A Small Thought Experiment on Made in China - Vivek Kaul's Diary
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A Small Thought Experiment on Made in China

Oct 21, 2016

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In the recent past there have been calls for boycotting Chinese goods. The question is: Whether this can be executed? Or to put it more specifically, whether it can be executed by a middle class Indian?

Consider my personal situation. I am writing this column on a Lenovo laptop, which is Made in China.

The Kindle book reader which I use to refer to many books that I quote in my regular columns, was assembled in China.

My internet connection is provided by Reliance 4G Wi-Pod. The device has been made by the ZTE Corporation, which is based out of Shenzhen in China.

I use the Moto g4 PLUS mobile phone, which is Made in China.

I own the most basic model of a Hewlett Packard printer, which is Made in China.

I own a Toshiba television, which also happens to be Made in China.

This shouldn't be so surprising. In 2015-2016, 36.6 per cent of Indian imports from China constituted of electronic products. Engineering goods came in second at 28.9 per cent and chemicals came in third at 18.4 per cent.

So, basically if we want to hurt China, then these are the goods which we should not be importing from them. In total, they formed close to 84 per cent of Indian imports from China.

So far so good.

How realistic is this? Here's a thought experiment I did in order to figure this out. So let's say you want to go out somewhere. You decide to call an Ola or an Uber taxi. There is a very good chance that you do this using a Made in China phone. In 2015-2016, 16.3 per cent of Indian imports from China were telecom instruments.

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Even if you manage to avoid that, chances are that some component of the phone would be Made in China. You have no way of knowing. Why do I say this? This is primarily because MNCs these days manufacture products using global supply chains.

As the World Trade Report for 2013 points out: "A central feature of this... age of globalisation is the rise of multinational corporations and the explosion of foreign direct investment (FDI)... Upwards of two-thirds of world trade now takes place within multinational companies or their suppliers - underlining the growing importance of global supply chains." This is something that India has clearly missed out on due to a whole host of reasons, which are beyond the scope of this column.

Further, the battery of the phone used to call the taxi, is charged through electricity. Chances are the electricity that you are using has been produced using equipment imported from China, using loans provided by the Chinese banks. Electrical machinery formed 4.4 per cent of Indian imports from China in 2015-2016.

You avoid thinking about this rather esoteric point and get back to calling for the cab. You need to go out after all. And in order to do that, you need to call an Ola or an Uber taxi. If you call Ola, you need to know that Ola is in alliance with Didi Chuxing, a Chinese taxi-company. They have entered into a non-compete clause. If you call Uber you are going to use Paytm to pay the taxi driver. The Chinese company Alibaba is the major investor in Paytm. So that rules out paying electronically.

So you need cash. You go to withdraw cash from an ATM. Chances are the ATM will be in Made in China. So what do you do now? You go to a bank branch and withdraw money. Chances are the computer used by the teller to give you cash is also Made in China. So what do you do? You think chuck it, let's not go out anywhere because we don't want to encourage Made in China. Let's order a Pizza. Ah, a perfectly American Pizza. Uncle Sam can have my money but I am not going to give it to China.

What do you think Uncle Sam will do with that money? Order goods from China.

But that is a second-order effect. So you ignore that and curse that MBA degree that makes you think so much.

Nevertheless, Pizza has cheese. And cheese is made from milk. In 2015-2016, industrial machinery for dairies formed 4.7 per cent of Indian imports from China. Oh then, it's quite possible that cheese also has Made in China inputs.

What is a Pizza without cheese? But you compromise and decide to go get Pizza bases from the market and make one for yourself at home with tomato ketchup.

Wait, wait, wait! What is a Pizza base made of? Wheat. And farmers use a lot of fertilizer to grow wheat and other food grains. In 2015-2016, fertilizers formed 5.25 per cent of Indian imports from China.

India is dependent on imports in the case of phosphatic and potassic fertilizers. As far as phosphatic fertilizers are concerned, almost 90 per cent of it is imported. With no known commercially exploitable source of potash in India, the country is totally dependent on imports for potassic fertilizers.

You decide not to think so much and just to order and eat the Pizza. After eating the Pizza you feel a little queasy. You decide to pop a tablet. Wait, wait, wait. Medicinal and pharmaceuticals formed 3.8 per cent of Indian imports from China in 2015-2016. Bulk drugs and formulations formed a major part of this. In 2015-2016, bulk drugs and formulations formed around 3.7 per cent of Indian imports from China.

So chances are that the drugs that have gone into the making of the tablet have been imported from China. Even if they haven't, there is no way for you to figure out.

How do we go we genuinely go about avoiding Made in China? Let's say we boycott Chinese brands. You don't buy a Moto G phone but an Apple iPhone. While iPhones are also assembled in China, a large part of the money will go to Apple, which basically seems like an American company.

Interesting. But the moment you buy Apple, you pay more. This leaves you with lesser money to buy everything else and in the process Indian manufacturers lose out.

Hence, Apple is not worth the trouble.

Okay, so you buy a Samsung phone. Samsung is a Korean brand. But they also make stuff in China. If more and more people buy Samsung phones (and not Moto G) that in turn will also benefit Chinese companies. What they lose out on Moto G they will possibly make up from Samsung.

So where does that leave us? It leaves us with crackers. Yes. Diwali crackers. Make sure you buy Indian brands this year. Made in Sivakasi. And not Made in China. And in the process keep encouraging regular fires in Sivakasi.

And forget about the fact that there have been cases of Sivakasi fire cracker entrepreneurs also getting their stuff Made in China. You will only know once you open the packet.

And how much will a boycott of crackers hurt the Chinese? Perhaps a little. But not something that they can't manage. Fire crackers are low value products at the end of the day.

So how is it possible to really hurt China? The way out is to ensure that the government creates an environment where Indian manufacturers can compete with the Chinese ones. And that is easier said than done.

Vivek Kaul is the Editor of the Diary and The Vivek Kaul Letter. Vivek is a writer who has worked at senior positions with the Daily News and Analysis (DNA) and The Economic Times, in the past. He is the author of the Easy Money trilogy. The latest book in the trilogy Easy Money: The Greatest Ponzi Scheme Ever and How It Is Set to Destroy the Global Financial System was published in March 2015. The books were bestsellers on Amazon. His writing has also appeared in The Times of India, The Hindu, The Hindu Business Line, Business World, Business Today, India Today, Business Standard, Forbes India, Deccan Chronicle, The Asian Age, Mutual Fund Insight, Wealth Insight, Swarajya, Bangalore Mirror among others.

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31 Responses to "A Small Thought Experiment on Made in China"

Alok Bhattamishra

Oct 27, 2016

Dear Vivek Ji,
Just gone through your article on " A small thought- Experiment on made in China ". Its gives a picture that we will never be able to discard chinese products with multiple examples. It totally ignores the potential India possesses. Also, Its silent to give a solution. I apologise to say so.....

The basic fact is that most of the people knows that its really tough to discard Chinese goods. The purpose of this drive is well known- " Lets look within - to be self reliant " and instead of depending on any other country for each of our needs, we should strive for " why not make it in India ..." Please note, much before " Boycott China slogan" there is a initiative called " Let's make in India " which has been already started.

For any challenge however big, we should start with - " Its possible ". Believe me, India is really a big country with diverse and ample resources to reverse the trend. Its none less than a sleeping giant.As everything originates with a belief that -"Its possible ", first we have to take a small step... till it becomes a giant leap..like "Bund bund se sagar ". It has already been achieved by a tiny country like Israel, Taiwan. Also see what japan does with a big country like US, India & the rest of world. We can achieve anything if we can take a first step and have faith on ourself. .. Thanks & Regards, Alok Bhattamishra

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seshadrinadan

Oct 25, 2016

What is narrated by Sri. Vivek Kaul are matters known to one and all. It is not a revelation. Facts narrated by him is the very reason why the call was made and is supported by persons like me. Let these intellectuals remember that this is an emerging World that is trying to remove shackles. It is not possible to carry on by shutting the doors, as China does even now. This is a world where one should tolerate and respect and refrain from intimidating. It is China which is benefited out of its trade with India. It is their responsibility not to act against us. They are bound not to use Pakistan to destroy us. So, it should be their outlook not to intimidate our Nation.The fact that persons like Sri. Vivek Kaul and other intellectuals have a high level of earnings and cosy life, because of our Defence Forces. If our Forces were not able to protect our Nation, we would have been overpowered by China, by using Pakistan to the hilt against us. Let these self proclaimed intellectuals remember one thing - it is the Sacrifice of Our Defence Personnel that helps the Nation to lead a normal and peaceful life. Entire nation is bound to stand shoulder to shoulder with our Veer Jawans rather than be skeptical.

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Mahesh

Oct 23, 2016

The author states some facts but has a very defeatist outlook. His article should be suggesting some solutions to help reduce imports from China, but he seems to be promoting Chinese goods & discouraging us in believing that we cannot make similar products in India. Even where the famous INDIAN firecrackers industry is doing well, he is trying very hard to put down the industry by talking about FIRE. This author's thinking is totally deplorable. For his information the very same products he mentions were first made some where else. Good China did not have people like this author. Other wise China would not have become a SUPER POWER today. Most important thing is that the people should work honestly & hard like the Germans. Just 2 years back a small country like Germany was the biggest exporter in the world. And one more thing........ people should avoid this author.

Like (1)

M v nayak

Oct 23, 2016

Agree fully your views on India using China made items. You made an excellent analysis quoting statistics. I remember you have said somewhere any economic disaster does not happen suddenly. It requires a build up for a long period, may be decades. You have suggested a proper environment has to be built so that Indian manufactures make these goods and compete with China. You admit that it is easier said than done.

As you are aware hardly two years have passed the new governament has taken over. The new governament has initiated several economic reforms which are too well known. You are bashing up the governament for the economic ills created by 60 years of Congress Governament. Why have you not analyzed this misrule of the previous governament?

It is clearyou are out and out against the current prime minister Mr Narendra Modi . I am seeing this in all your writings right from the beginning of my joining one of your recmmendation services. He may have several shortcomings. It is for all of us to point out those misconceptions and suggest solutions. I have never seen you picking up any of his actions for praising.

After reading any article by you, instead of thinking about the subject you have discussed, I start thinking about you, how you got this mindset like many other so called
Liberal Intelligent people.
Anyway thanks for your article with analysis.

Like (1)

Raghubir

Oct 22, 2016

Very low quality article. Not expected from Vivek

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A K Dixit

Oct 22, 2016

Dear Sir,
Your line of argument took a direction that since Great Britain was a dominant world power politically and militarily, we should not have even thought of political independence in 1930 or 1940. In your line of thought, Britishers were kind enough to do it for us. but everybody including you and me know that it happened and some of us did it. I hope you understand that something need be done for economic independence from China, the economic superpower of today, as per the pen picture drawn by you. Why not start with Diwali crackers? Better late than never.If we are able to reduce imports from China by 5% this year, it will be good starting, although not enough. In case you do not agree, let us go for Make in China instead of Make in India and soon we will be politically subjugated by China. I hope you remember the activities of East India Company and its Economic-Political consequences. Thanks a lot for your views under the umbrella Art 19 of the Constitution of India which is with us till abrogated by some economic- political super power. Your comments please.
A K Dixit, Bhopal.

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Chanchal

Oct 22, 2016

Let me share my experience. We were planning to set up a small thermal power station using high temperature waste gas . That high temperature waste gas if not used is a big loss. Indian manufacturer of steam turbine,when contacted their response was very sluggish, firstly because of Govt.set up and secondly they are not to entertain small customers unless politically pressurized. On placement of firm purchase order their tentative delivery time was nine months, extendable more than twelve months.Now which customer was going to bear that when hot gas going outside Un- utilized means simply money wastage to the sky.
From china same model steam turbine was delivered and installed within five months, as it was their of the shelf item.Price was considerably cheap from Indian counterpart.
Fulfilling market demand (Buyer requirement) is the key factor. We are mentally lagging behind. We are afraid of competition and engineering innovation.
Now every selling there are buyers. Those who are buying inferior quality materials or pollutants or poisons or detrimental to human or animals in bulk quantity not only from china but from any country are to be taken into task. That will require political morality which needs to be re rooted.
Banning import of dangerous polluting fire crackers must not be big administrative issue .

Like (1)

Prasad

Oct 22, 2016

Well, as you have articulated, its difficult live without Chinese items. But we can definitely ban them for a shorter period of time, say next 2 months or so. That will send out a strong message to China.
The Indo-China trade war has already started.

Like (1)

Khimji Motta

Oct 22, 2016

Dear Mr. Kaul,
Enjoyed reeding your article.
You listed few products. I would like to add few more.
Pen, Pencils, erasers, pencil sharpeners, children craft materials, wallets, calculators, torch & batteries, bulbs & tubes, Ganpati & Laxmi idols, crackers, kites & manja (kite thread), cotton buds, wipes, knives, scissors,nail
files, nail cutters, manicure & pedicure tools, buttons, zips, cutlery & crockery, school bags, umbrellas, combs & hair pins/clips, hair dryers, tiles, footwears, nappy & diapers, and thousands small products. These all products can be
produce by our small scale & medium scale industries. This will give more employments. India has Small Scale Industries Department and Small Industries Bank also. Along with Khadi and village industry we should encourage manufacturing
these products also in India. Somebody should visit wholesale markets in metropolitan cities and make the list. Even Govt. Departments and Custom Department may have the same.
Regards,
K.N.Motta.
======================================================================================================================


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Aloke Chakravartty

Oct 22, 2016

I am surprised to read this article. When everything was made in UK the world thought things would collapse if UK industry collapsed. Today nothing worth its name is made in UK nor invented. World is progressing. Now let us for a moment analyse Chinese economy. It is producing goods which west does not want to produce still needed for day today work. It hardly adds to value creation. China is now trying very hard to get in to producing military hardware. But west controls the design and innovation and one is left to copy not knowing what to do.
It was a wrong policy on the part of USA to transfer production to China on the excuse of low cost,quality has suffered. I bought a toaster in 1984 from UK and it still works well. Then my question is which is cheaper for underdeveloped countries china product which does not last even a year or some thing which last 20 years. People will say high quality is not good for production. That is not true because you save resources and economy has chance to grow with scare raw material.
India should progressively stop importing from China which will trigger setting up of small scale industries producing goods and services now imported from China. India is the only country after Japan which has a tradition of small scale industry producing good quality goods.
Apple has also realised now that making in India will reduce wastage and ensure consistent quality similarly as we are progressing we need quality. People do not not understand the number of accidents are happening because of using poor quality products.
India can not become a dumping ground for poor quality products made in China.
Aloke Chakravartty, MBA,PhD

Like (3)
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