Economic Highlights

New Delhi, 17 December 2010

India-China Trade

Thaw, Issues Remain 

By Shivaji Sarkar

The visit of Chinese Premier Wen Jiabao is being touted as a successful trade deal despite a failure at the political level. However, the trade talks are not as successful as it is touted to be.

Importantly, China’s reticence on its Pakistan-centric view on terrorism and Jammu & Kashmir, treating Arunachal as southern Tibet has cast its reflection on the trade ties as well.

Jiabao has not demonstrated his willingness to create bonhomie. Rather his entire effort was to ruffle the feathers to show that his country is the big brother and the small one has to tow its line. Since diplomacy has to be matched with diplomacy, Indian stand on Tibet was not a vocal statement for establishing the rights of the people who were historically a nation independent of China.

The euphoria created at the official level on trade relations should also have conveyed New Delhi's reservations. In fact, India's enthusiasm in this sphere too was not matched by a response from China. The much-touted $ 100 billion bilateral trade goal by 2015 runs virtually counter to the current pace of growth. Does China want to limit trade relations?

Apparently so. This is the lowest target fixed by the two countries. The bilateral trade is set to touch $ 60 billion by the end of this month, marking the year end. Trade between the two countries has been increasing at 43 per cent every year since 2005, as a sequel to the visit of the then Prime Minister Atal Behari Vajpayee to Beijing. The bilateral trade then was at $ 19 billion.

The average growth target was limited to an average of 13.4 per cent a year for the next five years. At best The Chinese response to India's expectations can be said to be tepid. Beijing need not worry too. The situation is favourable to the Eastern neighbour. It has learnt from its US policy that  aggressive marketing could boost its exports without giving any concession to even a powerful country. The US today, rues the Chinese market aggression along-with its about 4 4 trillion reserves in US dollar securities. Washington fears that Beijing could any day pull the rug and upset all US moves for economic revival. What desists China is the military supremacy of the US.

In case of India, it does not fear its military capability. This is amply demonstrated in Ladakh, where everyday the People’s Liberation Army is gobbling up Indian land, forcing the locals to move out. Apart from its illegal occupation of a part of the Pakistan occupied J&K area ceded to it by Islamabad.

The Chinese moves in Sri Lanka, Bangladesh, Myanmar and Nepal are blatantly meant to encircle India not only through military might but also via aggressive business deals to keep India out of its neighbouring markets.

The Chinese policy is simple. India does not have much to export, except raw material and mineral resources. Neither does it want to open up doors for other merchandise. It is happy with its growing trade surplus of at least $ 16 billion, which is a gargantuan deficit for India.

Jiabao knows his country has nothing to lose. He knows a larger trade surplus with the US has enlarged and strengthened the economy particularly of the Han people, the real rulers of the country. Continuing with the same prescription with India, the Chinese Premier understands, would create a larger market for China as it floods India with cheaper exports on the strength of the yuan which has been kept at an artificial low coupled with cheap extortionist labour that cares a hoot for international laws. The Chinese mines are most unsafe and have the highest death roll all over the world.

It was surprising that the issue of labour laws and the value of the yuan did not form part of the talk between Prime Minister Manmohan Singh and Jiabao. Had India done that, it could have won a significant economic battle. The silence on the part of the Government on these vital issues is difficult to comprehend.

If this had been done, and the issue had been clinched even partially, it would have helped the Indian economy in a big way. Such cheap exports have severely affected its manufacturing capability in many areas like the electrical, electronic goods and machinery.

As it stands the flooding of the Indian market with cheap Chinese goods has caused problems for India’s own industry. No one knows why such issues and dumping of many Chinese goods did not find a mention in the bilateral talks.

Jiabao has cold shouldered Indian efforts at seeking greater access to the Chinese markets. India is not exporting much of finished value added goods to China. It is exporting $ 4372.63 million worth irone ore, $ 698.91 million other ores and minerals, $ 739.5 million gems and jewellery and $ 301 million other commodities. China exports $ 9388 million worth electronic goods, $ 4139 million machineries, 4 2167 million organic chemicals and $ 1211 million project goods.

It is obvious India is a low-end exporter. Its exports are paving way for the growth of China. Indian iron ore exports has helped it build high capacity steel plants that roll out rails used to build railways upto India borders in Tibet. Iron ore reserves and other mineral resources are depleting in this country. It should be used as strategic mineral. India needs to ban all iron ore exports to secure its future. It would have a telling effect on China. New Delhi needs to learn from Beijing how its threat to stop rare earth to Japan could secure the release of the captain of the trawler held by the Japanese navy.

Power equipment  manufacturers BHEL and Larsen and Toubro have complained of duty-free access of products of their Chinese rivals, eating into their market share. China, on the contrary, imposes 30 per cent import duty on all capital equipment to protect its domestic market. Why can’t India take a reciprocal step? Indian IT companies also face tremendous problems for operating in China.

With this kind of a reticent approach Jiabao’s talks of the Asian century in would in reality turn into a Chinese century that would engulf all Asian markets. India needs to call for a stronger approach in dealing with China and stop giving away its own turf. ---- INFA

(Copyright, India News and Feature Alliance)