Even as emerging markets like India and Brazil join the United States in pushing China to appreciate its currency, Indian manufacturers have reiterated that the undervalued yuan vis-?-vis the dollar is marring their competitiveness in world markets.
China?s artificially undervalued currency, pegged at 6.81 to the dollar as on Tuesday, gives the country?s exporters an undue advantage as they can price their products cheaper and still make a profit. With India already a lucrative market for the world owing to its high GDP growth, the threat of cheap Chinese goods continues to create disruptions in the Indian manufacturing scene, according to industry players. R Mukundan, managing director, Tata Chemicals, told FE, ?The world has an overcapacity of most materials and so much of these will flow into the Indian market. The question is whether we should allow this to harm the interests of efficient producers in India.? From goods like steel and paper to a product like soda ash, which goes into the making of detergents and glass, China enjoys an undue advantage.
For instance, from April 2009 to March 2010 alone, a total of 2.5 million tonne of steel, including from China, has arrived at the Mumbai Port, while India?s entire crude steel production was 56.6 million tonne (mt) in 2009. In 2009, China produced 567.8 mt of steel, which is 47% of the world?s total crude steel production.
India, on the other hand, continues to be a net importer of the commodity.
Seshagiri Rao, joint MD and group CFO, JSW Steel, told FE in a recent interview, ?In the first 11 months of FY2010, imports have gone up by 22%, at 6.6 million tonne.? Exports of steel, on the other hand, have fallen. Vinod Garg, executive director-commercial, Ispat Industries, said, ?Dumping of steel is still happening here and China is also among one of them. It is a matter of concern for the steel industry.?
In the case of soda ash, the situation is even worse. Imports in 2009 were to the tune of 6 lakh tonne in a market of just 2.6 million tonne. Tata Chemicals? Mukundan said, ?What this will cause is an unnecessary disruption in the Indian manufacturing scenario and value chain.?
According to industry players, soda ash imports are almost equal to the size of a normal plant in India. So, effectively, imports have replaced an Indian plant. Tata Chemicals, the world?s second largest soda ash maker, has a capacity of 5.5 mt per annum.
Mukundan added, ?If imports continue to take place in this manner, domestic supplies will dry up in a growing market. The manufacturers of glass and detergents will have to pay a heavy price for transportation of the product over long distances.”
Chinese imports have not spared the paper industry either. Harsh Pati Singhania, managing director, JK Paper Ltd, said China has come back into the market with big economic growth.