India Intelligence Report
 

Indo-Sino Trade Boom May Eclipse Indo-US Trade

 

Commerce Minister Kamal Nath said if the 30% growth trend in Indo-Sino trade continues, it will eclipse Indo-US trade and make China India’s largest trading partner. Indo-Sino trade, valued at USD 18 billion, may reach USD 20 billion by 2007 a year ahead of projections. Indo-US trade is valued at USD 21 billion. Currently, China accounts for 20% of the world trade. 

Speaking at the Confederation of Indian Industry (CII) India-China Business Forum, China’s Commerce Minister Bo Xilai said that with the present trade trend, the value of trade between the two nations would be USD 50 billion by 2010. He said, “there is a huge demand in the Chinese market. Last year there was a 95% increase in input from India.” India sells mostly raw materials to China and there is a strong reservation in business and policy circles that the sale of raw materials—specifically high quality iron ore, about the unbridled export claiming that this policy will surrender Indian advantages to China.

 

The India-China Joint Economic Group is meeting after 6 years and China has brought a delegation of 40 officials and 42 business representatives. To boost investment flow, the two countries signed a draft agreement on investment protection and promotion. Xilai said that this agreement should spur Indian investments into China, which is less than 1% of foreign direct investment into China. He exhorted Indian business to study the Chinese domestic markets and bring in luxury and consumer goods. China says that its national savings is currently at USD 1.7 trillion and expects it to cross USD 4 trillion. 

To remove trade and investment hurdles, the two nations have decided to set up 6 task forces to study product homologation, non-tariff trade barriers, rules of origins of production and raw materials, and calibrate response to WTO negotiations. They will also set up a CEO’s Forum in 3 months to identify potential areas of investment and trade promotion.

China accuses India of creating obstacles to trade by slapping anti-dumping duties on Chinese goods and not granting “market economy” status. They say that India’s “frequent investigations” such as anti-dumping, safeguard measures, and special safeguard measures are major irritants in Indo-Sino trade and economic co-operation. They also complain of visa hurdles for Chinese companies. Recently, Indian investigative agencies advised Indian armed forces and Government companies against buying Chinese networking equipment saying that they are a major security risk to the nation. Moreover, Chinese defense policies and interactions with Pakistan is not helping matters any.