Last week, a hornet’s nest was stirred when the US-China joint statement issued at the end of the US President, Mr Barack Obama’s visit to China hinted at China mediating between India and Pakistan. Expectedly, the statement was criticised widely in India. Mr Obama’s visit to China came on the heels of verbal exchanges between India and China, threatening the existing bilateral ties.

The Ficci President, Mr Harsh Pati Singhania, had expressed the fear that business and economic relations could be affected by this.

 

PRANAB’S WISDOM

Despite all these verbal exchanges, the Finance Minister, Mr Pranab Mukherjee, went on record to say any differences between the two countries could be solved through dialogue. Conceding that there were differences on both sides, he said: “We have agreed to resolve them through dialogue.”

According to him, India does not visualise any conflict on border issues with China. He said bilateral trade between the two countries is expanding fast. “We have institutional arrangements. There is the Indo-China Joint Commission. It meets regularly... any dispute could be resolved,” he said.

TRADE

It does not make “economic sense” for India and China to scale up aggression. Sino-Indian bilateral trade has been witnessing over 30 per cent growth in the last few years.

Last year, it increased 34 per cent to $51.8 billion. Exports to China increased 39 per cent to $20.3 billion, while imports rose 31 per cent to $31.5 billion.

While India’s major exports to China include iron ore, cotton, oil-meal, organic chemicals, copper and precious stones, China exports machinery, chemicals, iron and steel, steel products and agricultural products such as apples and pears.

In fact, China uses the Indian iron ore spot market to soften miners in Brazil and Australia when they decide to hike prices of the ore. India has also emerged as the biggest cotton supplier to China.

On the other hand, Chinese machinery comes at a competitive price for Indian industry that is looking to cut capital costs. Fast-moving consumer goods from that country too are gaining acceptance in India.

Chinese investments in India have begun to rise. In 2008, they totalled $49.1 million against $16 million in 2007. Cumulatively,

INVESTMENTS

Chinese investments in India stood at $91.1 million till December 2008, according to the Chinese Ministry of Commerce data. China has also cumulatively invested $24.4 billion in contract projects, with the value rising to $12.9 million in 2008 against $4.56 million in 2007.

India made investments in 92 Chinese project totalling $257 million in 2008 against $34 million in 78 projects the previous year. Cumulative investments from India till end-2008 were $898 million in 426 projects.

The turnover from these investments for both the countries runs into billions of dollars every year. Indian companies operate in various sectors in China, ranging from pharmaceuticals, refractories, automobiles, wind energy and banking to information technology and information technology-related services.

Companies across borders

Over 100 companies, including TCS, Infosys, Reliance Industries, Mahindra Satyam, Aptech, NIIT, Aurobindo Pharma, Dr Reddy’s Labs, Orchid Pharmaceuticals, Sundram Fastners, Essel Packaging, Suzlon Energy, and major banks such as SBI, Canara Bank and ICICI are present in China. Chinese state-owned firms such as Sinosteel, Baoshan Iron and Steel, China Donggang International, Huawei Technologies, ZTE, TCL and Haier operate in India.

In fact, companies such as Huawei plan to expand their presence in India by taking part in tenders floated by telecom companies, including BSNL. Some of the Chinese equipment manufacturers are eyeing the supply of equipment to power projects.

Though China is one of the favourite whipping boys for the anti-dumping investigators in India, it has not led to any serious differences in bilateral ties. India and China stand to gain a lot, particularly on the economic front, by maintaining a cordial relationship. As long as both the nations look to make economic gains, they may only bark, but not bite.