Enter the dragon
The coming together of the two Asian giants, one successful and the other struggling, may unleash new forces that could redirect the way global trade flows.india Updated: Jun 25, 2003 13:10 IST
The joint declaration signed by India and China covers two crucial issues — border disputes and and trade. And the bonhomie witnessed after the ceremony for Prime Minister Atal Bihari Vajpayee suggests that the coming together of the two Asian giants, one successful and the other struggling, may unleash new forces that could redirect the way global trade flows.
The pacts will have deeper implications for the two nations because they have all the ingredients of unlocking the economic strength of two potential powerhouses. But considering the kind of infrastructure China has built on the basis of its export zones, Indian industry must shake off its shackles quickly.
While the green light to border trade across Sikkim into China and vice versa seems to be a tacit recognition of Sikkim as part of India, it could also imply deeper access to the Indian market both in terms of investment and trade. Last year, the Indian government refused to extend the work permits of Chinese nationals working in the Bangalore-based Huawei Technologies, a fully-owned subsidiary of its China-based principal. It had its fallout in China as was evident from the red-tape welcome to leading Indian IT firms instead of the usual red-carpet welcome the Chinese accord to foreign investors.
In the context of the agreement that has just been signed in Beijing, does it mean that it is going to be business from now on? Perhaps yes, even as the political differences over specific border issues continue to simmer. Recall the diplomacy between the US and China in the Seventies and the subsequent opening up of China’s economy and the creation of special economic zones. Witness the dizzy heights Sino-US bilateral economic relations have touched today. The so-called human rights violations in China and America’s serious reservations against it have not come in the way. Commercial interest driven by a huge market has made US firms the best spokespersons for the Chinese in Washington.
The fact that India and China want to focus on economic cooperation means a new direction in cooperation. Just look at some important statistical indicators that show how much Indian industry and government will have to do to face competition from China.
Its forex reserves of $ 316 billion are nearly four times India’s $ 82 billion; its trade volume of $ 600 billion is six times India’s $ 100 billion; its FDI of $ 48 billion is 12 times India’s $ 4 billion.
While China’s forex reserves are 1.85 times its external debt, India’s current forex reserves are at least $ 20 billion lower than its external debt. China is aggressive on selling State-owned enterprises to even foreign companies, but privatisation in India is on the reverse gear. China’s rediscovery of India could also be related to its accession to WTO, which in the immediate term may mean job losses and increased competition at home. What better way to get around it than getting increased access to the Indian market?
First Published: Jun 25, 2003 01:46 IST