The Hindu Business Line : From rivalry to partnership

The joint declaration issued by New Delhi and Beijing during the visit by the Chinese President, Mr Hu Jintao, provides one more proof of Beijing's keenness on pursuing the line of a `strategic partnership' with India instead of a policy of `great power rivalry', which marked bilateral relations since the late 1950s till around the mid-1990s. Beijing has its reasons for such a change in policy but for New Delhi the present should provide an opportunity for engaging in closer cooperation with a compatriot Asian `economic powerhouse' for maximum economic gains.

On paper at least, some progress has been made during Mr Hu's visit with 13 agreements being signed, ranging from the establishment of consulates in Kolkata and Guangzhou to an exchange programme on cooperation in education. Also signed were a protocol on phyto-sanitary requirements for the export of Indian rice to China (indicating that rice will be exported to China for the first time); an MoU on inspection of iron-ore export cargo (one of India's largest export items to China), and an agreement on bilateral investment protection and promotion which is expected to help Indian investors set up shop in China. But these accords do not amount to any substantive step to promote India-China economic ties, although New Delhi's decision to make certain visa concessions for Chinese visitors is certainly a meaningful gesture for easier trade contacts. Significantly, no decision was taken on the issue of some Chinese companies being subjected to security checks; this may be no more than an irritant but has the potential to rock bilateral ties. As for the announcement that the bilateral trade target will be $40 billion by 2010 against around $20 billion this year, it does not amount to much going by the recent rate of increase in bilateral turnover — the 2005 level of $18.7 billion was 40 per cent higher than in 2004.

The real test of a strategic improvement in India-China economic ties (from New Delhi's point of view) would lie in altering the trade pattern between the two economies — with Indian exports becoming more diversified — and by stepping up direct Indian investments in China. This will be no mean task, which is where the regional trading arrangement — in the works — will come in. Importantly, it will be useful to remember that the proposed RTA will cut both ways in that Chinese traders and investors will try their best to get the maximum advantage from the exchange. At the end of it all, it will be a test of the competitive strength of the two economies, one in which — if morning shows the day — Indian businessmen will have to strain every sinew to get the better of their Chinese counterparts.

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