China Shipments Stuck at India Ports Show Casualties of Standoff

Imports from China have been piling up at Indian ports pending government clearances, causing concern that a recent border standoff between the two nations could have an economic fallout that will disrupt supply chains.

From active pharmaceutical ingredients that go into the world’s most-consumed drugs to the innards of popular mobile phones, Indian companies purchase Chinese raw materials that feed their finished products. These consignments are now being delayed and firms aren’t sure why.

“Customs authorities have not been clearing consignments coming from China, and they haven’t been offering any reasons,” Dinesh Dua, chairman of India’s Pharmaceutical Export Promotion Council, said by phone. “It has been five days now. We have no source apart from China.”

Dua, who’s also chief executive officer of Nectar Lifesciences Ltd., said he has written to the ministries responsible for pharmaceuticals and trade to seek help as companies are spending about 350,000 rupees ($4,630) a day in demurrage charges. Similar concerns are being voiced by electronics manufacturers, along with anxiety about how they will run their factories, only recently reopened after India’s lockdown to contain the coronavirus.

“Five consignments of mine are stuck,” said Sudhir Hasija, chairman and founder of Karbonn Mobiles, which builds smartphones, chargers and set top boxes. “The government collected customs duty and GST on them. 100% of the inspections are done. Now I’m told they are waiting for release instructions, from whom I don’t know. I haven’t received any communication.”

Key Numbers:
  • India imports almost 70% of its bulk drugs and intermediates — the chemicals that make a finished drug work — from China
  • It buys 37% of electronic components, 45% of consumer electronics, and 44% of air conditioner and refrigerator parts from China
  • India has its largest trade deficit with China; imported about $69 billion worth of goods last year from China and exported $18 billion, according to data compiled by Bloomberg

Businesses worry that they may end up becoming the casualty of a brewing trade war between the Asian giants sparked off by a border clash that killed 20 Indian soldiers and left an undisclosed number of Chinese dead. India plans to impose stringent quality control measures and higher tariffs on imports from China, people with the knowledge of the matter have said. India on Monday banned 59 Chinese apps, citing threats to its sovereignty and security.

Stopping imports from China at domestic ports will lead to losses for those Indian businesses that placed orders before the border clashes, Nitin Gadkari, Indian minister for Micro Small and Medium Enterprises, told Quintillion Media on Sunday. Gadkari said his ministry is actively working with the finance and commerce ministries to resolve this issue.

Yogesh Baweja, a spokesman for the commerce ministry, declined to comment when called by Bloomberg News while Rajesh Malhotra, who represents India’s Finance Ministry, didn’t answer a call outside office hours in New Delhi on Monday.

At least six companies from across India have been affected by the delays, according to Daara Patel, secretary general of the Indian Drug Manufacturers Association that represents small- and medium-sized Indian pharmaceutical manufacturers. Firms are “quite anxious and concerned about the attitude of the clearing agencies across the country,” he said.

The Society of Indian Automobile Manufacturers warned in a statement that the congestion at ports could hurt manufacturers. Karbonn’s Hasija said freight forwarders are refusing to lift more material from China because they don’t have space to store the shipments.

Pankaj Mohindroo, chairman of the India Cellular and Electronics Association, which represents companies such as Apple Inc. and Micromax Informatics Ltd., said the industry body is in talks with the government to resolve the situation.

“We have been assured that the government does not want any disruption in these trying times,” he said, “and all actions will be taken in the interest of the industry and nation.”

— With assistance by P R Sanjai, and Ari Altstedter

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China Has $139 Billion Mountain to Climb to Meet U.S. Trade Deal

China’s purchases of U.S. goods increased last month as the economy continued its recovery from the coronavirus shutdowns, but imports are still far behind the pace needed to meet the terms of the ‘phase one’ trade deal.

By the end of May this year, China had only bought about 19% of the total purchase target of more than $170 billion for goods in 2020, according to Bloomberg calculations based on Customs Administration data. That means China needs to buy about $139 billion in the remainder of the year to meet the terms of the agreement signed in January.

Click here for the full break-down of the monthly data.

China promised to purchase an additional $200 billion of U.S. goods and services over the 2017 level by the end of 2021 in the agreement that paused a bruising trade war between the world’s two largest economies. The deal is in focus as one of the few bright spots in U.S.-China relations as the superpowers slide into a broadening strategic confrontation.

China will have to increase purchases “significantly in the coming months to meet the buying targets,” said Michelle Lam, greater China economist at Societe Generale SA in Hong Kong. But as long as China keeps buying, markets could stay calm, she added.

While purchases of energy products are only at about 3% of where they need to be by year-end, there was a significant jump in the imports of those commodities in May. China imported more meat than in April or March, making up for a slowdown in soybean shipments, the data show.

In manufactured goods, aircraft orders and deliveries surged more than ten-fold in May from from April, and purchases of integrated circuits were above $1 billion again.

Last week, financial markets plunged after an adviser to President Donald Trump made comments that were interpreted as meaning the trade deal was “over”. The President soon clarified that the deal was “fully intact,” but the market reaction underlined the uncertainty about both the agreement and the broader relationship.

What Bloomberg’s Analysts Say..

“China is likely to lean on agriculture and manufactured goods, as low energy prices and travel restrictions make the 2020 pledge impractical to meet. The burden to reach the import goal could rest on soybeans, meat and industrial, electrical and other manufactured goods as the country stimulates a domestic demand recovery.”

Steven Lam, Bloomberg Intelligence

For the full article click here

Following a meeting this month between top diplomats from both sides, China said it plans to accelerate purchases of American farm goods, according to people familiar with the matter.

China has “actually picked up their game, it’s not just commodity buying, although that’s picking up too,” President Trump’s top economic adviser Larry Kudlow said in Fox Business interview last week. “The trade deal is on, no question about it,” Kudlow said.

The phase-one agreement says that official data from both China and the U.S. will be used to determine whether promises have been met.

“What matters is the marginal progress rather than absolute percentage,” said Tommy Xie, an economist at Oversea Chinese Banking Corp in Singapore. The latter “is lagging due to the disruption from Covid-19.”

— With assistance by Molly Dai, and Miao Han

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