China Threatens Trade Showdown with India

Posted by: Bruce Einhorn on February 04, 2009

Economic ties between China and India are showing the strain of the global crisis. Late last month, New Delhi imposed a six-month ban on the import of Chinese-made toys, in a move clearly designed to protect Indian toymakers from Chinese competition. Now Beijing is preparing to fight back. Today’s China Daily, the official government paper, reports China is threatening to fight a new Indian import ban on Chinese-made toys by taking New Delhi to the WTO. “The ban cannot hold water. The Indian side is doomed to lose in the court if the Chinese government appealed to the WTO Dispute Settlement Body,” the China Daily quoted trade lawyer Fu Donghui, managing director of Allbright Law Firm Beijing, saying.

With the Chinese economy struggling as exports plunge, this isn’t the only instance where Beijing is showing it is ready to play hardball with trade partners. The Chinese are fighting trade moves the Bush administration made in its dying days, for instance. (See this story by BusinessWeek colleague Pete Engardio for the take on U.S.-China trade from Bush’s trade rep, Susan Schwab.) Beijing is also considering fighting at the WTO against a move by the European Union to impose high tariffs on Chinese-made screws.

I’m no trade expert, and I don’t know nearly enough about the details of these cases to make a comment about who is in the right. But it does seem the Chinese government senses a good PR opportunity here to appeal to the feeling shared by many Chinese that the rest of the world - whether it’s the U.S., Europe or India - is out to get them. “Despite calls to resist protectionism, trade barriers and countervailing duties launched by China’s trading partners have been running rampant,” reports the China Daily, which goes on to quote Fu again insisting the country would defend itself: “In the past, the Chinese government always kept silent. But the situation is changing, and resorting to the WTO is a right choice to prevent the trade partners from abusing the WTO regulations.”

This could get ugly, but for now, maybe we should agree with Schwab that China’s use of the WTO is actually a good thing: “The fact that China is fighting the U.S. in the WTO is actually a sign of progress, as far as Schwab sees it,” Pete wrote, “because it means Beijing is starting to respect the value of a rule of law when it comes to trade.”

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Reader Comments

Steven

February 4, 2009 03:09 AM

I don't think China will stop buying from India who is basically a raw material supplier for China. we need those.India has done this a lot with China. It bans Chinese companies enter India's infrastructure projects (useless ban, since Indian cannot make infrastructure fast and cannot make those equipment. They even begged China to send workers to build a gas pipeline for Reliance). It bans Chinese telecom equipment makers (But Huawei and ZTE still enjoy one after another victory since India simply cannot afford without Huawei and ZTE), it even bans boarding bridges from China at the excuse of security, but it paid more than twice.

Jeff

February 4, 2009 03:47 AM

Bruce dont worry so much, chinese won't hate you and ur friends :)


After all isnt this what the west wants China to be? Not to stay low profile and come out and play? Now China is playin pretty well you wanna get worried? cmon...

Like the saying goes its the yin and yang thing. Compromise has to be make.

manuel

February 4, 2009 03:39 PM

Steven is an example of the disgusting hyper-nationalism exhibited by Chinese expatriates. China is great. India (or the rest of the world) sucks. Yeah whatever.

AJ

February 4, 2009 04:33 PM

The sad reality is that China is probably right in most of the cases it has filed with the WTO. The protectionist Europeans have a longstanding history of flouting the rules, and America has shown its protectionist zeal in the last few months. And when it comes to India, its politicians appear to care more about votes than poverty alleviation and growth. China's politicians, thankfully, know that their interests are tied directly with the rapid growth rate of the country and is right to fight these cases tooth and nail.

ROB

February 4, 2009 05:25 PM

The rest of the world should ban Chinese products not because of competition, but because of safety/quality concerns. Chinese tiys, for instance, have excess lead which has posisned and killed many chidren; other Chinese products have similar problems.
CHINA should not be allowed to use the WTO to its advantage since there are no uniojs, IP, or legislation in China.
A trade war between China and the rest of the world would be good.The world needs to extricate itself from dependence of cheap, shoddy, and downright dangerous Chinese junk.

Rohit

February 4, 2009 05:25 PM

Nice bedtime stories Steven !!

Raj

February 4, 2009 07:50 PM

Biased article. Where's the analysis of the Indian perspective ? No comments from anyone in the India side either. Just "China will do this, will do that" etc. Eye On Asia or Obsequious To China ?

Bo

February 4, 2009 08:10 PM

Steven, what are you talking about? India can of course develop her infrastructure using her own resources. India is the largest democracy in the world, which makes everything magically easy to do. Also remember that India invented computer chips, rockets, space travel, surgery, automobiles, religion, etc. Roads, ports, trains, etc. are going to be a piece of cake. India doesn't need China's help or its money.

Of course, it will just take India a bit longer to finish her infrastructure projects without outside assistance. Say, instead of finishing a highway in three years by hiring a Chinese company, India will do it by herself in 50 years. Instead of building a rail link in 5 years by using Chinese expertise, Indians will do it in 80 years on her own. India has a lot of patience ;) We know that by 2020, India will become a super power, ah, I meant "Super Pauper".

Achimus

February 4, 2009 08:57 PM

China tops india again. I thought hyper-nationalism was exclusive Indian domain. Thanks to people like Bo and Steven.

BoPleaseGo

February 4, 2009 09:54 PM

Oh Yes u r the greatest man. U can build Infrastructure in months. Throw out millions from their home and build a huge city there. Kill thousands of students in days run tanks over them get the melamine into Milk and cover it up so that no one knows you know what pulling those stuff is called miracle out of this world .... Oh I forget there is no God in China it's Mr Mao or Mr Bo. China is already the Super power alas last time I was landing in china all I could see was DARK DARK and DARKER Clouds ... May the future ....

MO

February 4, 2009 10:08 PM

Judging from Steven and Bo, the hypernationalists are getting ever more shrill. It will be interesting to follow their twists and turns as the global recession deepens.

Gus

February 4, 2009 10:10 PM

Anyway trade is heavily tilted in favor fo china..so chinese need to be careful.

Chinese have already bullying India over tibet and Arunachal pradesh...

Chinese have lab tested pakistani nuclear bomb..supplied missiles and nuclear bombs...to propr up pakistan... and India Knows this ...


TrueIndian

February 4, 2009 10:34 PM

Dear Steven and Bo, I'm Indian. I accept that India has crappy infrastructure, we are nowhere near the renowned manufacturing skills of China. But we have managed to grow in spite of all that and our government. However we have something we call "freedom" that your ilk has no idea of. And we are better off for that. Plus we don't need your crappy technology and chemical laced stuff anyway. And another thing, the Indian government does not let any Chinese company into India because you are all spying thieves who copied even a little 150cc motorbike from Bajaj. LOL!!! So much for your superior technology that you thieves couldn't even come up with an original name for that and had to call it Gulsar! Ring a bell?

Bob

February 4, 2009 10:47 PM

Juvenile content, infantile readership. That is BusinessWeek.

chenleilili

February 4, 2009 11:31 PM

BoPleaseGo: do you think
there is GOd around you and blessing you?,why not God
save you from the economy crisis,maybe
God is really unwilling to help a man
so ugly,arrogant,ignorant and dark,darker like you
God only
bless kind persons except you (because you are totally in darkness that is why you think everything is dark{}

samarth

February 4, 2009 11:34 PM

Steven where did you learn all this crap from....u chinese ppl make all that crapy stuff...chinese toys were banned because of Pb paint(lead paint)....and talking about technology ur minds are good for doing only two things copying western tech and then making it cheap by lead paint and melamine(in milk)....lol

majesticblue

February 5, 2009 01:06 AM

It's a great idea to ask WTO settle the dispute. If it's India's intention to protect its industry by unfair practice, WTO will find out.

BTW, Raj, what's the perspective from India? I thought article already cited the reason India gave for the ban: poison in toys from China. Do you disagree? Do you know of percentage of 'poison/good' toys made in China, made in India? I look forward for your 'insights'.

MikeB

February 5, 2009 01:10 AM

China is a big fraud and a slave economy . You can use slaves to come up with cheapest goods in the world and china is a great example. US.UK and India are vibrant democracies where people have rights to ask whatever price for their products. So why are we comparing apples with oranges here.

BigAir

February 5, 2009 03:36 AM

Lets not forget that China is a currency manipulator. If they let the yuan float, they would be crushed by the free market. The biggest mistake for the world of free trade was allowing a communist country into the WTO. The chinese do not deserve the respect that membership offers. It is time the world takes notice and some payback in trade retaliation. Good for India.

Sud

February 5, 2009 07:15 AM

Full disclosure: Am Indian.

China and India shouldn't be mentioned in the same breath simply because they're not in the same league . In terms of potential perhaps yes, but not in terms of performance.

Having said that, most countries, and that includes India, have good reason to be wary of dependence on foreign expertise when it comes to critical sectors like Infrastructure. If it costs more and takes longer, fine, but better we know how to do critical work ourselves than rely on an unstable and unpredictable trade partner.

Maybe a couple of generations downthe line, PRC and India might becomes comparable, but until then, I'd rather India focus solely and quietly on its own development without getting into pi$$ing contests with an obviously larger and richer neighbor. Now, I wish Pakistan had the same common-sensical attitude....
Just my 2 paise.

MotherIndia

February 5, 2009 09:31 AM

India does not need China and the world. India should stop trading with China and diplomatic relation with China altogether. After all we India is the world largest democracies while China is the world largest dictatorship. India is a much, much better than China. Even Dalai Lama doesn't want to be in China.

Mukund

February 5, 2009 09:52 AM

There is clearly some level of gall in the Chinese. When the whole world is protesting quality issues with China-made products, they think they can ride roughshod over the developing world. The Indian gvernment's ruling was designed to protect not Indian manufacturers, but Indian consumers.

Pius

February 5, 2009 10:01 AM

What to do with a stock pile of toys which cannot make to the US? India is a target to land tainted toys which cannot make it to the US because of lead paints and other unsafe materials.If no other imports are being singled out, kids in India too need to be protected.

ROB

February 5, 2009 10:03 AM

Did you know that on the streets of China are copies of Honda cars that they named HONGDA? And China has stolen Indian Bajaj-mobike designs and created copies of that!
They are truly a thieving, lying, scheming nation with the morals of a snake.
KEEP CHINA OUT. No TRUCK OR TRADE with CHINA!

Jeff

February 5, 2009 11:11 AM

see bruce like i told you we still love you and your crazy articles.

always invite simpleton yelling the tarzan yell and keep us all amused :)

Steven

February 5, 2009 01:44 PM

I object to any bad rection from Chinese government in this issue. We need resources from India. Iron ore is about half of what India sells to us. If you plus cotton, that's even more. The world needs India for amusement. The $10 laptop designed in IT superpower India make all the world laugh for free. That democrazy is a very good example for others who is hesitating to adopt that system. More than 2 million kids died each year in such a country that someone want to compare to US, UK. isn't another joke? How do I think of Indians? High ambitoin, big mouth, but, sorry, low capability. They cannot achieve anything big.

Rationalist

February 5, 2009 02:44 PM

India has banned chinese goods because they are laced with chemicals and are potential health hazards. What's wrong with that. If China wants to start the trade back then they should produce quality and chemical-free toys and prove that to Indian government. Thats the way to go about it, why fight? Will chinese government accept Indian goods which are harmful to its citizens health. Be pragmatic...

HealthCheck

February 5, 2009 05:49 PM

you know what is happening? Guys like Bruce Einhorn just wants to make you fight and then he will silently watch the fun.

a

February 5, 2009 06:47 PM

china and india should not be compared with each other, they should be compared with the best of the best and that is american and japanese companies. China and India, both have a long way to go in many areas.

p.s STEVEN... ZTE and Huwaie is an ant compared to TCS and infosys.

animesh

February 5, 2009 08:12 PM

Its funny.
That each time anybody writes content about nations such as, but not limited, to India,China, or Pakistan..
We indians, chinese but especially we indians see apparent bias where none exists and immediately start yelling thoughtless, strident and ugly abuse from the rooftops.

Its pretty tasteless.
Read the article, appreciate the article and forget the article.

Blog don't flog.

JiaMing

February 5, 2009 09:06 PM

I don't understand why Chinese and Indians can't respect each other. China is far ahead of India in economic development. It is not because of China's "slave" economy in which people are forced to work for cheap wages. This is just nonsense and I urge those who believe it to read some history. China's economic success is achieved mainly through the hard work and intelligence of its people and leaders. India is a democracy with the freedom that citizens of China do not enjoy. Freedom is the basis of intellectual development of the modern era. Chinese should respect India's freedom. India is also a very diverse nation where people of different ethnicities, religions and races generally get along fine. There are enough for both countries to learn from each other.

Ninan

February 6, 2009 12:33 AM


Both China and India needs each other for the same reason- markets. In fact the competition is doing a world of good. India is trying to venture harder into manufacturing whilst China into services. However selling dangerous toys or rotten mangoes is not the way out for each other.

Hindi Chini bhai bhai

February 6, 2009 02:24 AM

To all our northern neighbour friends - keep it coming, great entertainment man !

Bhuddy

February 6, 2009 03:43 AM

If given the choice I'd prefer product from India over China. Go India!!

Anil

February 6, 2009 07:49 AM

I fail to see why any country cannot reject another country's goods on grounds of quality.

China's goods are demonstrably of inferior quality and can be downright dangerous, as the melamine-tainted milk scandal shows (China's judiciary tried to stomp on citizens' rights when they attempted to file suit against the Chinese authorities who were hand-in-glove with the manufacturers).

Let the WTO see the poor and dangerous quality of Chinese toys. China is being foolhardy in going to the WTO. It should quietly improve its products and try to gain genuine market share rather than risking ruining its image af the WTO, the chances of which are extremely high.

tinkerbell

February 6, 2009 01:49 PM

Indians and Chinese using abusive language against each other only make their own country look bad... grow up people! show some class.

Yash

February 6, 2009 04:05 PM

I am assuming that the first comment is from a Chinese with Anglicized name.

Chinese, just like any other country are welcome in most of the sectors in India. There are few exceptions though:
1. Selling toxic toys, for that matter toxic milk, powder, clothes. Except for pesticides and such.
2. Telecom equipment from a company that has Chineese govt holding in it. (indirectly maybe chineese spy agencies as well)
3. India has more than 13000 KM long gas and oil grid. Chineese are building 800 KM pipeline in India because a private company gave them the contract and that too because that was the cheapest option as other Indian companies are building more pipelines, LNG stations and last mile connectivity.

Barring nationalistic romanticism and insecurity I don't see any other reason for you and some others to hamper on such things.

For others - you are right, materialistically and infrastructurally we may be "behind" others, but we Indians for big part have believed in living in a sustainable villagish economy. Which is changing for benefit of all, everyone throughout the world gets to make more, sell more, have bigger cars and bigger homes and live "happily ever after". Remember - there is little bit of Indian and Chineese in every Americans, Europeans and Africans life and vice versa.

MO

February 7, 2009 02:34 PM

There is no way to really find out I suppose, but I would like to know just how prevalent Steven's supremacist attitude is in China.

phillip

February 7, 2009 08:55 PM

I thought the lead incident occurred in 2007 and there is no more lead. Is the world still using that silly excuse? Also, I would venture that there are no more companies in China putting melamine into stuff. I mean, how long can you beat a dead horse?

Howard

February 8, 2009 12:21 AM

According to some sources of India, the indian toy manufacturers use more paints with lead to make toys, but the government is turning a blind eye at Indian's poor toy safety standard. So it is clearly protestism under the excuse of safety.
India is really the biggest democracy in the world, though very corrupt and conservative... More than 800M indian live under poverty line, while a few enjoy extreme wealth. Terrorist, racism and business fraud are other big problems the country keeps facing for decades, and, the blood in Membai, the bombs at train stations, and the scandal of Satyam's cooked books, are all so fresh memories for everyone in the world...
It's understandable the Indian government want to stimulate local toy industry by banning chinese toys bcoz the current economic crisis are making thing even worse in India and everyone is feeling the pains.

Howard

February 8, 2009 12:45 AM

Reply to A: "ZTE and Huwaie is an ant compared to TCS and infosys."

Facts (from corporate web sites):
ZTE in 2008:
Annual Sales: USD 10B
Employee: 50,000
Huawei in 2008:
Annual Sales: USD 23B
Employee: 70,000
TCS in 2008:
Annual Sales: USD 5.7B
employee: 120,000
Infosys in 2008:
Annual Sales: USD 4B+
Employee: 103,000

So we can compare like the following:
ZTE + Huawei in 2008:
Revenue: $33B
Employee: 120,000
TCS + Infosys in 2008:
Revenue: $9.7B
Employee: 223,000

ZTE + Huawei, with 55% staff, made 330% money compared with TCS + Infosys.

Facts say the truth, not perceptions. FYI...


Ashok Medhi

February 16, 2009 12:02 AM

India has to respect WTO regulations and cannot just go on banning imports, as much as it wants to export its software and cheap labor and yet maintain currency restrictions in a global economy!

Ashok Medhi

February 16, 2009 12:02 AM

India has to respect WTO regulations and cannot just go on banning imports, as much as it wants to export its software and cheap labor and yet maintain currency restrictions in a global economy!

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BusinessWeek’s team of Asia reporters brings you the latest insights on business, politics, technology and culture from some of the world’s biggest and fastest-growing economies. Eye on Asia’s bloggers include Asia regional editor Bruce Einhorn, Tokyo reporter Ian Rowley, Korea bureau chief Moon Ihlwan, Asia News Editor and China Bureau Chief. Dexter Roberts, and Hong Kong-based Asia correspondent Frederik Balfour.

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