The effects of rising anti-Chinese sentiment: A focus on Sino-Indian relations

Anti-Chinese sentiment has grown in 2020 in the form of foreign media outlets and governments issuing blame to the country regarding numerous contentious affairs. This may begin to pose significant problems for future Chinese economic development, with consumers less inclined to knowingly purchase Chinese goods and Chinese exports consequently potentially suffering. Of particular interest is the growing separation of relations between China and India and the global impact of this.

A primary, overarching, reason for the presence of anti-Chinese sentiment is global politics. With the first cases of COVID-19 emerging in Wuhan, China was blamed for the global proliferation and mishandling of the virus. Other issues, such as the treatment of Uyghur Muslims, accusations of debt diplomacy (intentionally lending developing countries capital to extract political or economic gains), and intellectual property theft all also contribute to the shifting attitude. Chinese and Indian diplomatic relations, in particular, have also been affected by border clashes.

In the summer of 2020, these border disputes resulted in the deaths of 20 Indian soldiers, which led to a significant rise in anti-Chinese sentiment in India, one of China’s largest trading partners. As a result, many Indians abstained from buying Chinese produced items, and some even went as far as destroying Chinese products they owned. One such example is a video emerging in June of Indians throwing a Chinese brand TV set from a balcony before stomping on it. India also retaliated politically by banning the use of 59 mobile apps, of which the majority were from China. In order to weather the anti-Chinese sentiment in India, some Chinese manufactures have started labelling their products as ‘Made in PRC’ (People’s Republic of China), rather than ‘Made in China’, as many are unaware of the abbreviation. In spite of these increased tensions, a trade war remains unlikely however, due to India’s economic reliance on China. India has the largest trade deficit with China, importing around 4 times as much as it exports to the country such as smartphones, electrical appliances, and iron and steel products.

Some companies, however, have been able to take advantage of the Sino-Indian dispute. Apple, for example, recently launched its first online store in India. iPhone prices in India retail at 40% higher than in the US, as Apple pays significant duties to import assembled units, inflating selling prices. However, in a market where Chinese phones currently dominate, the growing reluctance to purchase Chinese goods, is making Indian consumers more amenable to Apple’s products and prices. Apple is even potentially looking to move some manufacturing into India to tap further into the market. This thus shows that there is potential for companies that had not previously broken into the Indian market to do so given anti-Chinese sentiment.

However, through introducing restrictions on Chinese foreign investment, India has closed itself to Chinese capital investors. Indonesia has been the major beneficiary of this, with Chinese capital outflows from India helping to create a 55% increase in tech investment in the first half of 2020 in Indonesia. Investments from the likes of Facebook, Google, and Paypal this year have also contributed to the surge.  Beau Seil, co-founder of south-east Asian venture capital firm Patamar Capital has made comparisons in terms of fundraising levels, to Silicon Valley. Other countries that rely on manufacturing, such as Thailand and Vietnam, have also benefitted from anti-Chinese sentiment, seeing increased growth in exports due to the decreased demand for Chinese goods.

The economic repercussions of growing anti-Chinese sentiment have had mixed effects worldwide. Foreign companies will continue to follow in Apple’s footsteps to strategically benefit in this changing climate. For China, there is a growing stigma attached to the worldwide ‘Made in China’ label. This, in addition to the trade war with the US, are a cause for concern to the industrial giant, which must look to restore its global reputation and reputability. The situation has had varied effects for other countries, with India benefitting politically but losing Chinese capital investment to Indonesia. India also still relies greatly on Chinese exports. It is this exact reliance on China for global trade ties that perhaps limits the overall effectiveness of countries’ anti-Chinese sentiment.

 

By Hadi Ahmed

Sector Head: Jared Gibson

 

 

 

 

 

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