Covid-19: China lockdown hits Indian companies

Analysts say the trade relation between the two nations are buoyant despite the clashes at the Ladakh border

Exports to China jumped 34.9 per cent to $28.1 billion in 2021 from $20.9 billion in 2020. : File photo

R. Suryamurthy   |   TT  |  New Delhi   |   21.03.22 : The lockdowns imposed by China to battle another wave of the coronavirus pandemic will disrupt global supply chains and hit Indian steel, automobile, electronics a
nd pharma companies as they are dependent on the imports from China.

Analysts said the trade relation between the two nations were buoyant despite the clashes at the Ladakh border.

Beijing has imposed tough lockdown measures at its key manufacturing hubs in Shenzhen, Dongguan and Changchun as well as at Shanghai, the home to the world’s busiest container port. Beijing on Saturday reported two deaths from the coronavirus, the first since January 2021.

“After the border clashes, Beijing had been voicing not to mix trade and political relations even as the rhetoric continued in the country. The data shows that the trade relations were unaffected by the clashes, clearly indicating how the manufacturing sector is dependent on China for input and critical components,” Keshav Mishra, China expert at the Banaras Hindu University, said.

Exports to China jumped 34.9 per cent to $28.1 billion in 2021 from $20.9 billion in 2020. Exports were higher by 58 per cent compared with pre Covid 2019.

Imports rose to $97.5 billion in 2021, up 46.1 per cent from $66.7 billion in 2020, which was impacted by Covid restrictions, according data with the China General Administration of Customs.

Imports in 2021 were up 30.3 per cent over 2019.

The sharp uptick in imports on a large base has pushed the trade deficit to a record high $69.4 billion in 2021, up from $45.9 billion in 2020 and $56.8 billion in pre Covid 2019. Total trade with China in 2021 was worth $125.7 billion.

India’s main import China is electronic components — at $8.8 billion in the 11 months of the current fiscal against the total imports of $76.6 billion.

Other principal imports include telecom instruments, computer hardware, chemicals and pharmaceutical raw materials. As much as 70 per cent of the demand for active pharmaceutical ingredient (APIs) are met through China.

Trade expert Biswajit Dhar of JNU said “India's supply chains will be hit across the board since the lockdown is so severe. The worst hit could be the pharma and the electronic sectors in India, where the bulk of the produce comes from Shenzhen and China. Steel companies and automobile manufacturers would also be hit, given Shenzhen’s importance as a vital cog in the global supply chain.”

Analysts said electronic device makers in the country import a large chunk of parts from Shenzhen. Steel makers also import coal shipped out of Shenzhen.

The disruption will compound the problems caused by the Russia-Ukraine conflict.

Ukraine is a big supplier of raw materials, including semiconductor-grade neon used in manufacturing, while Russia is an important source of palladium used for memory and sensor chips.

Supply chain may snap

⚫ Beijing imposed lockdown in key manufacturing cities such as Shenzen and Shanghai, the world’s busiest container port

⚫ Supply of electric components will be hit. Almost $9bn of parts imported

⚫ India sources 70% of active pharma ingredients from China

⚫ Other sectors to take a hit include computer hardware, automobile and steel