Silk and porcelain may have given way to telecom and heavy machinery, but trade has always played a role in ties between India and China, which today represent one-third of humanity and the world’s two fastest-growing economies.
Yet with the two countries sparring every now and then on a range of issues (see below ‘Sticking points’), their common commercial interests often get obscured. These interests will hopefully get a healthy boost when representatives of both countries meet tomorrow in Beijing for the first India-China Strategic Economic Dialogue. (See at the bottom of the page ‘Let’s talk shop’).
“Both countries’ are preoccupied with transforming their domestic economies,” explained an Indian official who deals with economic ties between the two nations and declined to be named.
“As long as both understand that this goal remains a peaceful peripheral one, the elements of competition can be managed and those of congruence built upon,” he said. “Conversely, any clash can impede both the countries’ progress. Neither wants that; the costs of an escalation in tension are too high.”
India’s trade with China is likely to rise to $70 billion this year from $61.74 in 2010, and is expected to hit $100 billion by 2015. India is a bit concerned that it has a deficit that is growing. China dominates global trade, selling and buying in a month more than India does in a year, and it is the number one or number two economic partner of all big economies. India also wants Beijing to remove market barriers for its pharma and IT products.
“The Chinese are offering quality product at good prices,” said another official. “And we are importing huge machinery and exporting primary products. That can’t help the deficit.” Yet overall, there is a feeling of optimism. Many Indian companies, for example, find Chinese export loans attractive because of their low interest rates. For instance, Reliance Power has a commitment of term loans worth $1.11 billion from the Bank of China, China Development Bank and Export Import Bank of China.
A new CEO forum, to be co-chaired by the Reliance Group’s Anil Ambani is expected to meet soon and boost econmic ties. There is also mutual, if not often articulated, respect. Indians acknowledge that this country’s infrastructure needs with respect to power and telecom equipment can be met only by Chinese manufacturers.
On the flipside, the Chinese are curious about India’s capital market. “In China, everything is state-controlled so people there wonder how so many Indian companies raise funds in the capital market,” said one official. “They wonder about our IT prowess too.”