Chinese imports hurt SMEs, FICCI Survey

15 Jun '09

3 min read

Indian Small and Medium Enterprises (SMEs) are caught in a vice-like grip of monumental proportions. While the global economic slowdown and weakening domestic demand are affecting companies across sectors, the SMEs are up against rising imports from China which are reaching Indian markets at prices lower by 10-70% of their Indian counterparts, according to a FICCI Survey.

Trade and industry have reported that with western markets losing their appetite for imports, Chinese manufacturers are increasingly looking at alternative markets to offload their wares. India is an obvious first choice in such a scenario given its geographical proximity and the fact that it is still growing at an appreciable 6.5% to 7% rate.

The FICCI Survey reveals that close to 70% of the participating small and medium businesses are feeling the heat in the domestic market due to rising imports from China. In fact, close to two thirds of the surveyed enterprises reported that they have been seriously injured because of competition from Chinese products whose landed price in the Indian market could be lower by 10% to 70% as compared to prices of similar Indian products.

The list of industry segments that have been impacted by this onslaught includes processed food items such as honey, light engineering goods such as power presses, welding machines and printing machinery, heavy engineering goods such as high speed diesel engines, chemicals and chemical products such as chlor alkali, soda ash, ammonium chloride and metal products such as auto components, to name a few.

Companies that participated in the FICCI Survey mentioned that the price gap between the Indian products and Chinese products is huge and difficult to explain. Interestingly, India has not offered the 'market economy' status to China, as there are serious distortions and lack of transparency in the pricing of products that come out of any Chinese factory.

While competing with Chinese products on the price front may not be an easy task, many Indian companies that participated in the survey drew attention to quality and safety related aspects of Chinese products. An overwhelming majority was of the opinion that imports from China must clear quality and safety norms before these are allowed to be marketed in India.

Immediate imposition of severe testing requirements on imports from China is a must as these include basic items of consumption and even vaccines. Feedback gathered by FICCI shows that in the year 2008 there has been a substantial rise in imports to India from China with almost 75% of the companies surveyed reporting that they have seen erosion of market share in the domestic market in 2008 compared to the previous year.

Companies are apprehensive that as the Chinese government gives more incentives to boost exports, which are the mainstay of the Chinese economy, imports into India and other neighboring countries would only go up. To deal with the over the counter export subsidies that Chinese manufacturers enjoy, companies feel that the anti-dumping investigations for imports from China need to be beefed up and decisions taken at a quick pace.

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Federation of Indian Chambers of Commerce and Industry

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