India’s ill-considered move on anti-dumping duties risks igniting trade war with China

By Wang Jiamei Source:Global Times Published: 2017/8/13 20:03:39

A trade war between China and India seems to be looming after the latter moved last Wednesday to impose anti-dumping duties on 93 products from China. Now Chinese companies must reconsider the risks of investing in India amid strained bilateral trade ties, and India should also be prepared for the possible consequences for its ill-considered action.

Even before the decision on duties, India was already the country with the most trade remedy probes against China, initiating 12 investigations into Chinese products in the first half of this year, according to statistics from China's Ministry of Commerce. Of course, China could easily retaliate with restrictions on Indian products, but that doesn't make much economic sense for the country. According to the Embassy of India in China, India's exports to China fell by 12.3 percent year-on-year to $11.75 billion while India's imports from China rose by 2 percent to $ 59.43 billion, resulting in a trade deficit of $47.68 billion.

It is understandable for the Indian government to be eager to narrow the trade deficit with China, but trade remedy measures should not be used as shortcuts, a strategy that will only backfire. If India really starts a trade war with China, of course China's economic interests will be hurt, but there will also be consequences for India.

First, it is not just Chinese companies that will face a setback due to the anti-dumping measures - India's consumers will also lose. Although Indian manufacturers are reportedly catching up with their Chinese peers, there is currently no alternative to many Chinese products in the Indian market, so Indian consumers will be the chief victims of the anti-dumping policy targeting Chinese products.

Second, given the tense bilateral trade ties, China may consider temporarily suspending investment or economic cooperation projects in India to ensure the security of these investments. Chinese companies should also be alert to the potential investment risk amid the growing policy uncertainties in India and should re-evaluate such projects.

Many Chinese companies have accelerated their investment in India over the past few years amid strong optimism over bilateral ties. According to a report in the Times of India in March, the Indian government was in talks with both Indian and foreign companies to introduce $62 billion investment in the country, which might create 1.7 million jobs.

Chinese companies accounted for about $32 billion of the proposed total. For instance, Sany Group planned to invest nearly $10 billion in wind power, while Dalian Wanda Group considered investing about $5 billion in real estate projects.

These Chinese-sponsored projects were expected to ease the bilateral trade imbalance. But as trade relations deteriorate, Chinese investors, increasingly concerned about potential risk, must reconsider their options. Many will probably shelve their projects, especially the large ones.

The author is a reporter with the Global Times.


blog comments powered by Disqus