China’s Loss, India’s Gain: This Is How India Can Replace US Exports To China & Boost Its Own Economy

The Covid-19 pandemic has inflicted irreparable damage to the world economy. Even giants such as the United States and China are so hit hard that it would take months, if not years, to recover from the contraction suffered in the past few quarters. 

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China’s status as a world’s factory has been affected by declining global markets and US President Donald Trump’s trade war as well his move to ban Chinese tech firms such as Huawei, TikTok. Although China made a quick recovery in exports, which has been the mainstay of its economy, countries such as the US and Germany are yet to gain their lost ground.

Amid this, there is, however, a silver lining for India that can capture China’s commodity market vacated by the Americans. A report by India’s commerce department has identified at least 100 products such as cotton, corn, almonds, wheat, and sorghum where the country can replace US exports to China as a result of Beijing imposing higher import duty on product coming in from the US.

Experts have also stressed that exports can help improve India’s pandemic-battered economy. “This is India’s moment to integrate into the Asian supply chain by attracting multinational companies seeking a China hedge in the region,” Sajjid Z Chinoy, chief India economist at JP Morgan, was quoted as saying by The Indian Express.


China, on the other hand, is set to change its economic model because of the challenges posed by the pandemic. At the Asia-Pacific Economic Cooperation (APEC) forum, Chinese President Xi Jinping announced the country’s new development plan which includes a dual circulation model. 

“We will foster a new development paradigm with domestic circulation as the mainstay and domestic and international circulations reinforcing each other,” he said.

“The new development paradigm is a strategic decision we have made based on the current stage and conditions of development in China and with full consideration given to economic globalization and changes in the external environment,” he added.

Even amid the trade war where calls for decoupling have been made, Chinese exports rose 11.4 percent on year in October, better than 8.9 percent predicted by a Bloomberg poll of economists. On the other hand, imports grew only by 4.7 percent, falling short of an 8.8 percent rise as predicted. 

Amy Celico, a principal at the Albright Stonebridge Group and a former US diplomat stationed in Beijing and Shanghai, stated that even after the intense trade war China remains the third-largest exporter for the US while the US is China’s largest export market.

“In the past two years, tariffs, an uncertain business environment and policies enacted in Washington and in Beijing meant to decouple some of our economic interdependence, all these together have led to a steep decline in our trade ties, particularly the US exports to China,” Celico said at China Town Hall held virtually and organized by the National Committee on US-China Relations.

She added that the trade war has hurt the US more than China and the first priority for President-elect Joe Biden should be to re-engage with Beijing to recover the US economy that has been hard hit amid the pandemic. 

However, Chinese experts believe that under the Biden administration the US-China may worsen but not as quickly, providing only a “buffer period”.

“We should not put too much expectation on Biden,” Jin Canrong, associate dean of the School of International Studies at the Renmin University of China in Beijing, told the Chinese state media, Global Times, adding “because to contain and confront China is a strategic consensus between the two parties of the US.”

At the forum, Jinping also revealed China’s performance in the last two decades. “The ratio of foreign trade to Gross Domestic Product (GDP) dropped from 67 percent in 2006 to less than 32 percent in 2019, while the ratio of current account surplus to GDP has come down from 9.9 percent in 2007 to less than one percent today,” he noted.

“In seven years since the 2008 global financial crisis, the contribution of China’s domestic demand to GDP exceeded 100 percent, making domestic consumption the main driver of its growth,” he added.

With the second wave of COVID-19 hitting the US and Europe, Beijing is pushing its domestic markets to maintain growth levels.

Capital Economics, an economic research consultancy based in London told AFP that “most measures suggested that domestic demand continued to strengthen and the infrastructure investment at the heart of the ongoing stimulus is particularly import-intensive.”

Recently, China also signed the Regional Comprehensive Economic Partnership (RCEP) along with 15 Asia-Pacific member countries which is a push in the right direction for Beijing as the free trade agreement is expected to improve export from these countries.

On the other hand, US President Donald Trump pulled out of Trans-Pacific Partnership (TPP) which was earlier negotiated by the Obama administration and was expected to reduce tariff barriers among member states.

“The US government not being part of now two Asian free trade agreements is very bad for the United States, which is a self-proclaimed leader and participant in the Pacific economy,” Celico warned.

“I think there is more pressure on the US government to rethink when and how it might restart the process to join the CPTPP (the Comprehensive and Progressive Agreement for Trans-Pacific Partnership).” CPTPP is an updated version of TPP.