Business Today

Dancing with the dragon

Despite niggling distrust, India and China talk trade.

Print Edition: February 10, 2008

Singh and Jiabao
Singh and his counterpart Jiabao
It was Prime Minister Manmohan Singh’s first official visit to China and the communist country was at its charming best. In the three days that Singh spent in Beijing, he and his counterpart, Premier Wen Jiabao, ended up signing 11 agreements in diverse areas, including economic planning, housing, health and culture, and land management. The two premiers also promised to work towards boosting bilateral trade (in calendar 2007, China is expected to have displaced the US as India’s biggest trading partner) from $38.6 billion (Rs 1.5 lakh crore) at present, to $60 billion (2.4 lakh crore) by 2010.

But what gave the business honchos accompanying Singh from India the jitters were talks of a regional trading agreement (RTA) with China. “There are apprehensions that India might become a dumping ground for Chinese goods at the cost of the Indian manufacturing sector in case things are not spelt out,” says an official in the Commerce Ministry. Adds Srikant Kondapalli, a China expert at Jawaharlal Nehru University: “Any such RTA would be heavily loaded in favour of China and could end up further increasing India’s trade deficit with China of $10 billion (Rs 40,000 crore).”

Predictably, industry chambers are coming up with caveats that could act as barriers to a deluge of imports from China. “The RTA must include a product safety clause between the two countries,” says Anjan Roy, Senior Economist with FICCI, who has been studying China closely. “Last year, the US was flooded with Chinese products that were produced using poisonous substances like lead.” Meanwhile, the two countries have signed a protocol on tobacco and are in discussions for greater trade in fruits and vegetables produced in India. China is a big market for tobacco, and it buys from different countries. Union Commerce Minister Kamal Nath says that if India is able to supply good quality tobacco at competitive prices, then “India will get a piece of the Chinese market”.

Trade between the two countries has been surging—it jumped 53 per cent to $25 billion in calendar 2006 and then to $39 billion in 2007. “India-China trade would grow even faster if the discussions during the PM’s visit fructify in 2008,” says Nath. Industry will be keeping a close eye on the trade figures.

— Amit Mukherjee

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