Catching up with China

IN the Indo-China story of bilateral trade the balance could finally tip in favour of India. India8217;s bilateral trade with China has bee...

IN the Indo-China story of bilateral trade the balance could finally tip in favour of India. India8217;s bilateral trade with China has been growing swiftly8212;the total value stood at 7 billion in 20048212;and that is excluding Hong Kong. In the Nineties, the trade tilted favourably towards China. But post-2000 India has some some catching up.

India8217;s exports to China are now growing at a much faster rate than imports, and her balance of trade is stabilising. For instance, the growth in imports from China between 1997 to 2000 stood at 70 per cent and went up to 171 per cent in the period 2001-2005. Growth in exports to China meanwhile have jumped from 12 per cent in 1997 to 2000 to 256 per cent in the period 2001-2005.

While India8217;s exports in the 1997-2000 period were sipping, they are now increasing swiftly, in fact outpacing its imports. At this rate, India8217;s trade deficit with China could well turn into a surplus by 2010.

Chinese exports to India have been dominated by electronic products, machinery and organic chemicals, while iron, steel and iron ore make up India8217;s exports see box.

The trade-off
Indiarsquo;s exports to China 2004
All figures in US million
8226; Iron ores and concentrates: 1,548
8226; Ores, slag and ash: 869
Iron and steel: 605
Plastics: 267
Organic chemicals: 222

Imports from China 2004
8226; Electrical machinery and equipment: 1,185
8226; Transmission apparatus: 656
8226; Organic chemicals: 645
8226; Nuclear reactors, boilers, machinery: 495
8226; Cellular telephone: 480

Early this year, the two countries signed an agreement aimed at resolving border disputes and spoke about boosting bilateral trade to 20 billion by 2008 and to 30 billion by 2010. The Indian figure of 7 billion excludes the trade with China that passes through Hong Kong, which accounts for almost half of all of China8217;s trade.

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In fact, according to the latest Chinese customs statistics, two-way trade with India last year totalled 13.6 billion, making China India8217;s second largest trade partner. Considering the fact that in January to August of this year alone, the total value of trade touched 12.2 billion, this target doesn8217;t seem over ambitious.

But Indian companies are still wary of opening the market to Chinese goods. Fearing their aggressive marketing, they tend to overlook the benefits that co-operation with China could fetch.