China and India Resolve to Increase Bilateral Trade and Investment

As the two fastest growing economies in the world, China and India have agreed to establish a working group to liaise on all trade related matters and have also agreed to collaborate on a five-year economic co-operation plan. At the ninth session of the India-China meetings on economic relations, science, technology and trade held in China’s capital city earlier this week, Beijing also assured New Delhi that the issue of bi-lateral trade being weighted in China’s favor would be addressed by allowing India greater market access in agriculture, pharmaceuticals and information technology (IT), while at the same time raising the issue of the increase in customs duties imposed by India on imports of power equipment from China.

In a joint press conference attended by the Minister of the Chinese Ministry of Commerce Chen Deming and India’s Commerce and Industry Minister Anand Sharma, the latter noted that India had been assured of ‘understanding and support’ with regard to addressing trade imbalances between the two countries. Bilateral trade in 2011-12 stood at $75.45 billion, and while India’s exports to China were valued at $17.90 billion, imports reached $57.55 billion. Non-ferrous metals and iron ore typically account for up to 50 percent of India’s exports to China.

With regard to India’s import duties on power equipment from China, Minister Sharma reassured Minister Chan that all the large projects planned for India’s 12th five-year plan, which will run from 2012-13 to 2016-17, would be exempt from paying the duties in question. Regarding investments, it was agreed that both countries need work on raising these from the current level of China’s investments in India which stands at $580 million and Indian investments in China which touched $460 million. The feasibility of a free trade agreement between China and India will likely be on future meeting agendas.

New national investment and manufacturing zones are planned in India to provide employment for the increasing number of young people entering the job market. Sharma noted that China has been invited to support one or more of these new projects, describing the response to the investment proposal as being ‘positive and encouraging’.

Relations between the two countries have long been strained with three major border disputes taking place in modern times – the Sino-Indian War of 1962, the Chola incident of 1967 and the Sino-Indian skirmish of 1987. While diplomatic and economic ties were restored in the late 1980s, some disputes over territory remain unresolved.