5/19/2019 US China trade war: Amid US-China trade war, India needs to trudge smartly

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Amid US-China trade war, India needs to SPOTLIGHT

trudge smartly Equity»Large Cap
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There will be opportunities as well as threats for India as superpowers America and China
joust.
By T K Arun, ET Bureau | Updated: May 19, 2019, 06.13 AM IST Save

8
Comments

BCCL
American imperialism is back, the old,
Vietnam-war-era version, wielding its might
in the pursuit of self-interest, regardless of
norms and what damage it does to friend,
Motilal Oswal Focused 25 Fund
foe or those not aligned as either. However, Direct-Growth
the context is vastly different, that of a more ★★★★★ Figures in %
integrated, globalised world, and superiority 1M 3M 6M 1Yr 3Yrs
in ordnance is even less likely to prevail than -2.69 7.41 5.65 -0.28 13.25
it did in Vietnam.

INVEST NOW
Representative Image Make no mistake, US President Donald
For regulatory disclaimers, click here.
Trump’s trade war with China is about a
whole lot more than trade. It is an attempt to contain China’s rise and retain US pre-
eminence in not just Asia and the Pacific but in the world. China has replaced the erstwhile
Soviet Union as the rival superpower to the US.

The American attempt to strip Iran of the capability to stay an autonomous regional power
Reach out to Top Generator Dealers near you
has more ambiguous motivation, in which strains of the ancient animosity that propelled and get free quotes
the Crusades mingle with considerations of reinforcing the West’s current dominance in
GET QUOTE
the region, by further increasing the power differential between its regional proxy, Israel,
and its challengers. Iran, home to the Levant’s second largest population of Jews, is too
evolved and complex a civilisation to be subjugated by bullying.
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The US raised tariffs from 10% to 25% on imports worth $200 billion from China in the Major General A K Dhingra appointed as the first
Special Operations Division Commander
midst of trade talks, accusing China of going back on agreed provisions. Then it banned
US companies from trade with Huawei and its affiliates. This has stalled talks. China’s A new generation of liberal leaders shakes up
Indian politics
internal power equations will not allow a public perception of the government taking
American bullying lying down. China is preparing a fiscal package to counter the negative Why Shatrughan Sinha is khamosh, failing to gain
impact on its economy of curtailed exports to the US, amidst calls for a people’s war from BJP’s Bihar infighting

against US aggression. Ban on Chinese goods will fail, work harder if you
want to catch up: China's media advises India

Chinese countermeasures, such as diverting imports of soya and whiskey away from the Cars and shampoo tell a tale of India's slowing
US, will hurt small but influential segments of the American society. More expensive consumption

consumer goods, which would result from the US proceeding with its threat to raise tariffs More »
on imports from China across the board, would erode the living standards of less affluent
Americans, raise the cost of phones, laptops, gaming consoles and other tech stuff,
Top Trending News
irritating the youth.
RBI cuts repo rate Modi rally in kolkata JDU IAF
Amit Shah Arun Jaitley Yogi Adityanath ET Prime
At the same time, American multinationals will be hit. If the trade war with China persists,
they will have to rebuild their global supply chains, large parts of which are located in
China. Their sales to Chinese companies and consumers would hurt. While global capital
would cheer an end to the Chinese practice of insisting on technology transfer as a
https://economictimes.indiatimes.com/news/economy/foreign-trade/amidst-us-china-trade-war-india-needs-to-trudge-smartly/articleshow/6939131… 1/3
5/19/2019 US China trade war: Amid US-China trade war, India needs to trudge smartly
precondition for access to the vast Chinese market, they have little sympathy for the
Trumpian vision of shifting manufacturing back to the US.

Global production takes placed in enmeshed networks, in which development of

intellectual property, say, for a new generation of chips, could be taking place in the US
and India, while the chip’s fabrication could take place in Taiwan or Singapore and its
integration into a gadget in China, along with other parts that are built in the elaborate
supply chain nicknamed Factory Asia, in which bits and parts shuffle around East and
Southeast Asia, adding value along the way, before ending up in China for final assembly.

This has raised living standards in Asia and fattened the profits of western multinationals.
But it has also taken jobs away from the US and Europe. Domestic politics has failed to
address the scarcity of blue-collar jobs and their diminished ability to let low-skilled workers
join the ranks of the middle class. The resultant disquiet has been exploited by populists
like Trump to come to power and be seen to be doing something to bring the glory days of
flourishing manufacturing back to their economies, where the high-skilled and the
entrepreneurial see a huge rise in their incomes, widening income inequalities and fuelling
popular anger that facilitates yet more populist politics, be it Brexit or antiimmigrant anger
in parts of Europe.

China's R&D ecosystem has evolved to a level where it no longer needs to steal
technology -China even imports Wedgwood pottery from England, whose roots lie in
ceramics technology stolen from China centuries ago. China leads the world in quantum
communications, is heel-to-toe with the US in artificial intelligence and racing ahead in
digital technologies, unhindered by privacy concerns.

The US's denial of technology will accelerate, not stifle, this process. Denial of Qualcomm
chips brought ZTE to its knees. This will spur the Chinese to build their own Qualcomm.
China's rise as an economic and military power is unstoppable. Western capital gains from
this process more than western labour loses out. Trump's campaign to contain China will
fail even if turbulence in the capital markets does not halt the project before long.

However, the pre-eminent condition for China's rise to stay peaceful is the rise of India as
a countervailing power. The Indo-US nuclear deal signalled western enthusiasm for this
project. The myopia of India's political and economic elite is the biggest stumbling block.
The BJP opposed the deal. The Congress staked its government for the deal, but dithered
on the integrity of institutional functioning, without which lasting power cannot be built. The
BJP, with its Hindutva project, is creating political instability, instilling insecurity among
India's minorities.

If India puts its house in order, it will advance, as the US and China joust.

Save

8
Comments

Read more on Trade War US China Trade War Taiwan Israel Sunday ET

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