\n<ul>\n<li>India is utilising both options:<\/li>\n<li>imposing anti-dumping and anti-subsidy duties, and;<\/li>\n<li>implementing quality control orders (QCO) to check imports of cheap items from China.<\/li>\n<li>New Delhi is also considering collaborating with other Western countries to meet the challenge of Chinese hi-tech products capturing a lion\u2019s share of the global market.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Counter response by China &#8211; Blocking India\u2019s access to solar equipment<\/strong>\n<ul>\n<li>The Economic Survey 2023-24 warned that in response to India\u2019s anti-dumping probe against Chinese entities, China has been quietly blocking India\u2019s access to solar equipment.<\/li>\n<li>India aims to achieve <strong>500 GW<\/strong> of renewable energy capacity by <strong>2030<\/strong>, investing <strong>$4.5 billion<\/strong> in clean energy manufacturing.<\/li>\n<li>However, <strong>80%<\/strong> of India&#8217;s solar cells and modules still come from <strong>China<\/strong>, which dominates the global solar supply chain.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<hr \/>\n<h3><strong>Q.1. What is &#8220;China Shock 2.0&#8221; and its impact on global markets?<\/strong><\/h3>\n<p>&#8220;China Shock 2.0&#8221; refers to the surge in Chinese exports of high-tech goods, which is disrupting global markets and harming industries in various countries, including India. The influx of inexpensive goods is straining local manufacturing sectors and intensifying international trade tensions.<\/p>\n<h3><strong>Q.2. How is India responding to the challenges posed by China Shock 2.0?<\/strong><\/h3>\n<p>India is responding by imposing anti-dumping duties and quality control measures to restrict imports of cheap Chinese goods. Despite this, India&#8217;s dependence on Chinese imports, especially for electronics and solar equipment, continues to grow, threatening its manufacturing sector&#8217;s stability.<\/p>\n<p><strong>Source: <\/strong><a href=\"https:\/\/indianexpress.com\/article\/business\/china-shock-2-0-what-could-it-mean-for-india-and-the-world-9590481\/\" target=\"_blank\" rel=\"nofollow noopener\">Electronics to solar equipment to steel, India grapples with China Shock 2.0<\/a><\/p>\n<p><a href=\"https:\/\/www.thehindu.com\/business\/india-gears-up-to-combat-beijings-made-in-china-2025-manufacturing-plan\/article68684661.ece#:~:text=India%20is%20bracing%20to%20meet,control%20orders%20and%20a%20possible\" target=\"_blank\" rel=\"nofollow noopener\">The Hindu<\/a><\/p>\n<p><a href=\"https:\/\/www.fortuneindia.com\/macro\/china-plus-one-narrative-sinks-as-chinese-share-of-global-exports-rises\/116378\" target=\"_blank\" rel=\"nofollow noopener\">Fortune India<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>As China floods global markets with high-tech goods, India struggles with increasing imports, threatening its manufacturing sector. Learn about the rising impact of China&#8217;s exports and India&#8217;s strategies in response.<\/p>\n","protected":false},"author":5,"featured_media":42704,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[],"class_list":{"0":"post-42703","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-mains-current-affairs","8":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/42703","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=42703"}],"version-history":[{"count":0,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/42703\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/42704"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=42703"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=42703"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=42703"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}