China Overatakes the United States as the World's Second-largest Export Destination

5 mins read  Sealuminati TeamJune 8, 2021

For the first time in recent memory, China surpassed the UAE to become India's second-biggest leading exporter in FY21, trailing only the United States, even after the Covid-19 pandemic and a dangerous demilitarized zone conflict.

According to official data, imports from China increased by 28 percent year over year to more than $21 billion in FY21, while exports to the UAE decreased by 42 percent to nearly $17 billion. While China's huge infrastructure push prompted it to import large amounts of iron ore and steel from India, the UAE, negatively affected by a fall in oil prices, reduced acquisitions in a pandemic year. Last fiscal year, India's total trade balance fell by slightly more than 7% to $291 billion. Even though, imports from China remained less than 50 percent of those to the US ($21 billion vs $52 billion in FY21), despite a 3% drop in outbound shipments to the biggest economy in the world.

Importantly, as public officials have frequently stated, determining the exact magnitude of the tariffs on Chinese Imports is difficult because Beijing can redirect resources via other countries in the region, particularly ASEAN representatives.

Nonetheless, this is an exciting prospect that the Chinese government is starting to release its grip on its territorial opponent's industry after ferociously defending it for years.

Experts, on the other hand, warn against reviewing too much into FY21 statistics, stating that "one swallow does not make a summer." As a result, the pandemic year isn't the right opportunity to predict a trend based on it.

In addition, Beijing should commence purchasing a broader portfolio of New Delhi products instead of just raw resources (iron ore and cotton) and low value-added goods for the recent acceleration (certain steel products and other base metals). They believe that China's incredibly self-import tariffs and ignorance of crucial access to the market by stealth (by erecting non-tariff barriers) have been the most significant impediments to India's interests.

Interestingly, India's goods exports to China did not decrease even though the Galwan clash on 15 June and pandemic-induced supply disruptions. But the increases of shipping to the neighbour slowed significantly to 20% in the September quarter and just over 2% during the December quarter, after an impressive 33% increase year on year over the April-June period. Yet exports to China more than doubled in the March quarter each year, with impressive annual growth of 28%.

In exchange, exports from India to its largest market, United States, grew by 3% in the September quarter and 5.5% in the December quarter, a 39% decline in the three months through June. Between January and March, export markets to the largest economy increased by 20%, restricting the yearly contraction to around 3%.

In exchange, India's exports to its largest market, the United States, increased by 3% in the September quarter and 5.5 percent in the December quarter, following a 39% decline in the three months to June.