China busy widening capability gap against the Indian military as India narrows trade deficit with China

Lalit Shastri

Xi Jinping

While the war mongering president of expansionist China Xi Jinping has told the People’s Liberation Army to be prepared for war, the experts or the India watchers in the Jinping land have started gloating over the fact that nearly 20,000 Indian soldiers have tested positive for COVID.

Taking off from a written statement regarding the novel coronavirus and its impact on the armed forces in Rajya Sabha by Minister of State for Defence Shripad Naik in September, an opinion writeup in the official Chinese mouthpiece Global Times said “Although it (COVID) may not have a fatal impact on the overall deployment of the Indian army, it certainly puts pressure on the allocation of combat resources and equipment for any future scenario. The article also talks of “the risk of freezing to death in the upcoming winters” and goes on to add that India would be propped by the US to “make trouble” and intensify provocation on the border but due to COVID, New Delhi would resort to negotiations to resolve disputes with China.

The assertion by Global Times that India is bent upon making trouble on the border at the US bidding and it is only due to COVID that it has come to the negotiating table comes after both India and China had issued a joint communique stating “both sides agree not to turn differences into disputes” at the end of the 7th meeting of senior military commanders of the two countries at Chushul in Ladakh

Another article in Global times underscores, quoting Chinese military analysts, that in winter, the Chinese military will “widen the capability gap against the Indian military” banking upon its “superior logistics support system, infrastructure and strategic positions”.

Another point being emphasised by the Chinese is that the narrowing of India’s trade deficit with China will be unsustainable and hurt India’s interest.

Citing the Trade data for 2020 Q1-Q2-Q3 which shows that trade between India and China dived 10.9 per cent year-on-year, with China suffering a 17.7 per cent decline in Exports to India and imports from India rising in equal measure, Global Times goes on to say, narrowing trade deficit notwithstanding a non-economic approach to closing the deficit gap will only hurt India’s interests.

Global Times has drawn attention to statistics on a monthly basis and pointed out that China’s exports to India reached 46.4 billion yuan ($6.89 billion) in September up from 22.5 billion yuan in April this year, leading the monthly trade surplus with India to bounce back after a period of decrease in the early phase of the pandemic. Moreover, it adds, the increasing shipment of goods from China to India in the immediate past shows India’s demand for products made in China, arising due to the gap between economic and industrial structures of the two economies.

Discounting India’s year-on-year increase of exports to China during the first nine months, the official Chinese mouthpiece goes on to underscore its mainly due to rising export from India to China of natural resources to cater to China’s growing demand for raw material.

On the basis of the latest data from India’s Department of Commerce, Global Times further highlights that China drastically increased imports of mineral resources from India between April and July. For instance, India’s exports of aluminum (as raw material) to China rocketed 1,936 percent year-on-year, a nearly 20-fold rise compared to last year.

China in a significant move in 2006 had identified the Aluminium sector amongst the nine ‘pillar’ industries where the government was supposed to play a predominant role. The Chinese 12th five-year plan also included non-ferrous metals as a part of key industries.

When China was upgrading its infrastructure and economy to synthesize it with the Aluminium sector and was already on the fast track, Rahul Gandhi, as party general secretary, signed an MoU between the then ruling Congress party and the Communist Party of China (CCP), in the presence of his mother and party president Sonia Gandhi and the then Chinese Vice-President Xi Jinping. It appears there was some clandestine understanding between both sides to allow China proceed on the fast track on the aluminium and infrastructure front, while India’s economist Prime Minister Manmohan Singh perhaps was told to look the other way and focus only on the Congress party’s pet policy of direct money transfer to the poor. That made India a leading exporter of raw aluminium and importer of finished goods from China.

It is a matter of serious concern that even in 2020, India is far from a turnaround as even now it continues to remain a major exporter of raw aluminium to China. Going into the genesis of the problem, one cannot also ignore the role of the communist and Maoist backed activist groups and NGOs that have remained in the forefront raising environmental issues to block smelter units from functioning. The 2018 protest against Sterlite Copper, a Vedanta group copper smelter unit in Thoothukudi had turned violent with 10 people getting killed in police firing. Casualties were also reported when police opened fire on demonstrators outside Vedanta’s alumina refinery in Kalahandi in Orissa in March 2019.

The aluminium sector and its importance

Newsroom24x7 Desk

Aluminium smelting unit of Vedanta at Jharsuguda, Odisha. It is one of the world’s largest single-location aluminium smelters outside China

Since 2000, there has been a gradual shift of primary aluminum production centers from west to east largely from North America to China, India and Middle East. China dominates production as well as consumption of aluminum accounting for nearly half of the global production and consumption. China’s per capita consumption of 24 kg compared to world average of 11 kg is largely driven by huge investments in infrastructure and construction and government support through specific initiatives undertaken by the Chinese government.

China also accounts for more than 50 per cent production of Primary aluminum production (MTPA) and more than 40 per cent of the total world Aluminum semis Consumption (87.7MTPA).

The aluminum industry comprises two basic segments: upstream, and downstream. The upstream sector produces primary or “unwrought” aluminum from raw materials and involves bauxite mining. After extraction, bauxite is processed into alumina. The alumina is transformed into primary aluminum through a process called smelting. Primary aluminum is the starting block for aluminum products and is mainly in the form of ingots and billets.

Production of primary aluminum is a capital and energy intensive process and thus major players in this segment are large players. Major global players in the primary aluminum industry are Hongqiao, Rusal, Rio Tinto, Shandong, Chalco and Alcoa.

The processing of aluminum into semi-finished aluminum goods such as rods, bars, rolled products, castings, forgings and extrusions comprises the downstream segment of the industry. These aluminum products can be manufactured using primary or secondary aluminum, or a combination of both depending on the specification of the final product. Aluminum production from recycled scrap is secondary production.

Extrusion products are mainly used in building and construction sector (B&C) in the form of windows, doors, curtain walls and formwork, bathroom and kitchen applications etc. B&C accounts for almost 62% of extrusion consumption. Automotive sector also uses extrusion products for light weighting of vehicles in the form of extruded tubes, multi-hole profiles, door beam, bumper system etc. Both developing and developed countries are increasingly using them for the purpose of urbanization and the need for sustainable buildings respectively. The transport sector accounts for almost
14% of demand, primarily driven by light weighting of vehicles (aids in fuel efficiency).

China is the biggest consumer of extrusion products accounting for almost 63% of global consumption. Chinese demand for extrusions was driven principally by its B&C and infrastructure projects, but also by its emergence as the world’s leading supplier of transportation equipment.

A country’s over-reliance on foreign import for essential strategic metals may be detrimental towards the objective of national security. A strong economic power should be able to produce enough high quality metal to ensure selfreliance in its defense and critical infrastructure needs in order to avoid global volatility in supply and prices.

Many industrialized nations have included non-ferrous metals/ aluminum industry as a strategic sector in their industrial strategy/plan.

Aluminum is a key metal for industrial growth. Its unique properties like strength, durability, conductivity, flexibility, impermeability, light-weight, non-corrosiveness, recyclability make it a metal of choice for various industrial activities.

Aluminum Consumption in India at 2.5 kg per capita is much below the global average of 11kg per capita. To reach the global average of 11 kg per capita, India will require an additional annual consumption of 16mn tonnes, thus, making it the second largest consumer in the world (absolute terms).

Even at low consumption, aluminum contributes 2% of manufacturing GDP (steel 12%, cement 9%) and this is expected to move up with consumption growth. This growth is critical for India’s industrial vision of achieving 25% of GDP from manufacturing by 2022.

According to available figures (2017), India was the 4th largest Alumina Producer, 3rd largest Aluminum Producer and 5th largest consumer of Aluminum.

India is endowed with rich and good quality coal and bauxite reserves (5th largest in the world for both). India’s unique advantage of abundant, good quality bauxite (compared to China which has high silica content) along with coal, which needs to be leveraged to develop a globally competitive aluminum industry which will also help achieve our economic development goals. India has a significant primary aluminum capacity (4100KT) and downstream processing capacity (3880KT) which lays a good platform for scaling up and leveraging our natural resources. (Aluminium and India -Information source: NITI Aayog )

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