Notwithstanding steps announced by India and China to reduce their trade deficit during premier Li Keqiang's ongoing visit, Chinese analysts believe the imbalance is likely to keep growing in the short term due to structural problems.
"India's trade deficit with China is
expanding. In the short term, that's hard to resolve. The imbalance is mainly because India has limited exports to China, while Chinese manufactured goods have a competitive advantage in the Indian market," Liu Xiaoxue, a researcher on South Asian studies at the Chinese Academy of Social Sciences said.
The slower growth pace in China in recent years, together with overcapacity in the steel and iron sectors and the Chinese government's tightening policies in the real estate sector, reduced demand for Indian raw materials — mainly iron ore and iron sand, which account for the bulk of Indian exports to China.
That's the reason behind India's increasing trade deficit with China, Liu told China Daily.
In the first four months of the year, Sino-India trade declined 6.2% year-on-year. Chinese exports increased 3.6% and imports decreased 24%, yielding a trade surplus of $8.83 billion, according to China's General Administration of Customs.
In 2012, bilateral trade dropped 10.1%, and China's exports went down 5.7% while its imports plunged 19.6%, leaving a trade surplus of $28.87 billion, compared with $27.17 billion in 2011 and $20.08 billion in 2010, according to customs data.
Indian officials say the iron ore exports from India also fell due to investigations into allegations of corrupt practices in mine sector.
"The trade imbalance is rooted in India's trade structure. India's trade deficit with China will not be reversed in the foreseeable future. Any change depends on whether India can export products that meet the demand of the Chinese market," Hu Shisheng, director of the Institute of South and Southeast Asian and Oceanian Studies at the China Institutes of Contemporary International Relations said.
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