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Last
Sunday, I had to go to buy fruits and vegetables
from the weekly bazaar that comes up near our
house in Noida on the road, as Yamuna was sick.
I was stunned to find apples from China along
with those from Australia and the local sources,
all selling at Rs 100 a kg. Let me confess, the
Chinese ones looked more attractive because of
their uniform pinkish colour and size. I kept on
enquiring from the vendor and all others who
also had them, ‘are they sure that these are
from China?’ Let me confess, I bought only two
of ‘Australian ones for Rs 40, as I never even
imagined that the apples will be that costly and
there will be so many buyers even in this weekly
bazaar.
While I was talking with the fruit vendors, an
elderly bearded man selling locks and knifes on
his bicycle mounted mobile shop that doubles as
repair shop too, came from behind and confirmed
that he also now sells all Chinese products.
I read and wrote earlier about the Chinese
kirpans used by Sikhs that are now all
Chinese-make. The Chinese have captured the
export market of kirpans too that was earlier
held by Punjabi manufacturers. It made me blog
on the subject. I had earlier written about the
other items such as lamps and decorative pieces
including Ganesh and Lakshmi statues that
appeared in market during Diwali. I also read
about the Chinese Banarasi and Kanchivaram silk
sarees that are so much sought after by the
Indian brides in North and South India for
marriage displacing the original ones woven by
the local weavers. All these items from China
are certainly hurting the poor craftsmen and
workers, and now fruit growers in Kashmir,
Himachal, and Uttarkhand.
It serves the unscrupulous traders well who get
these popularly demanded items from torchlight’s
to table tennis racquets or badminton gears or
crockery and regularly required electrical items
such as transformers, capacitors, inductors, ICs
or fluorescent lamps from the Chinese sources,
as it gives them better margin. Chinese imports
have wiped out almost 80% of the ‘gift segment
of the domestic ceramic industry and forced the
60 out of the 70 units around Delhi to close
down.
Are these the benefits of globalisation that all
reputed economists such as Jagdish Bhagwati of
Columbia University and prospective candidate of
Nobel Prize talk of so loudly? How do these
small manufacturers and poor craftsmen fight
this unethical invasion?
‘Business Today’, March 24 issue has published a
feature ‘The China Effect’ dealing how ‘in a
variety of industries, cheap imports from China
are killing local manufacturers. How much of it
is due to China’s competitiveness and how much
due to dumpings?’ It reports on sectors such
auto components, silk and textiles, toys,
ceramic tiles, bulk drugs, automotive tyres, and
gifts and household goods that are reeling under
the Chinese Price menace. But I got a shock when
I read a news report that small shops of a town
in Gujarat came out on roads to complain against
the so called invasion of biggies of organized
retail sector in big malls coming up fast that
are selling cheap and unbranded produces of
China and killing their business and livelihood.
I was for organized sector in retails. But if
these outlets go for importing the items of
China, as claimed by the protesters, that are
rejected by the European and Americans at very
cheap price and sell to ignorant Indian
customers, it is just simple cheating. China is
having the first move advantage. The
manufacturers in China developed the household
items such as one for gifts for the developed
market, and flooded the developed markets at
cheaper price compared to what was available in
those market from the local manufacturers
because of the higher labour cost in those
countries. Many big retail stores such as
Wal-Mart got the items developed and
manufactured by the China for the price
advantage. Chinese created a huge manufacturing
capacity for those items. Many of them were
fakes of the branded items of the Western
countries. For Indian manufacturers, it is
difficult to compete in price if Indian traders
bring the rejected lots that are basically
seconds or scraps, and sell at cheaper prices.
Again, the importers are resorting to many other
unscrupulous means too such as importing kirpans
that might attract more duty as toys that is
charged lower duties.
In some cases as automotive tyres, the Indian
manufacturers allege traders of undervoicing
imports. Fuels account for about 30-60% of the
manufacturing costs in case of crockery and
pottery items, and the Chinese fuel costs almost
one-third of that in India. Naturally, the
question is ‘How can the Chinese fuels be that
cheap?” Is the fuel cost subsidized by the
Chinese government?
I am much more shocked with some news from the
auto component sector that I am more acquainted
with. While India exported Rs 69.3 crore of auto
components to China in 2002-03 and imported only
Rs 47.4 crore, ACMA predicts that by the close
of the 2006-07, Chinese imports will touch Rs
1,127.6 crore. How can the Chinese offer cost
advantages of 30-40% to OEMs? As reported,
recently an Indian supplier of auto component
was outbid by 55%. Indian manufacturers
sarcastically call it Chinese black magic of
pricing to outbid competition. One Indian
manufacturer asked, “How can the Chinese quote
below the price of the steel going into the
component?”
How do Indian manufacturers, particularly the
smaller ones with limited resources, face this
unethical competition from China? Will NMCC
(National Manufacturing Competitiveness
Council), CII and Assocham have a cell of
experts to study all these cases and suggest
some means to compete to the manufacturers and
the government? Can some NGOs such as Mr. Arvind
Kejriwal of RTI fame and with a background of
mechanical engineering help on the issue of this
Chinese invasion in pretext of free trade and
globalisation? Can the students and faculty of
IIMs and IITs take up this challenge to study
the challenges posed by the Chinese and come out
with suggestions? While the bigger manufacturers
as in past will have to focus on innovative
approaches to compete through superior design
and R&D and better management practices, the
smaller manufacturers, craftsmen, and weavers
need help of all sorts including the removal of
anomalies of taxations such as higher import
duties for raw materials than for the finished
products and even subsidies of some sorts.
Indian manufacturers must face the competition
and grow in scale to compete, but all who can,
including the employees, must provide the input
for that. Otherwise the consequences will be
severe so far the employment potential of the
sectors are concerned. Moreover, the new
entrepreneurs will hesitate to enter in
manufacturing sector.
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Comments: |
If you have written this article 10
years ago, it would be a good
article. Now, it is too late. The
article does amuse me a bit because
so many years have passed and still
some people write such article which
should be written 10 or 15 years
ago. The fact you have mentioned in
your article is nothing new. It
happened 10 or 15 years ago.
Everybody knows that China started
reform in their agriculture and then
manufactures. China started to build
their infrastructure and improve
their manufacture much early and
much efficient compared to India.
High productivity and large scale
are the two factors for their
efficient manufacture industries.
High productivity is obtained from
well educated labours and advanced
equipment plus good management.
Large scale can significantly cut
the cost per unit and still make
profit even the margin of per unit
is low. They can make final product
even cheaper than the cost that you
pay for raw material because buying
large quantity is always cheaper
than buy small amount. Such rule
applies to raw material purchase as
well. It is not dumping but Chinese
simply work hard and smart. India
took a different developing road.
Instead of manufacture, India has
done very well in offshore service
and IT industries. However, service
and IT industries can only benefit
few people compared to manufacture
industries. This is why India’s
development and people’s life have
not improved as fast as in China.
Please remember, manufacture is the
back bone of a country, especially a
big country. Look at USA, Japan and
most EU countries. They all started
from manufacture. Small countries or
regions like Singapore and Hong Kong
are different. They do not have a
lot of people to support and they do
not have massive labours so they can
afford and have to develop their
service, financial or high tech
areas without left a lot of people
in poverty like India. I have said
this 10 years ago and I will say it
again: If India does not develop its
manufacture industries and their
infrastructure (manufacture
related), India can never really
take off. IT and service industries
can not support the growth that
India wants for whole India even
though they can make a few more
Billionaires.
Good luck to India. - Dake Yu -
Mar. 31, 2007
I think problem is not with Chinese
competition but with Indian racist
mind. Porn Magazine such as
‘Business Today’ is too
self-indulged to write anything
genuine to protect the interest of
Indian manufacturers. Accept
promoting racism and interest of
internal colonialist nothing can be
expected from porn Indian media.
Hurdles to Indian Manufacturers are
being created by Indian Customs and
Central excise who have added rules
worth thousands and thousands of
pages year after year to intimidate
manufacturers in India. I don’t
think quality of Chinese products
should be raised as an issue because
I am sure if Indian consumers can
pay more Chinese will surely export
high quality goods to India moreover
low price does not mean low quality.
I am having some personal experience
of this by having my own business
both in India and China. I am a
manufacturer myself. My company
manufactures electronic products for
our own brand and because we have
enough manufacturing infrastructure
we also provide manufacturing
services to others across the world.
Recently my office in UK received a
bulk order for manufacturing some
electronic devices from a renowned
company. Here is part of two
quotations one received by my Indian
office from an Indian supplier and
second received by my Hong Kong
office from a Chinese supplier for
the sub assemblies of the same
order. It tells every thing at once.
Indian Supplier, Terms &
Conditions:-
Excise Duty :- 16%
Ecess :-3 % on Excise
VAT :- 4%
Octroi :- 3 %
Payment :- 50 % advance 50 % against
delivery
SPECIAL NOTE :-
PLEASE DECLARE THE DESIGNING COST IN
YOUR PURCHASE ORDER
BECAUSE IT ATTRACTS 16% EXCISE DUTY
ON DESIGNING COST
AND YOU CAN AVAIL THE CENVAT ON THE
SAME.
Chinese Supplier:
Call me if you have any problem
I have removed the actual quote
amount and other details for
commercial reasons but Indian
Supplier had quoted double the price
of Chinese supplier besides
quotation of Indian supplier had lot
of extra ‘%’ sign. Obviously after
saying ‘Resurgent India, India
shining etc’, sitting in my UK
office, I forwarded the order to my
Hong Kong office to process. Sorry
it may sound a bit cynical but while
reading those %s in Indian quote it
always sound to me like,
Dadua Dakait :-16%
Raju Chamcha:- 3% of Dadua Dakait
Munna Sardar:-4%
Ghutan Shukla:-3%
SOCHA KYUN SOCHNE KA YAHAN 16% LAGTA
HAI!
Problem for manufacturers like me in
India is not only with complex
structure of custom duty or excise
duty but also with the way we are
forced to pay illegally under
various sections which are not
applicable to us in case we get
intimidated and try to get matter
solved by paying under the table via
crook clearing agents. How laymen
like me, can be expected to know
about each page of the book on
Indian customs and excise running
over thousands of pages. By the time
we come to know that we have been
forced to pay illegally, it’s late
and who has got the time to fight in
court for years when easy and cost
effective options are available in
China. Unless you are Tata, Birla or
so called ‘Guru’ expert in applying
the means, manufacturing business is
not an easy business in India. Yes,
business like software or BPO are
different all together because in
that case import and export both
takes place over Internet.
I am all for Chinese imports. I can
relate objection to Chinese imports
only with racism and not with
protecting interest of Indian
manufacturers as our own Indian
Customs and excise have assured that
genuine manufacturers are adequately
harassed in India.
If India seriously wants to compete
with China then rather than offering
SEZs to neo colonialists it should
ease the rules of Customs and excise
in general so that whoever wishes
can start and run manufacturing
business smoothly. This way by
volumes even customs and excise will
collect more revenue for India and
people will get cheaper product and
services. It took a Laluji from so
called economically backward Bihar
to teach the world the other way to
do business by earning money without
increasing the fare. May be some day
someone will come from grass-root
who will show by generating much
more revenue for customs and excise
through volumes while equally
encouraging the manufacturers rather
than talking rubbish about fears of
Chinese imports, promoting crap like
SEZs and promoting FDI in organized
retail sector while strangulating
the manufacturing sector with
tougher regime of customs and excise
year after year. For ‘Laluji Darshan’
only business ‘students’ from all
over the world are coming but to the
‘Darshan’ of that reformer business
‘practitioner’ (investment) from all
over the world will come. Please
don’t quote me about IT because that
takes place on IP, pass the software
through customs and then we will
like to hear about some success
story. In fact success of IT proves
the capability of us Indians. Just
imagine what great heights we can
achieve if the similar freedom is
achieved in manufacturing too. Till
then it really feels like Robin Hood
of Loxley with the idea of
manufacturing in India. - Shiv
Shankar Sharma - Mar. 31, 2007
As one who frequently travels to
China and having seen the hard work
patriotism and dedication of the
Chinese people in building up their
industrial and manufacturing
capabilities I disagree with the
point of view of the author of this
article.
The Chinese have opened their
markets and their economy to every
thing. They are not afraid to
compete, and not afraid of
competition. In the words of their
leader Mao Tse Tung
" Let a hundred flowers bloom and
let a hundred schools of thought
contend". This principle is applied
by China as much to their economic
relations with other countries, as
to their general lifestyle.
The Chinese have embraced free
market competition and the results
are spectacular. China is more than
a country of peasants with a small
keyboard punching convent educated
English speaking clerical urban
elite. The Chinese are primarily a
working people, a nation of
industries, a factory to the world
and to themselves. China is also a
free market of over a billion people
with a rapidly improving quality of
life and a purchasing power based on
real cash (not credit cards). They
have shed their former
superstitious, religious, feudal
outlook and moved on.
An appraisal of China would be
fairer if we look at what China has
achieved after what it went through.
China achieved independence or
rather liberation from foreign
occupation and a feudal system in
1949, two years after India. Unlike
India which was flushed with foreign
aid and investment from the
Commonwealth and the USA,
post-independence China stood
diplomatically, militarily,
geographically, and economically
isolated. China had completely lost
its infrastructure through decades
of civil war, and a savage foreign
occupation by the Japanese which had
claimed millions of lives and left
90% of its population in the grip of
famine, poverty and illiteracy. It
could not re-build because of a
vicious foreign backed interference
and military blockade by Taiwan.
China faced threats from superpower
backed wars on two of its sensitive
frontiers ; in Korea, and Vietnam.
China had no access to the outside
world. On its Pacific coast two
massive nuclear powered carrier
based naval task forces kept its
meager obsolete fleet of merchant
vessels blockaded in bombed out and
shattered harbors. Those vessels
attempting to leave were promptly
sunk by Taiwanese surface vessels,
air strikes or submarines. Sabotage
by Taiwanese amphibious commando
strikes destroyed every power
station and communications post on
their eastern seaboard. China did
not even control its own air-space.
The then superior Taiwanese air
force ravaged the coastal cities of
China and penetrated as far as
Beijing destroying civilian
air-ports, aircraft on the ground,
and shooting down the remaining
obsolete air craft that did manage
to make it into the air. An embargo
of spares and equipment grounded
most military and civilian aircraft
in China. Until the late 60s China
never had a national air line on
account of the dangerous flying
conditions in the country. On its
western border China was blockaded
by several armored divisions of the
Soviet Union backed by hundreds of
bombers and strike fighters. Every
Chinese city was targeted by both
Soviet and US intercontinental
ballistic missiles. Chinese
communications were pathetic relying
on 30’s era telephone and telegraph
lines. China had no road links to
any of its neighboring countries.
Worst of all a growing poverty
stricken population and periodic
famines resulted in massive
starvation deaths.
China had lost all its technical and
trained manpower through massive
waves of emigration through Hong
Kong and Taiwan. There was no
international redress as China was
not a member of the United Nations
and it had no relations with any of
the wealthy economic countries of
Europe and North America. It was a
bleak scenario very unlikely to
attract any foreign investment.
Yet by sheer will power, dedication
and patriotism the Chinese overcame
their economic problems. By the
early sixties the Chinese had more
or less addressed their internal
security problems, and felt more
confident in dealing with the
Taiwanese disruption.
By sheer hard work the Chinese built
up its military capabilities
sufficient to secure their coast
line and their air space. Their
power stations, and communication
links could now function and their
rail road networks could be
restored. The superpower blockades
remained but that would be dealt
with later. The Chinese exploded
their nuclear devices in the
mid-sixties successfully
demonstrating to the outside world
their military prowess. Education,
coupled with birth control, and
complete equality of gender ensured
a move to stabilizing the
population. A secular government
ensured that religion based
conflicts which could be exploited
by others compromising internal
security was now history.
China broke its geographical
isolation in late 1970 when portions
of the Karakoram Highway were
completed linking China with the
Middle East through Pakistan. In
1971 the diplomatic blockade was
finally broken when China was
accepted as a permanent member of
the UN Security Council displacing
Taiwan. The emergence of a united
independent Vietnam in 1975 (in
which China played a major role) was
turning point. The superpower naval
presence on its eastern sea board
was greatly reduced and Soviet Union
eased the pressure on the western
borders. Diplomatic relations with
all nations followed. The collapse
of the Soviet Union in 1990 and the
depletion of the surviving Russian
military capabilities has ensured
China’s eminence in the region.
China has never looked back since:
Today China has the following:
- A massive advanced industrial
infrastructure
- A skilled educated labor force,
with no bars to race religion or
gender
- No internal conflicts based on
religion
- Advanced communications, road and
rail links.
- A stable political system with a
manageable amount of corruption
- Completely secure borders
- A military capability to defend
its assets.
- Advanced R & D and massive
investment in scientific
development.
- Open markets and open competition.
This is why China succeeds. We need
to learn from China and march in
step with that nation has as great a
destiny as its past history. -
Reza Sami - Mar. 31, 2007
"The article does amuse me a bit
because so many years have passed
and still some people write such
article which should be written 10
or 15 years ago…-- ‘They can make
final product even cheaper than the
cost that you pay for raw material
because buying large quantity is
always cheaper than buy small
amount. It is not dumping but
Chinese simply work hard and smart."
This was in a long comment from Dake
Yu. I don’t know if ACMA members
would agree to this logic.
However, my main points in the
article were:
Indian traders must not adopt unfair
means of changing the description of
the items to attract less import
duty in their invoices and must not
manipulate the values of the
invoices.
Indian government must have a
rational import duty for raw
materials and finished goods.
Chinese must not sell rather Indian
traders must not buy the products
rejected by Americans and EU
countries and sell it to Indian
customers.
Chinese must not copy the
traditional handicrafts and handloom
items such as Kanchivaram and
Banarasi silk sarees that is sold by
unscrupulous Indian traders as
original.
Chinese must not put ‘Made In India’
mark on their products.
Chinese government must not
subsidize the export to make it
competitive. How can the cost of a
product be less than the cost of the
raw materials used in it?
And none who put their comments
talked about it.
It is known to every one that it was
American retail biggies such as
Wal-Mart that developed the low cost
manufacturing capabilities of China
by providing all inputs, as the
American manufacturers couldn’t have
reduced the labour cost in US
because of headstrong unions. EU
countries also followed the American
solution to go to China. India’s
manufacturing sector was not ready
to meet the American demand at that
time. However, the things have
changed and changing fast in favour
of India in manufacturing sector
too. At least in some sector such as
auto components and textiles, Indian
manufacturing may succeed, as Indian
manufacturers intend to fight the
competition from China. - Indra -
Apr. 5, 2007 |
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