The Hindu Business Line : `India, China must come together for mutual benefit'

INDIA and China should collaborate rather than compete in investments for mutual benefit. Both are considered the fastest growing developing economies, represent the largest markets and need to improve the living standards of their people.

This was the line adopted by speakers at a conference on `China - A India Opportunity' organised by the Confederation of Indian Industry (CII) on Friday.

Mr Wang Jinzhen, Assistant Chairman, China Council for Promotion of International Trade, said that expediting China-India free trade agreement would significantly help to increase bilateral trade.

China is the seventh largest economy in the world and India the 10th and both are the most populated. Cooperation between the two would have a positive impact, he said.

Between January and May 2005, trade between the two countries touched $7.71 billion, a 41 per cent increase over the same period last year. But the bilateral trade represents about 1 per cent of China's total import and export volume and over 8 per cent of India's import and export. Though investments have started the full potential is yet to be exploited.

Industrial cooperation is needed in information technology, energy, software, services, machinery and equipment.

Ms Hong Liang, Executive Director, Chief China Economist, Goldman Sachs (Asia) L.L.C., said that China and India along with Brazil, and Russia — representing the BRIC economies — could emerge global leaders in the coming decades provided their policies do not precipitate a major crisis.

Banking could be a bottleneck in the medium term and the concern on China's high percentage non-performing loans are not likely to have a short-term effect. Only a series of policy mistakes that lead to runaway inflation, credit crunch and mishandling of sick financial institutions could trigger a banking crisis, she said.

Unlike the crisis in other Asian countries, China is not vulnerable to external pressures because of its huge foreign exchange reserves and low external borrowings. As long as it keeps a tight rein on its bad loans and does not let them grow, China can leave its troubles behind, she said.

China can double its per capita income in five years and the resulting increase in purchasing power will have a major impact on its neighbours. Certain expenditures such as in housing, recreation, education and segments of food such as dairy and meat are gaining in market share. The changes represent an opportunity for investment in China, she said.

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