At his spinning mill in Tamil Nadu, 64-year-old Thirunavkarsu has observed a marked slowdown in operations. The viscose yarn produced at his facility, a material widely used in woven garments, is piling up in storage. Orders from domestic factories have decreased by nearly 40% over the past month. The primary reason behind this downturn is a surge in cheaper Chinese imports. These viscose yarn imports are now priced 15 rupees less per kilo, undercutting Indian producers and saturating Indian ports.
The development is a ripple effect of the US imposing tariffs as high as 145% on Chinese imports. In response, Chinese manufacturers are now targeting other markets, including India, leading to significant disruptions for local businesses. Indian textile producers argue they are bearing the brunt of these international trade tensions as Chinese yarn floods critical production zones.
Although China remains the world’s top producer of viscose yarn, India has traditionally relied on domestic production to meet its own needs, only turning to imports to cover shortfalls. But with the current price war, local mill operators like Thirunavkarsu feel outmatched. “We can’t match these rates. Our raw material is not as cheap,” he lamented.
Jagadesh Chandran, who represents the South India Spinners Association, highlighted the issue further. He told the BBC that close to 50 small spinning mills located in Pallipalayam, Karur, and Tirupur in southern India are currently “slowing production.” Many of these mills fear they may have to scale down even further if the situation remains unresolved.
In an effort to calm concerns, China’s Ambassador to India, Xu Feihong, assured that his country does not intend to destabilize foreign markets. He stated that China hopes to increase its imports of quality Indian goods. “We will not engage in market dumping or cut-throat competition, nor will we disrupt other countries’ industries and economic development,” Xu wrote in an opinion piece for the Indian Express newspaper.
Nevertheless, concerns are mounting across various sectors in India, not just textiles. As Asia’s largest economy and the world’s leading exporter of industrial goods—ranging from chemicals and metals to rare minerals—China’s outreach has extended well beyond yarn. Although some Chinese exports such as pharmaceuticals, semiconductor chips, laptops, and smartphones have been spared from US tariffs, many other goods are now seeking new markets, with India being a prime target.
According to Japanese brokerage firm Nomura, this influx could cause major disruptions in Asia’s emerging economies. The firm’s earlier research found that China was already pushing cheap goods into global markets even before Donald Trump returned to office in early 2024.
This concern is reflected in the record number of investigations into unfair Chinese trade practices. Data from the World Trade Organization (WTO) indicates that in 2024 alone, nearly 200 complaints were filed against China. India filed 37 of these, more than in any previous year.
India, already heavily reliant on Chinese raw materials and semi-finished goods, is particularly vulnerable. Its trade deficit with China has now ballooned to $100 billion. In March alone, imports surged by 25%, driven largely by electronics, solar cells, and batteries.
In response, India’s trade ministry has formed a dedicated committee to monitor the inflow of cheap Chinese goods. This committee, along with a quasi-judicial arm, is investigating imports across various sectors, including viscose yarn.
The Indian government has also imposed a 12% safeguard duty on specific steel imports, primarily targeting low-cost shipments from China. These imports were undercutting local steel mills and forcing them to scale back production.
Despite these protective measures and the government’s high-profile “Make in India” campaign, the country has struggled to wean itself off Chinese imports. Even during periods of heightened border tension with China post-2020, Indian imports continued to climb.
Trade expert Biswajit Dhar points to structural issues. He believes that initiatives like production-linked incentives (PLIs), aimed at turning India into a global manufacturing hub, have seen only “limited success.” According to Dhar, India still depends significantly on Chinese intermediate goods to manufacture finished products.
This reliance is evident in sectors like electronics. Even as multinational corporations like Apple shift assembly lines to India, the country still relies heavily on Chinese components for manufacturing phones. Consequently, imports in this sector have soared, further widening the trade gap.
Ajay Srivastava, founder of the Global Trade Research Initiative (GTRI), called India’s growing trade deficit a “worrying story.” Despite a weaker rupee, which should typically benefit exporters, India’s shipments to China have fallen below 2014 levels. “This isn’t just a trade imbalance. It’s a structural warning. Our industrial growth, including through PLI (production linked incentive) schemes, is fuelling imports, not building domestic depth,” Srivastava wrote in a social media post. He emphasized, “We can’t bridge this deficit without bridging our competitiveness gap.”
India must act swiftly to capitalize on the opportunity presented by the current US-China trade tensions. There’s urgency, too, because countries experiencing a surge in imports from China typically undergo a sharp decline in manufacturing output, as highlighted by Nomura.
Akash Prakash of Amansa Capital echoed this sentiment. In a column for the Business Standard, he wrote that a major reason Indian private firms were hesitant to invest was the fear of being “swamped by China.” This observation aligns with a recent study conducted by ratings agency Icra, which reached similar conclusions.
As concerns about Chinese dumping spread globally, regions like the European Union are also pressing Beijing for assurances that their markets won’t be overrun. This growing international pressure is compelling China to seek alternative trade partners outside the US with greater urgency.
Dhar believes that China is attempting to reshape the global narrative. “It is trying to come clean amidst increased scrutiny,” he said. Yet, despite China’s reassurances, Dhar argues that India should use the current diplomatic thaw with China to assert its position on anti-dumping measures more clearly. “This is an issue that India must flag, like most of the Western countries have,” he urged.
In summary, the situation has underscored India’s vulnerability to global trade shifts and its ongoing reliance on Chinese imports. With domestic industries like textiles under pressure and structural issues hampering the success of industrial policy, experts say the country must address these challenges decisively. Otherwise, the current flood of cheap Chinese goods could stall India’s manufacturing ambitions at a crucial juncture.