How Cutting ties with China will Impact Young Businesses the Most

By Sthitaprajnya Panigrahi Tuesday, 18 August 2020

India and China have always had a love-hate relationship and it was China that has always posed a threat in areas where we share borders with them. Most of us are familiar with the current tension that is happening on the border between India and China. The provocative military policies adopted by the Chinese government have added fuel to the fire and it has pushed the Indian government to hit back. Recently the Indian government has banned 59 Chinese apps from the country which has weakened the relationship between the two countries even more. Looking from an economic standpoint, the rift between the two nations is going to have a massive impact on both India and China. With nationwide protests to ban Chinese goods gaining momentum, the facts show that India can only cut 30 percent of Chinese imports in the current scenario. With both the countries remaining hesitant to find common grounds it is evident that the pertaining issues are going to be prevalent for some time now. While this is going to have a direct effect on most Indian businesses, it is the young and upcoming businesses that are going to be affected the most. The following pointers make up only some of the most important reasons why cutting ties with China will adversely affect young Indian businesses.

  • Finding Alternate Suppliers: It is true that, many Indian companies take supplies from Chinese manufacturers for production. If the situation becomes worse over the course of the coming months Indian companies who have been taking supplies from China will be left with no other option but to look at other countries for their supplies. For well established and reputed companies this might not be of much concern owing to its business connections and networks but for newly incepted companies it will be a massive blow. Even if they are able to find alternate suppliers, chances are they might not be able to get the supplies at the price that the Chinese suppliers may have been offering.
  • Losing Exports: India exports lots of commodities that include both raw materials and finished goods to China. Indian products such as salt, plastic, rubber, optical and medical equipment, and various dairy products make up some of the many products that are of high demand in China. Cutting ties with China will most probably put an end to a massive share of these exports and the Chinese government can also ban Indian products in China which will be a massive hit on Indian companies. While most companies will suffer because of this, the younger companies will again take the brunt of the hit.
  • Possible Investment Impact: Investments from China in the name of foreign portfolio investments has been a massive boost for many listed Indian companies in their operational and developmental processes. If ties are cut with China the flow of Chinese investment will deteriorate and it can have a devastating impact on Indian companies who relied heavily on these investments. Again, for new companies who maybe counting on foreign investments, this will prove to be a tough hurdle to overcome.

While some might say, the idea of India completely cutting ties with China is a far-fetched idea, the recent events have proved that anything can happen between these two Asian powerhouses. The above-mentioned points only serve as a warning of what could happen if the worst fear comes true and how it would leave a massive dent in the survival and sustained development opportunities of young companies.

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