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China to address India's concern over trade deficit

China has agreed to send frequent buying missions to India to diversify its import basket from the country.

world Updated: Jan 14, 2008 13:09 IST
VS Chandrasekar and Raghavendra
VS Chandrasekar and Raghavendra

China has agreed to send frequent buying missions to India to diversify its import basket from the country in the backdrop of New Delhi's concern over burgeoning trade deficit which crossed $9 billion last year in Beijing's favour.

India also wants to diversify the basket of exports to China by including fruits and vegetables and sought access to its aviation and entertainment sectors and removal of technical and non-tariff barriers specifically in pharmaceutical sector, Commerce Minister Kamal Nath told reporters.

The assurance on buying missions was given to Nath by his counterpart Chen Deming during a meeting on the sidelines of Prime Minister Manmohan Singh's three-day visit.

During the parleys, Nath expressed concern over the growing trade deficit and raised many issues that were restricting Indian exports to the communist giant.

"Mr Chen clearly recognised that such a large trade imbalance is not desirable and sustainable. He offered to send buying missions to India frequently to promote a more diversified basket of exports from India to China," Nath said.

He said he had requested CII and the FICCI to host these promised missions and find suitable niche areas where India had core competency with globally competitive edge.

The Indian concerns arise from the fact that the current bilateral trade that stood at over $38 billion and the trade deficit was significantly in favour of China.

India has told China there was no China-specific restrictions on investments in India due to security concerns. Nath also took up with his counterpart many issues related to Indian businesses' access to Chinese market. Beijing's restraining policy on export of coking coal to India for the steel industry was specifically raised. The huge cess on coking coal and hiking of the price for Indian buyers was also raised. There was no such cess in 2005 and today it was as high as 25 per cent.

It was pointed out that India was supplying iron ore to China at an export duty realisation of only one per cent. "We lowered this duty at their request and it is now for the Chinese side to reciprocate in the area of coking coal. Our steel industry is asking for a 40 per cent allocation of coking coal exports for India as China had done for the EU sometime earlier," he said.

On diversification of Indian export basket, Nath said India had permission for export of only three from the agreed list of 17 fruits and vegetables and hoped that Chinese government would expedite the issues of quarantine and other required permissions to allow more exports to China.

India also raised the issue of investment in the restricted aviation and entertainment sectors in China. The Indian private airlines were ready to fly directly to China and use Chinese airports as hubs for onward flights to the US and other countries. This would stimulate people-to-people contact and strongly promote tourism between the two countries.

"I am hoping that this proposal will be accepted within the framework of a progressive aviation sector understanding signed a few years ago," he said. Nath also discussed the downlinking of Indian broadcast channels in China. India has allowed Chinese channel CCTV to downlink in India.

Similarly, China is prepared to allow Zee TV landing rights in China, he said, noting that it would help the people to know each other's culture and practices.

"I am hoping that this market access proposal will be accepted and in turn will strengthen our cultural understanding of each other. It will also open up the Chinese market for our content services, animation, gaming and special effects in the future," he said.

Nath said he took up the issue of regulatory structures in China in many areas which "sometimes tantamount to Non-Tariff barriers". Citing the case of pharmaceutical industry, he said it takes three to four years in registering a pharmaceutical drug in China which was a major hindrance to Indian exports.

"Frequent changes in rules and regulations across the trading space was another major hindrance to Indian exports and investment capabilities," Nath said and called for a focus on investment in the two nations.

"We have very little investment as of now in each other's countries," the Minister said. Nath said an India-China business summit amounted to a "global summit" because 40 per cent of the world's consumers were represented in this event.

The two nations were looking for investment not just on each other's soil but in third countries in Africa and Latin America as they have now emerged as the engines of growth, unfazed by western fears of global economic slow down and problems like sub-prime crisis in the US.

He said trade deficit between India and China per se was not a worrying factor but if it persisted and increased then it had to be addressed. The Chinese minister told the Indian Minister that they were conscious of the issue and were addressing it.

Inviting Chinese investment in Indian infrastructure, Nath said China has offered India that it could use the infrastructure created by it for the Olympics being held in Beijing in August.

This could be used for the benefit of the Commonwealth Games to be hosted in Delhi in 2010. To a question on increasing the number of points for border trade, he said the issue was being dealt with at the official level. Both India and China have exchanged the lists on the points to be increased.

China has also proposed a partnership with India in the hydro-electric sector in which India has a lot of potential. Beijiing plans to increase its dependence on renewable energy from 6 to 20 per cent. This cooperation could be extended to third countries also.