Rise of China as an economic neo-colonial power, and the case of India being one of the colonies.

ChinaGlobalisationIndianeo-colonialWorld Economy

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April 26th, 2021

China today is the largest trading partner for over 100 countries. And, it’s not a mere coincidence. Their policies have helped them to overtake and lords over global trade as an undisputed king.

 

By Aks Kuldeep Singh


 

What is neo-colonialism?

Colonialism is when one power or one set of people controls another power or another set of people in such a way that essentially, they can exploit them economically.

 

They can get the colonized power or colonized people to do low-value work for them or produce the low-value raw material. This raw material is then imported and converted into high-value manufactured goods and essentially, sold back to the same people who produced it.

 

Colonies, as history tells us no longer exist, Neo-colonialism has taken its place in the modern era. It’s the practice of using economics, globalization, cultural imperialism, and conditional aid to influence a country instead of the previous colonial methods of direct military control (imperialism) or indirect political control (hegemony).

 

Has China become a neo-colonial power?

Although China doesn’t directly control any of the colonies like imperial powers used to, it conducts itself as one of the imperial powers.

 

According to Jean-Marc F. Blanchard, a China scholar, “the general features of China’s relations with many countries today bear a close resemblance to the European colonial powers’ relations with African and Middle Eastern countries in the 19th and 20th century. Among other things, we witness countries exchanging their primary products for Chinese manufactured ones; China is dominating the local economy; countries becoming heavily indebted to the PRC; China exerting greater weight on local political, cultural, and security dynamics; and Chinese abroad living in their own ‘ex-pat enclaves.’”

 

Due to the production at a very large scale, Chinese products are very cheap and causing harm to the local manufacturing market. For an instance, in Namibia Chinese products have destroyed the local products. This is not just the case with Namibia but with every other country that China trades with.

 

China today is the biggest trading partner for over 100 countries. And, it’s not a mere coincidence. Their policies have helped them to overtake and lords over global trade as an undisputed king. The Chinese also provide cheap loans to poor countries that the poor countries cannot payback. As a result of which they fall into a debt trap.

 

Focussing on the “Qualitative” aspect rather than the “Quantity” reveals a different story

There are two ways of assessing trade relationships between two global powers. One way is to see the volume of imports and exports. If a country has an export surplus with another country, it is doing very well in terms of trade. For example, India enjoys a healthy trade surplus of almost $22 billion with the United States (OEC 2019).

 

Top 10 trading partners of China and America

 

At the same time, India has a trade deficit of $55 billion with China (OEC 2019). Now one might argue that if India is a colony of China in terms of trade then the United States is a colony of India in the same terms. But perhaps numbers only might not reveal the true picture.

Another way of assessing the trade relationship between any two countries is by looking at it qualitatively i.e. what is being imported and what is being exported.

 

Let’s have a look at the top trading partners of China and how they fare.

 

Despite a big trade deficit with China, the US is able to match China qualitatively

 

In 2019, the United States exports $103B  worth of goods and services to China. The main products were Integrated Circuits ($8.47B), Soybeans ($7.87B), and Cars ($7.34B).

Whereas, China exported $429B worth of goods and services to the United States. The main products were Broadcasting Equipment ($50.5B), Computers ($41.6B), and Office Machine Parts ($15B).

 

Chinese export and import to United States in 2019

 

China enjoys a hefty trade surplus of over $326 billion. In quantitative terms, it is massive. However qualitatively, the US is able to match China. Therefore this relationship cannot be termed as colonial because China is not importing raw materials from the United States. It is importing cars, integrated circuits, and other value-added products. Similarly, China is exporting broadcasting equipment, computers, and other manufactured goods to the US.

 

At the other end of the spectrum, South Korea enjoys a trade surplus with China

 

We are examining this case simply because South Korea is not only one of the few countries to claim a trade surplus with China, but it is also the biggest of them.

 

In 2019, China exported $108B worth of goods and raw materials to South Korea. The main products exported from China to South Korea were Integrated Circuits ($15.1B), Broadcasting Equipment ($4.85B), and Office Machine Parts ($3.69B).

 

While on the other hand, South Korea exported $136B worth of goods and raw materials to China. The main products exported from South Korea to China were Integrated Circuits ($33.8B), Refined Petroleum ($6.5B), and Cyclic Hydrocarbons ($6.36B).

 

South Korea enjoys a trade surplus of over $28 billion with China. Not only does South Korea match China in terms of quantity but it also matches China in every aspect qualitatively.

 

 

Is India a colony today of China when it comes to trade?

This is a provocative question to ask, but after looking at the trade data, it is clearly evident that it’s true.

 

India’s exports to China are only $17.4 billion whereas, Indian imports from China are $72.6 billion which brings India’s trade deficit with China to a whopping $55.2 billion (OEC 2019). On average, over the last 6 years, India’s average yearly trade deficit with China stands at $57 billion.

 

Now, this relationship would not have been termed as neo-colonial if India was importing a raw material (say crude oil or iron ore or bauxite from China) and converting it into steel, or aluminum sheets, or into finished refined goods and exporting back to china even if the value was low.

 

 

But after taking a look at what India imports from China and what India exports to China one can see that most of the exported goods are raw materials whereas most of the imports are finished goods.

 

India’s exports to China include iron ore, a few petroleum fuels, organic chemicals, refined copper, fish, shrimp, cotton yarn, and cotton. Indian export raw cotton and cotton yarn are converted by China into textiles. Interestingly, China accounted for more than 50% of global textile output in 2019.

 

India used to be a large exporter of refined copper (i.e. copper cathodes) to China but following the shutdown of Sterlite Copper’s plant in Tuticorin, India went from an exporter of copper cathodes to net importer. Pakistan took India’s place in exporting copper to China. India’s loss was Pakistan’s gain and India’s dependence on China only went up.

 

India’s imports from China include computers, phones, video equipment, semiconductor devices, electronic circuits, transistors, heterocyclic compounds (used in drug making, pharma, dyes, and chemicals both natural and synthetic), fertilizers, TV cameras, automobile parts, and capital project equipment.

 

Much of India’s imports from China are complex manufactured goods, while exports to China are low-value goods.

 

India- United States trade relationship

India’s exports to the US in 2019 were almost $55.3 billion while imports were nearly $33.7 billion.

 

Qualitatively looking at the trade composition of what India has exported and what India has imported one can see the difference between India- US and India- China trade.

 

India has exported $29.7 billion worth of services to America and imported services worth $24.3 billion. There’s a surplus of $5.4 billion. Services export include outsourcing and imports include travel and IP rights among other things. No such luck with China.

 

 

India imports fuels (crude oil and natural gas), precious metals and stones ( raw diamonds), Boeing aircraft, machinery and organic chemicals, defense equipment. On the agriculture side, India has a small import from America of about $1.8 billion. Again India has a surplus there.

 

India exports finished pharmaceuticals, diamonds, refined petroleum, crustaceans, vehicle parts, cars, and house linens among other things to the United States.

 

Machinery, spices, rice, essential oils, at every level in India, has a surplus. India not only has a surplus with America in terms of value but also matches America in terms of quality.

 

India- Saudi Arabia trade relationship

India has a high trade deficit with Saudi Arabia, at nearly $19 billion. India’s exports to Saudi Arabia are about $6.35 billion whereas India’s imports from Saudi Arabia are nearly $25.1 billion. Does this make India a colony of Saudi Arabia in terms of trade? The simple answer to this question is no.

 

About 73% of India’s imports from Saudi Arabia are crude petroleum. India has a massive demand for crude petroleum and not enough reserves. On the other hand, Indian exports to Saudi Arabia comprise rice, cars, refined petroleum, cyclic hydrocarbons, etc.

 

It is not a colonial trade relationship because Saudi Arabia sends to India a raw material that India does not have enough of i.e. crude oil. India has massive refineries that convert the crude to commercial products, which are then exported to various countries including Saudi.

 

 

The world is slowly but surely moving from “bipolar” to “unipolar”, with the only pole being China

 

The trade data when analyzed with a qualitative lens confirms the theory that China is slowly becoming a neo-colonial power and there’s no stopping it. A recent trade war with the USA and the formation of “The Quad” will prove to be minor bumps along the way for China. The world will most certainly move from “bipolar” (USA-USSR and now USA-China) to a “unipolar” world (China).

 

Xi’s flagship Belt and Road project is a testimony of China’s ambitions of being a “true global power”.  China’s conquest of Africa over the last 2 decades is a case study in itself on this matter, as during this period China went from being a marginal actor in the continent’s economic life to its biggest trading partner. Boosted by the Belt and Road Initiative, more than 10,000 Chinese companies – 90% privately owned – are now operating in Africa.

 

The situation is particularly worrisome for a country such as India whose trade relationship with China has stark similarities with the drain system the British Empire had imposed on India. But, the wisdom tells us when it comes to international trade and politics, the dynamics are much more complex than it seems on the surface. The change will take years, sometimes decades, but only if one yearns and persevere for it.

 

The views expressed in this article are those of the author alone and not the WorldRef.


 

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