Last month’s deadly border battle between India and China has already begun to affect business and technology. But the world’s two most populous countries have a lot to lose should the dispute escalate into a full-on trade war.
Hong Kong (CNN Business)Last month’s deadly border battle between India and China has already begun to affect business and technology. But the world’s two most populous countries have a lot to lose should the dispute escalate into a full-on trade war.
New Delhi has indicated that it is willing to exert economic pressure on its neighbor. Trade organizations in the country reported last week that Chinese shipments were suddenly being held up at Indian checkpoints, while authorities in one state paused hundreds of millions of dollars worth of Chinese business deals. And earlier this week India took the dramatic step of banning dozens of mobile apps, including well-known Chinese ones like ByteDance’s TikTok, Tencent’s(TCEHY) WeChat, and social media network Weibo(WB).
The backlash has reached the highest political levels: Weibo said this week that it had removed Indian Prime Minister Narendra Modi’s account at the Indian government’s request.
Beijing says it’s ‘strongly concerned’ by India’s decision to ban Chinese apps
Beijing’s response so far has been cautious. Chinese officials said Tuesday that they were «strongly concerned» about the app ban, for example, but they did not threaten any kind of retaliation. And on Friday, a spokesperson for the Ministry of Foreign Affairs stressed that the two countries should work together, adding that barriers to cooperation «will harm India’s interests.» Some Chinese state media have called for «cooler» heads to prevail.
«As of now, China is only assessing the situation,» said Geethanjali Nataraj, an economics professor at the Indian Institute of Public Administration (IIPA). A «trade war is not going to benefit either of the countries,» she added.
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China’s tough line
China has plenty of leverage, if it chooses to retaliate for India’s app ban.
It has long been a critical trade partner for India. From April 2019 to March 2020, India bought $65 billion worth of goods from China, accounting for nearly 14% of its total imports, according to Indian government data. Meanwhile, China bought $16.6 billion worth of goods from India. China was India’s second largest trading partner for that period behind the United States, though that value of trade does not include Hong Kong.
Indiaaccounts for a much smaller share of China’s total trade. Exports to India comprised only 3% of China’s total in 2019, according to Chinese government statistics.
