Does China's export drop open new avenues for India?

China's exports have decreased for three months in a row, dropping 14.5% in July compared to last year. Imports have also fallen for five consecutive months in the same period. This decline is the largest since February 2020.

In this businessline podcast, Santosh Pai, Partner at Dentons Link Legal and Honorary Fellow at the Institute of Chinese Studies (ICS) sheds light on China's export situation.

While the headlines emphasise the sharp drop, Pai provides context by explaining that the decline in the first seven months of the year amounts to 5 per cent, suggesting a more gradual trend. He notes that this decline aligns with the ongoing pressure on Chinese exports due to factors like the US-China trade war and the pandemic-induced disruptions.

Pai delves into the reasons behind this export decline, citing weak global demand as a short-term factor and the shift in trade patterns due to geopolitical reasons as a long-term trend. He acknowledges that diversification away from China in supply chains is a continuing process, as countries seek to build resilience and reduce dependency.

The conversation moves to India's efforts to reduce reliance on Chinese imports. Santosh clarifies that India is not imposing bans but rather working to diversify its sources of imports, emphasising the need to boost domestic manufacturing. He notes that India's focus on reducing dependency aligns with global trends of supply chain diversification.

Regarding the impact on the yuan's value, Pai mentions that China's central bank is actively managing its currency and policies to prevent a flight of capital, indicating a careful approach to maintain stability.

The discussion also touches on the evolving India-China relationship. Santosh explains India's cautious approach to Chinese investments, focusing on attracting non-sensitive investments in manufacturing while also managing political considerations.

Overall, the discussion provides insights into China's export challenges, India's efforts to diversify, and the broader implications for global trade dynamics and bilateral relationships. Listen in.

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