China stir over zero Covid policy may infect key sectors in India

The widespread protests in China against the strict restrictions under its zero Covid policy and the spreading pandemic could impact India's consumer electronics, gold, diamonds, and engineering goods sectors, industry executives said.

A drop in demand for India's products and disruption in the supply of parts and inputs from China could weigh down several sectors.

Orders from Far East countries for cut and polished diamonds, which typically increase during this time, have slowed over the last few days. The industry fears this will erode India's overall gem and jewellery exports this fiscal.


Domestic consumption of gold has also been hit as prices have firmed up following the Chinese protests, executives said.

Electronics industry representatives said Chinese component manufacturers have indicated a delay in supplies by 10-14 days, which is manageable now due to subdued post-Diwali demand, but if protests continue, the crisis could dent domestic production.

China reported a record 71,310 new Covid cases on November 29. The country's manufacturing Purchasing Managers' Index (PMI) fell further in the contraction zone to a seven-month low of 48 in November from 49.2 in October.

Enough Stock for Now
Production for the coming summer is scheduled to gather pace from January. There will be no immediate impact on product availability as brands have enough stock to help them cope for at least two months.India's engineering goods exporters said shipments will be hit as the officials at the Chinese customs department are not cooperating as a mark of protest. Engineering goods exports to China fell 64% year-on-year in October.

"The agitation in China is going to impact demand in the Far Eastern countries. It has slowed down a bit but if the agitation continues for long then the January-March quarter of FY23 will not be very bright for the country's gem and jewellery exports," said Vipul Shah, chairman, Gem & Jewellery Export Promotion Council.

China is the second-largest importer of diamonds from India after the US. China and Hong Kong and the Far Eastern countries together account for 30% of India's diamond exports.Avneet Singh Marwah, chief executive of SPPL, which manufactures the Kodak, Thomson and Blaupunkt brands, said shipments from China are impacted and suppliers are not able to give a timeframe for when supplies will normalise.

Shipments may be Stalled

"China will go into a long holiday after January first week due to the Chinese New Year and hence this is when we import the components. There is no problem in the Shenzhen factories, but work has slowed down in the ports," he said.Haier India president Satish NS said shipments are going to be impacted by a couple of weeks, but since there is enough stock right now there is not much to worry."Orders for AC and refrigerator components are placed. If the unrest continues for a month or so, there might be challenges," he said.

Pradeep Jain, managing director of Jaina Group, which makes smartphones and electronics for several brands, besides retailing its own Karbonn brand, said if the protests continue for another 15-20 days, it will become an issue for companies.Indian consumers are holding back their gold purchases, despite the marriage season, and waiting to see if prices fall, industry executives said. Surendra Mehta, national secretary, India Bullion & Jewellers Association, said domestic gold demand is expected to fall 8% after prices went up due to China unrest. Saiyam Mehra, vice chairman, All India Gem & Jewellery Domestic Council, said consumers are in wait-and-watch mode.As per the latest media reports, ocean container departures from China have declined due to renewed Covid-19 lockdowns and weak demand abroad. Unrest in China's southern manufacturing hub of Guangzhou over lockdown curbs was reported on Tuesday.

For the country's engineering goods exporters, China's zero Covid policy has already hit export shipments and the current protest threatens a further slowdown as Chinese officials may not cooperate in the current scenario, said Arun Kumar Garodia, chairman, EEPC.