Domestic producers have been raising a hue and cry about the ‘dumping’ of a wide array of Chinese imports in Indian markets for more than six months.

The steady and significant rise of the yuan vis-a-vis the rupee does not seem to have been enough to level the field.

Unbranded mobiles, unbranded tyres for the automobile replacement market and imports of power equipment, all figured in the list of threatening developments at one time or another.

A few weeks ago, Mr V. Krishnamurthy, Chairman of the National Manufacturing Competitiveness Council (NMCC), told Business Line that cheap imports from China were hurting domestic small-scale industries the most; and went on to add that if the Government did not protect small and medium industries the sector would be ‘wiped out’ by overseas competition.
Slapping on duties

In response to such threat perceptions, anti-dumping duties had earlier been slapped on automobile tyres and sulphur.

Such levies are allowed in cases where a country exports a commodity at a price that is lower than the price at which it is sold in the domestic market.

But a large number of commodities imported from China do not violate the rules of ‘fair play’ in this sense.

Therefore, appeals were/are being made to tax imports on the grounds that the imports are ‘market disrupting’ in nature, and protective levies are hence WTO compatible.
‘Can’t compete’

Making this demand in the course of a December 23, 2008 roundtable discussion on ‘Tackling the downturn’, Mr Kumar Mangalam Birla argued that “China used to supply to the US and (since) that market is closed, they are (turning) to India.

“The Chinese are not as value conscious as they are employment conscious. There is no way that domestic industry can compete if you have four quarters of a situation like that.”

According to the latest available data, despite a 12 per cent rise in the yuan, Chinese imports rose year-on-year by 44 per cent between April/June 2007 and April/June 2008, to Rs 36,122 crore (11.2 per cent of imports, as compared to 10.8 per cent in April/June 2007).

The yuan has gone up a great deal more since then. Its average value over October/December 2008 was 34 per cent greater than the corresponding figure for 2007.

This being the case, it is possible that recent warnings about the threat of Chinese imports are a bit dated.

If, however, they accurately reflect the situation prevailing today, what is at stake is something far more serious than a temporary ‘market disruption’.