World’s factory offers win-win, Indian merchants working hard to keep trade flow unchecked

By GT staff reporters Source: Global Times Published: 2020/12/23 15:43:22

Workers make linen products inside a textile plant in Dongguan, South China's Guangdong Province. Photo: GT/Cui Meng

Even as bilateral ties between China and India fell to their lowest point in decades this year, following a deadly border clash on the Himalayas in June, Indian companies and traders are still buying goods from China, according to exporters from Dongguan, one of the world's leading maufacturing hubs in South China's Guangdong Province.

Although China's exports to India continued to show weakness with a 13-percent drop in the first 11 months of the year, exporters in Dongguan, the export-oriented southern Chinese manufacturing hub that accounts for 4.3 percent of China's foreign trade, said the business with Indian partners went as usual, and some sectors even saw better-than-usual results as Indian manufacturing collapsed due to the unchecked COVID-19 pandemic in the country. 

In many cases, the pandemic has brought years-long business associates to work even more closely with each other to tackle some of the challenges posed by the Indian authorities that hindered a 'win-win' from happening during the height of an economic crunch. 

Hard to say 'No'

Just as millions are confined in their homes, a manager surnamed Xu working in LED screen parts and circuit boards based in Dongguan, told the Global Times that orders from India is jumping up by 30 percent compared with that of last year, marking one of the best periods on record for his company. The circuit boards are used in home appliances such as micro-ovens and washing machines.

It is difficult for India to say no to Chinese circuit boards, because after years development, India may have its own advantages in software, but apparently China has more advantages when it comes to hardware, Xu said.

"Firstly, Chinese circuit boards are batter quality; our clients can make higher profits through our high-quality products, even though our products might not be the cheapest," said Xu, who exports nearly 200-million-yuan worth of products to India yearly.

"Secondly, efficiency; we can deliver the same amount of orders in 10 days due to China's highly-developed industrial chain and labor efficiency, while factories in other countries often need 15 days," Xu added.

When it comes to elevators, a major export item that helps China generate exports dollars, India also faces the similar situation as the country's supply chain and production capacity are not strong enough to support the sector, an insider told the Global Times.

"In 2019, the world's total demand on elevators is equal to 1.19 million sets, and Chinese market accounts for an absolute major portion of the demand as it needed 890,000 sets, which is 10 times higher than that of the second largest market -- Indian market," an executive surnamed Bai at a listed elevator company based in Guangdong told the Global Times.  

Such a big market share makes China the most attractive country in to world for major elevator makers to establish factories in, which has boosted the country's development of the sector's supply chain, Bai said, adding that his company can easily access to standard parts within a single day.

By comparison, India's elevator industry is relatively small, Bai said.

The circuit boards and elevators represent a large category of items of Chinese exports to India, where even government supported players produce poorer quality products compared with their Chinese counterparts.

It's a pipedream to think India can overtake China when it comes to IT products or elevators, analysts said.

Be prepared for five years without magnets, only after such a long time can domestic Indian companies come up with alternative products to suit the Indian nationalist, though such products will be economically uncompetitive and quality wise inferior, said an executive surnamed Tang from a local company that makes rare-earth permanent magnets.

These are items which, because of China's dominating position in industrial supply chain, copying will daunt even the most ambitious Indian manufacturers. 

The production chain of rare-earth permanent magnets is solely in China, this fact alone is enough to deter any wish to copy and move the manufacturing of rare-earth magnets outside China, said Tang, whose company mainly engaged in producing magnets with functional use, such as in gift box, roof lamps and magnet charger.

"Some 85 percent of rare earths are from China. But for rare-earth empowered magnets, the figure is 95 percent," Tang said, noting that China's supply chain for rare earths and permanent magnet is unique .

If you decide not to source from Chinese magnets suppliers, then you are practically saying goodbye to magnets, Tang said. 

A self-reinforcing win-win relation

Amid rising political tensions, the Indian government has taken a range of tough measures against China, including banning more than 200 Chinese apps that unnerved Chinese investors in Indian market.

For many items, India can make it, but it needs to build the industrial chain first, and China spent three decades to learn and build such a supply chain, entrepreneurs said.

Customers are buying from China not because they love China, they are buying because they can make a profit from reselling of the goods they purchased here or the goods here offers the most value for the dollar they are prepared to spend, multiple company owners, senior executives told the Global Times.

"China is able to manufacture elevators with lifting speed of 10 meters per second, while it is hard for Indian companies to produce elevators with lifting speed of 1.75 meters per second, Bai said," adding that India also need to import for mega infrastructure projects, as it can only produce normal commercial travellators.

"I think it is unrealistic for them to boycott Chinese products, because they need them," Bai said.

"It is lucrative for them [Indian clients] to cooperate with Chinese companies in the circuit boards, and I believe it is hard for India to catch up China in five to 10 years in this sector," Xu, the owner of the circuit boards factory, said.

India's imports from China as well as its trade deficit declined sharply in November, and was hailed as a welcome exception as China's exports to the world is at its best levels in years. However, manufacturers in Dongguan warned that such a situation may not last. 

"From what I have heard from my Indian clients, Indian manufacturing has collapsed, Tang said, noting that all of the Indian merchants have paid in time and in full, even the goods are still in our plants, " Tang said.

Clients told us many plants in India were hit by widespread infections and production was halted, Tang said, so more orders will be shifted to plants in China over the coming months.
Newspaper headline: Exporters unfazed by China-India trade tensions


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