The reaction has reached the highest political levels: Weibo said this week that it had deleted the account of Indian Prime Minister Narendra Modi at the request of the Indian government.
“For now, China is only assessing the situation,” said Geethanjali Nataraj, a professor of economics at the Indian Institute of Public Administration (IIPA). A “trade war is not going to benefit any of the countries,” he added.
China hard line
China is highly leveraged if it decides to retaliate against India’s app ban.
India it represents a much smaller proportion of China’s total trade. Exports to India accounted for just 3% of China’s total in 2019, according to Chinese government statistics. And India was just China’s twelfth largest trading partner last year.
But analysts who spoke to CNN Business emphasized that any kind of war, economic or otherwise, with an Asian neighbor would be costly for Beijing. The world’s second-largest economy is already handling pressures on several fronts, including a Western backlash over a controversial new security law for Hong Kong and its handling of the coronavirus pandemic. China is also handling its own economic struggles, including a historic first-quarter contraction and rising unemployment.
“Chinese companies already face trade restrictions from [the United States] and other countries, and face excess capacity, “he said.” Therefore, it is not easy for China to ignore a large market like India. “
Still, there are political considerations at stake for Beijing. Deng said China cannot be too “soft” in territorial disputes, or else it could risk angering the public.
India’s Dilemma
Meanwhile, India is likely to “lose more” by engaging in a trade war with China, according to Nataraj.
Nataraj said that many industries in India, including electronics, pharmaceuticals and IT hardware, are highly dependent on imports, particularly from China.
Shipping and delivery companies have confirmed that the dispute is already causing disruptions. DHL Express India told CNN Business on Friday that it is “temporarily suspending the collection of import shipments from mainland China, Hong Kong and Macao due to recent delays in customs clearance of shipments to India.” And FedEx said, “It currently faces delays beyond our control, leading to congestion at our facilities.”
“Although there is nothing wrong with [being] vocal for local [business], immediate short-term momentum against China would affect the supply chain of Indian production networks, “Nataraj said, adding that arbitrary import restrictions or consumer boycotts will be largely” counterproductive. “
Potential retaliation
Even if both countries have reasons not to engage in a trade war, analysts noted that raw emotions could push them toward escalation.
“If the confrontation persists, Delhi can also take economic measures on trade,” added Bajpai.
In retaliation, Beijing could “walk slowly” some of the market access it has promised India in areas such as pharmaceuticals and agriculture, according to Rick Rossow, president of Wadhwani in US-India Policy Studies at the Center. of Strategies and International based in Washington. Studies.
China could also withdraw from new investments it was seeking to make in India, he said.
China’s investment has been poured into Indian startups and manufacturing, but was already becoming a point of discussion. In April, the Indian government announced that foreign direct investment from countries that share a land border with India would be subject to increased scrutiny.
“The economic consequences of these movements are likely to be modest initially, but the biggest impact could come if India decides to separate from China and secure stronger strategic ties with countries like the United States, Japan, Australia and France,” Rossow added. .
– Shawn Deng, Swati Gupta, Manveena Suri, Jordan Valinsky Philip Wang, Isaac Yee and Hanna Ziady contributed to this report.
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