trade settlement: US-China trade settlement: What’s in it for India?


The implications of the first phase of the US-China trade settlement will travel far beyond China, impacting countries that deal with Beijing. In most cases, the impact on China’s trade partners, including India, will be negative. But smart Indian companies can take advantage of some aspects of the deal, especially what they failed to cover, such as the technology sector.

The deal will curtail China’s ability to buy goods from non-US countries as Beijing has committed to purchasing goods and services worth $200 billion above the 2017 level from the US. Countries such as India that have been trying to persuade China to buy more have reasons to worry.

India and several Asian countries are not in the same league as the US when it comes to supplying quality goods from the industrial and agriculture sectors. For instance, Indian grains, fruit and vegetables have not been able to overcome testing and quarantine requirements essential to access the Chinese market. But there are situations where trade logic does not work in its entirety. China is being forced under the agreement to import far beyond its requirement for high-quality US goods; this will mean less buying from other countries. The deal is a severe blow to the Chinese economy, which recently recorded its worst growth in three decades.


The deal will mean greater transparency in China’s financial sector and opportunities for the Wall Street to operate in Shanghai and Shenzhen. China has committed to opening the doors wider for US non-bank financial institutions (NBFIs). This means removal of foreign ownership caps on insurance, securities, futures and fund management companies by April 1. The commitment will hasten the process of implementing a promise that China made in 2017. Whether US NBFIs will be about to gain a foothold in China is a different matter. Chinese rivals are tough players with deep contacts. Foreign banks have been unable to make a mark despite being permitted to operate via wholly owned subsidiaries since 2003.

Indian financial and IT companies, which have close contact with American players, might get a chance to ride piggyback into China. The deal can open new possibilities of Indian companies and research and development (R&D) institutions to find Chinese financiers and collaborators.

China has been trying to get off the hook from Donald Trump administration’s scrutiny and controls over technology acquisition by Chinese companies. Beijing is desperately pushing for a technology upgrade programme called Made in China 2025. It needs western technology and collaboration with companies and institutions in the US to make a success of it. The first phase of the deal does not touch this aspect at all. The second phase of the trade settlement is unlikely to happen before 2022; till then, Washington will monitor the implementation of the first phase. Meanwhile, the trade war will continue.

As I argue in ‘Running with the dragon: How India should do business with China’, many Indian companies have the opportunity to grow dramatically if they find creative ways to adopt new technologies while operating in China and engaging with Chinese companies in India and in other countries. It is wise to engage with potential competitors before they overtake our business as we have seen in market segments such as mobile phones and some white goods.

In not addressing the technology question, the deal gives Indian companies and institutions an opportunity. They can join hands with Chinese counterparts, who are desperately looking for alternatives to US institutions. Indian entities should creatively use the opportunity to find out what exactly Chinese companies are seeking before making their offer. Indian firms must reach out rather than wait for invitation as China has alternatives.

China is scouting for scientific and engineering talent globally. The number of Indian post-doctoral students and scientists in China runs in hundreds. What is required is talent and technology aggregators on the Indian side who would pitch for business in China. There are many such western aggregators operating in China but hardly any Indian firm.

The Indian government and corporate sector were not quick to respond to the needs of Chinese companies to relocate or invest overseas as rising costs, reduced export demand and anti-pollution laws pushed up product prices in China over the past three years. Vietnam stepped in.

Granted that Vietnam, with similar culture and surface road connections with China, had an advantage. But what India can offer more than any Southeast Asian country is its huge market and trained manpower. It is to be seen whether Indian companies and government agencies would respond to the new situation as smartly and creatively as it is necessary to monetise opportunities.

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