China may have found a way to keep India in the dark over trade deficit
China's policies have been under focus, putting Beijing in a spot over trade surplus.
Trade numbers for 2018 showed India-China trade deficit falling by a significant $10 billion, mainly because of a sizeable increase in exports by India. Trade watchers cheered, Commerce Minister Suresh Prabhu even put out a celebratory tweet on the "whopping, unprecedented reduction" in India's trade deficit with China.
Going by Mint's analysis of these figures, there is probably a big catch, though. It shows that during the same period, there was a sharp rise in Hong Kong's export to India of the same goods that New Delhi buys from Beijing. This has now given rise to serious doubts that China may have begun using Hong Kong to camouflage the real size of its sale to India.
A data deep dive
According to Commerce ministry data, China saw its trade surplus with India go down from $59.3 billion to $57.4 billion in 2018. During the same year, Hong Kong's trade deficit with India — which stood at $3.9 billion in 2017 — turned into a $2.7-billion surplus on the back of rising exports to India. Combined figures showed India's trade deficit with Hong Kong and China expanded to $60.1 billion in 2018 from $55.4 billion the year before.
Data shows India's exports to China for 2018 stood at $16.5 billion — a rise of 30.4 per cent over the previous year. During the same period, India's exports to Hong Kong fell from $15 billion to $13.3 billion. These two figures combined, it made for a $900 million loss for India.
In the analysis, data from calendar year 2018 is being used because complete sectionalised figures for the entire 2018-19 are not yet out. In most cases, full-fiscal data generally follows the same pattern as calendar year data.
While calculating trade figures, India should always regard China and Hong Kong as one entity, a government official said.
Deliberate ploy, or coincidence?
The Mint analysis — product by product — explains how this latest phenomenon may be happening. India's imports of mobile phone spare parts from China fell by 34.1 per cent in 2018, while the import of the same product from Hong Kong jumped by a whopping 728 per cent during the same period.
China's export of LAN adaptor cards to India slipped by 32 per cent, but that of Hong Kong shot up by 173 per cent.
One of the most significant figures in the story pertains to digital monolithic integrated circuits. Imports by India of the item from China rose too, but the rise in imports from Hong Kong was eye-watering — 6017 per cent.
Of late, China's skewed policies have been under renewed focus, putting Beijing in a spot over burgeoning surplus with its trade partners. India is a case in point. To cut its massive trade deficit, India for some time has been pressuring China to open IT and pharma, among other sectors, for Indian companies.
Recent years have witnessed India's trade deficit with China rising in an out-of-proportion manner, owing primarily to the shooting import of electronic goods. It has put India's balance of trade under serious pressure.
According to Commerce ministry data, the India-China bilateral trade touched $84.44 billion in 2017, in which India's deficit was $52 billion. In FY18, exports to China had risen 31 per cent to $13.33 billion while imports were up just 24.64 per cent at $76.38 billion, which increased the trade deficit to a whopping $63 billion.
Coming back to the latest curious phenomenon, is it a deliberate ploy or just plain coincidence? The paper's query to China Embassy in Delhi elicited no response. China is perfectly capable of playing such tricks though, the article says quoting an Commerce ministry official.