India's border conflict with China has sparked off a sentiment to drastically reduce dependence on Chinese imports. But that is easier said than done as Indian value chains have deep material links with China. Let's take a closer look at some key bilateral trade metrics and the sectors vulnerable to such policy changes.
1. High Trade Deficit With China
From barely any in the financial year 1999 - '00, India has ended up with a trade deficit of $48.6
billion with China in financial year 2019 - '20.
2. Consumer Durables
Chinese brands in TV and mobiles have a strong presence in Indian markets. They are looking at
increasing their share in refrigerators, air conditioners and washing machines. It will be hard to
replace suppliers in critical components like compressors and LED chips.
* Share of Chinese brands (Xiaomi, TCL and VU) in TV industry is 49%.
* Share of Chinese brands (Xiaomi, Vivo, Oppo, Realme) in cellphone industry is 76%.
3. Chemicals
Raw material imports from China for agrochemical industry range between 10 - 50% depending
on the product portfolio.
The specialty chemical sector has relatively lower dependency on China for raw materials.
4. Pharmaceuticals
* We are dependent on China for 60 - 70% of key raw materials for the industry.
* Raw materials from China are estimated to be 20 - 30% cheaper than those in India.
* Substantial investment, time and government approvals are needed to substitute imports from
China in the supply chain.
* An import ban would raise costs in the short-to-medium term but is unlikely to result in
unavailability of APIs (active pharmaceutical ingredients) or plant shutdowns.
Sourcing of raw materials by companies from China.
* Ajanta 100% of API requirement outsourced.
* Alkem 70% of API requirement outsourced.
* Aurobindo 50% of the raw material requirement is dependent on China.
* Cadila Healthcare 45% API requirement is outsourced.
* Cipla Except in oncology and respiratory all the API requirement is outsourced.
* DRRD 40 - 45% of API is outsourced. High single digit direct dependence on China.
* JLS Some of the KSM for API (-7% of total sales) is directly procured from China.
* Strides 100% of API requirement is outsourced. About 35 - 40% of requirement is fulfilled
Indian API firm Solara.
* Sun 45% of API requirement is outsourced.
* TRP 70% of API requirement is outsourced.
5. E-Commerce
Chinese companies have high investment exposure to some key start-ups in India.
* Ant Financial/Alibaba Invested in Paytm, Snapdeal, Zomato, Big Basket.
Total investment $ 2.7 billion.
* Tencent Invested in Policybazaar, Ola, Udaan, Flipkart, Byju, Dream 11,
Hike, Swiggy.
Total investment $ 2 billion.
* Shunwei Capital Invested in Zomato, Meesho.
Total investment $ 0.13 billion.
* Hillhouse Capital Invested in Swiggy, Udaan, Cred
Total investment $ 0.16 billion.
* TR Capital Invested in Flipkart, Lenskart, Urban Ladder, Big Basket.
Total investment $ 0.11 billion.
6. Automobiles
27% of total imports are from China, with the country being a key supplier of auto components.
It would be difficult to replace Chinese suppliers in segments such as electricals and semi-
conductors as the required scale and skill are not available.
* 30% of domestic consumption of auto components is imported.
* China accounts for over a quarter of total auto component imports.
7. Telecom
* Telcos are dependent on Huawei and ZTE for network access, which includes front-end
telecom sites as well as back haul network.
* Huawei's equipment is used in three of Bharti Airtel's circles and 7 of Vodafone India out of a
total of 22 circles.
* Back haul equipment is far more deeply deployed across India.
* Globally there are 4-5 major network equipment producers and Huawei is one of the largest
along with Ericsson, Nokia Siemens, Samsung and ZTE.
* High requirement for telecom equipment
Source. Adapted from TNIE.
Now, one can understand as to how daunting the task of shutting off the Chinese completely is. But if it's inevitable, so be it!
Tailpiece.
Got up half an hour late, the chores and was still ready by a half past 9. Murali, the youngster from the Warriath House came by to fix up my laptop but wasn't able to do so. Joined the Story teller webinar in the evening which was a pleasant experience!
1. High Trade Deficit With China
From barely any in the financial year 1999 - '00, India has ended up with a trade deficit of $48.6
billion with China in financial year 2019 - '20.
2. Consumer Durables
Chinese brands in TV and mobiles have a strong presence in Indian markets. They are looking at
increasing their share in refrigerators, air conditioners and washing machines. It will be hard to
replace suppliers in critical components like compressors and LED chips.
* Share of Chinese brands (Xiaomi, TCL and VU) in TV industry is 49%.
* Share of Chinese brands (Xiaomi, Vivo, Oppo, Realme) in cellphone industry is 76%.
3. Chemicals
Raw material imports from China for agrochemical industry range between 10 - 50% depending
on the product portfolio.
The specialty chemical sector has relatively lower dependency on China for raw materials.
4. Pharmaceuticals
* We are dependent on China for 60 - 70% of key raw materials for the industry.
* Raw materials from China are estimated to be 20 - 30% cheaper than those in India.
* Substantial investment, time and government approvals are needed to substitute imports from
China in the supply chain.
* An import ban would raise costs in the short-to-medium term but is unlikely to result in
unavailability of APIs (active pharmaceutical ingredients) or plant shutdowns.
Sourcing of raw materials by companies from China.
* Ajanta 100% of API requirement outsourced.
* Alkem 70% of API requirement outsourced.
* Aurobindo 50% of the raw material requirement is dependent on China.
* Cadila Healthcare 45% API requirement is outsourced.
* Cipla Except in oncology and respiratory all the API requirement is outsourced.
* DRRD 40 - 45% of API is outsourced. High single digit direct dependence on China.
* JLS Some of the KSM for API (-7% of total sales) is directly procured from China.
* Strides 100% of API requirement is outsourced. About 35 - 40% of requirement is fulfilled
Indian API firm Solara.
* Sun 45% of API requirement is outsourced.
* TRP 70% of API requirement is outsourced.
5. E-Commerce
Chinese companies have high investment exposure to some key start-ups in India.
* Ant Financial/Alibaba Invested in Paytm, Snapdeal, Zomato, Big Basket.
Total investment $ 2.7 billion.
* Tencent Invested in Policybazaar, Ola, Udaan, Flipkart, Byju, Dream 11,
Hike, Swiggy.
Total investment $ 2 billion.
* Shunwei Capital Invested in Zomato, Meesho.
Total investment $ 0.13 billion.
* Hillhouse Capital Invested in Swiggy, Udaan, Cred
Total investment $ 0.16 billion.
* TR Capital Invested in Flipkart, Lenskart, Urban Ladder, Big Basket.
Total investment $ 0.11 billion.
6. Automobiles
27% of total imports are from China, with the country being a key supplier of auto components.
It would be difficult to replace Chinese suppliers in segments such as electricals and semi-
conductors as the required scale and skill are not available.
* 30% of domestic consumption of auto components is imported.
* China accounts for over a quarter of total auto component imports.
7. Telecom
* Telcos are dependent on Huawei and ZTE for network access, which includes front-end
telecom sites as well as back haul network.
* Huawei's equipment is used in three of Bharti Airtel's circles and 7 of Vodafone India out of a
total of 22 circles.
* Back haul equipment is far more deeply deployed across India.
* Globally there are 4-5 major network equipment producers and Huawei is one of the largest
along with Ericsson, Nokia Siemens, Samsung and ZTE.
* High requirement for telecom equipment
Source. Adapted from TNIE.
Now, one can understand as to how daunting the task of shutting off the Chinese completely is. But if it's inevitable, so be it!
Tailpiece.
Got up half an hour late, the chores and was still ready by a half past 9. Murali, the youngster from the Warriath House came by to fix up my laptop but wasn't able to do so. Joined the Story teller webinar in the evening which was a pleasant experience!
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