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India should resist the temptation of resorting to "protectionism" to shield local mobile phone makers against Chinese smartphone firms, China's official media said today warning that Beijing could take countermeasures against any such move.
The Indian firms are seeking government action to ease the pain of their defeat to Chinese rivals, an article in the state-run Global Times said referring to pleas by the mobile phone makers that government should raise supplementary levies against handsets from Chinese companies.
"As for China, the Chinese government is unlikely to sit idly while India harms the interests of Chinese companies. We cannot rule out the possibility that China will take countermeasures if India takes unfair measures to protect its home grown companies from international competition," the article said.
"Beijing and New Delhi should avoid a potential trade war and enhance economic cooperation in order to strengthen bilateral ties between the two countries," it said.
With the 'Make in India' campaign having been initiated by the Modi government, India is in a period of rapidly developing industrialisation, and the question of how to effectively protect nascent home grown industries is a tough task faced by local governments, the article said.
Although protecting local brands from intense international competition can buy some time for the expansion of home grown industries, such moves will reduce local companies' competitiveness in the long-run and build an inefficient industrial system, it said.
"The Modi government has ramped up efforts in recent years to make India a more attractive investment destination, for instance by reforming its tax structure," it said.
"However, potential protectionist measures could overshadow the effects of the government's plan to improve the investment climate. China is currently a major source of investment in India, and the country may not be able to complete its industrialisation and modernisation without help from foreign investors," it said.
Additionally, Chinese telecom equipment maker Huawei Technologies Co and some other Chinese smartphone vendors have announced that they will establish production facilities in India to increase their local assembly of handsets in the country, meaning that supplementary levies against products from Chinese companies would hurt the interests of Indian employees working for the Chinese firms, it said.