China Covid surge stokes supply fears among Indian traders

Exports, which have been sluggish, could also take a hit as demand from China may plunge, adding to weakness in many developed markets, traders said.

“Engineering goods exports to China dropped 40% in November. China continues to grapple with rising Covid-19 cases and a growing real estate crisis, leading to low demand,” said Arun Kumar Garodia, chairman of the Engineering Export Promotion Council India.

Export of engineering goods to China dropped 58.2% to $1.74 billion in April-November of the ongoing fiscal year (FY23) compared to $4.18 billion in year-ago period.

“Many chemical factories in and around Shanghai are operating at 30-40% capacity because of labour shortages. We are watching how the situation evolves,” said Ajay Kadakia, chairman of Mumbai-based trading house Vivil Exports, which imports dyestuff from China.

India’s imports from China in April-October were worth $60.27 billion, while overall exports were $8.77 billion.

India’s exports to China are falling as there is already a slowdown in the Chinese economy, said Ajay Sahai, director-general, Federation of Indian Export Organisations.

“There is no clarity as of now but if the situation there prolongs for a month, then there could be an impact on our trade with China,” Sahai said.

The spread of Covid-19 and the upcoming Chinese New Year in the second half of January could lead to further workforce shortages.

“There is 40% absenteeism in our factory in China. There is fear, and people are not going out,” said Sharad Kumar Saraf, founder-chairman of Technocraft Industries India, an exporter of engineering goods and textiles.

The company’s unit in Quanjiao (in Chuzhou city, Anhui province), with a revenue of ₹250-300 crore, manufactures steel scaffolding systems for the Chinese market.

“There was not much disruption in supply of APIs from China during the earlier waves as they never restricted exports. We are in wait and watch mode now,” a representative of the pharmaceutical industry said.

Exporters said India must look at ways to export more food products to China amid the ongoing uncertainty.

“We don’t expect an improvement in exports to China as 70% of India’s exports are raw material. We must look at ways to increase shipments of broken rice, marine products, tea and tobacco to China because the demand for these products is largely stable,” said an industry representative.