June 6, 2022

Economic Decoupling from China – Could India Stand to Gain?

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Economic Decoupling from China – Could India Stand to Gain?

Current situation

Over the past few months, China, the world's second-largest economy, has seen its worst spread of Covid-19 since the pandemic began in 2019. Since the end of March 2022, China's largest urban economy, Shanghai, a city of 25 million, has been under strict quarantine due to the spread of the omicron variant. Last week, the capital of Beijing reported an increase in cases with stricter lockdown measures. About 327.9 million people in more than 40 cities have been affected by the latest lockdowns across the country, according to Ting Lu, chief China economist at Nomura.

Statistics

According to statistics released on May 16, 2022 by China's National Bureau of Statistics, China's industrial output fell 2.9% year-on-year in April, while retail sales fell 11.1% year-on-year in April. While these numbers reflect the short-term impact of strict quarantine measures on the Chinese economy, in the long term, with the growing challenges facing foreign businesses in China, economic separation from China will continue to be of great importance to many foreign companies investing in the Chinese economy.

branch trend

Recently, many large companies such as Apple, General Electronics, Starbucks, Amazon and Adidas, for whom China is not only a major manufacturing base but also a major consumer market, have expressed concerns about their future investment strategies for China. Some companies, such as Starbucks, for which China is the second largest market, have refused to make forecasts at all, with CEO Howard Schultz calling it "the only responsible course of action." In April, Apple CEO Tim Cook "warned of huge losses related to the Covid-19 outbreak in China, saying supply chain problems could hit the company's $4 billion to $8 billion in sales this quarter."

Why India?

Tech giants such as Apple and Samsung have already started ramping up their production in India. This could become a growing trend in many sectors, opening up huge opportunities for the Indian economy. The Indian government is also investing heavily in improving its infrastructure, which is often considered one of the major shortcomings of the Indian economy. Thus, India can become the next world manufacturing center. But only with aggressive political support from the government, India can take full advantage and become the next industrial center. The time has come for India to seize this opportunity.

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