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Tuesday, Dec 28, 2004

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Trading with China

IN RECENT MONTHS, India-China trade has been on a high, and estimates are that the overall figure for calendar 2004 could well cross the target of $10 billion to touch $12 billion. In 1990, the bilateral trade was just $260 million, climbing to around $1.4 billion in 1996 and to $3 billion in 2001. At least one official Indian estimate puts the trade turnover at around $20 billion by 2010. Happily India's trade surplus with China has gone up too. According to official Chinese figures, during January-October, India's exports to China were worth $6.27 billion, up 90 per cent over the same period last year, while imports at $4.56 billion being 72 per cent higher. During the 10-month period, the overall bilateral trade exchange (at $10.84 billion) 82 per cent compared to the corresponding previous period.

This rise in trade has placed India among China's top 10 trading partners, led by Japan with $138 billion worth of trade exchange in the January-October period. Clearly, for India the road ahead is a long one, but the potential is indicated by the fact that India's exports account for just about one per cent of China's total imports. China is importing from India in increasing quantities "project goods" whose exports, according to Commerce Ministry figures, have shot up in the past couple of years. The export of "railway items" has also increased substantially, suggesting that Indian products are playing an important role in the Chinese drive to develop infrastructure.

While it is certainly in India's interest to participate in the heightened economic activity in China and, in the process, reap benefits for its manufacturing and service industries, it is also imperative that New Delhi keeps a close watch on the efforts by Chinese investors to set up shop in the country, principally in the shape of joint ventures. A beginning was made in this direction by the late Murasoli Maran who, as Commerce Minister, had announced that the Government would study the export potential for Indian products vis--vis the Chinese market and also the threat posed by Chinese competition to Indian products in the domestic market. Not much has been heard of these projects since, but it would perhaps be safe to say that Indian industry has been able to well contain the Chinese export; domestic products are able to hold their own against the cheap Chinese imports which are generally wanting in quality.

But the Chinese being what they are, specially when determined to make headway in a target market, New Delhi would do well to keep "unfair" Chinese imports out of the domestic economy. Not surprisingly, China has been targeted as one of the principal offenders of the WTO regime on anti-dumping, with Indian counter measures against select Chinese exports being singled out by Beijing for some harsh comment. The Free Trade Agreement between China and Asean should also be monitored because of its potential to be used as a conduit for dumping Chinese products into India. It is not without reason that the Chinese are perceived to have become a serious economic threat in South-East and East Asia. New Delhi should keep this in mind while encouraging stronger trade links with China.

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