There were a number of important events including the joint statement of both Chinese and Indian Prime Ministers and Chinese Premier's address to the business community at two different fora including one in Mumbai on the last day of his visit. While the joint statement did lay down the broad policy agreement, it was during his addresses later on to the trade and industry that he made more significant statements on potential and possibilities of India-China co-operation, in the context of the trade turnover target of $100 billion by 2015, keeping in view the heavy tilt of balance of trade in favour of China at present.
India's Serious Trade Imbalance with China
The Joint Statement was quite forthcoming on the issue of serious trade imbalance that has marked India-China trade, so far. It says, "While striving to realize the trade turnover target of US$ 100 billion by 2015, the two countries agreed to take measures to address the issue of the trade imbalance. These include cooperation on pharmaceutical supervision including registration, stronger links between Chinese enterprises and Indian IT industry, and completion of phyto-sanitary negotiations on agro-products."
On India's trade imbalance with China, he said China "does not enjoy having a trade surplus with India". It would find ways through which Indian exporters could get greater access to the Chinese market. Trade between India and China rose from $2.09 billion in 2001-02 to $75.59 billion in 2011-12, before falling to $67.83 billion in 2012-13. Simultaneously, India's trade deficit increased from $1.08 billion in 2001-02 to $40.77 billion in 2012-13, despite 10.27 per cent contraction in total trade.
It is evident that Chinese Premier had done his home work well, before he set foot on Indian soil. He was particularly keen, even emphatic, that the combined strength of China and India could achieve new levels of prosperity. While elucidating this point later, Chinese Premier Li Keqiang said China and India could together create a new economic miracle which would prove prosperous for the world. "As China and India grow, it will lead to a strong Asia, South Asia and the world. It will be the attempt of both the countries to achieve a balanced growth. Although at present, China has a trade surplus, we want to have balanced growth. Both, China and India have already arrived at a strategic consensus and have stepped up efforts to increase political trust in order to increase the two way trade to $100 billion by 2015," Li said at the business summit, jointly organised by the Confederation of Indian Industry, Assocham and Ficci.
While the Chinese side had identified the areas of strength of India on which India could concentrate for exports, Indian side, unfortunately did not seem to be ready with any suggestions or even identification of its strengths, while seeking to restore reasonable balance of payment with China. All that India could contribute to the joint statement of both the premiers was, "The Indian side welcomed Chinese enterprises to invest in India and participate in Indias infrastructure development. Project contracting cooperation between the businesses of the two countries would be enhanced."
"Both governments are finding solutions to achieve balanced trade with more participation of business communities and thereby creating a level playing field," Li assured.
BCIM (Bangladesh, China, India and Myanmar) Corridor
The Joint Statement goes on to say "The two sides appreciated the progress made in promoting cooperation under the BCIM (Bangladesh, China, India, Myanmar) Regional Forum. Encouraged by the successful BCIM Car Rally of February 2013 between Kolkata and Kunming, the two sides agreed to consult the other parties with a view to establishing a Joint Study Group on strengthening connectivity in the BCIM region for closer economic, trade, and people-to-people linkages and to initiating the development of a BCIM Economic Corridor."
It may be pointed out that the term 'BCIM' is not as evocative as SAARC, BRICS, IBSA or even CHOGM. There are many reasons why the abbreviation BCIM should figure much more in the discourse on diplomacy and foreign policy. BCIM is in short Bangladesh-China-India-Myanmar Forum for Regional Cooperation. Sub-regional efforts, like the BCIM forum, are pivotal in making the Look East Policy (LEP) work for India's East and Northeastern regions. I feel that BCIM could certainly prove useful for India, as it would be for China, to develop that economic corridor. The biggest benefit of the LEP, as Foreign Secretary Ranjan Mathai underscored the importance of India's robust re-engagement with its eastern neighbourhood and emergence as "a significant player in the strategic dynamics" of the region.
Li said China was committed to expanding the scale of economic cooperation with India by establishing industrial parks and economic zones here. He highlighted the need to expedite the process of creating the BCIM (Bangladesh, China, India and Myanmar) corridor, which, he said, would open new avenues of economic ties and lead to greater integration of South Asia with the Association of Southeast Asian Nations.
He announced that China was willing to launch a regional trading arrangement along with India for the progress of the two countries and of South and East Asia. Li Keqiang said amid applause, "A distant relative may not be as useful as a close neighbour". He stated that India and China have more common interests than differences.
Indian Response
However, External Affairs Minister Salman Khurshid said talks on a bilateral trade pact with China would start only after India resolved the trade deficit issue with that country. "The Chinese side suggested an RTA, but we have said this RTA should come sequentially, after we arrest the issues of trade with thembecause whatever we do beyond that, we also have to take into account other countries in our neighborhood," Khurshid said.
Chinese Investment in Indian Infrastructure projects
China ranks 31st in the list of countries contributing foreign direct investment (FDI) to India. Currently, FDI inflows from China stand at $0.575 billion, while those from India to China stand at $0.898 billion, according to available data. Major Chinese companies present in India include Huawei, ZTE, Haier, Sino Steel, Lenovo, Beijing Automotive Industrial Corporation, Xindia Steel and SANY. Li stressed India and China should create new models of connectivity and strengthen trade across the border.
In his unrelenting pursuit, the Chinese Premier went slightly overboard on the issue of expansion of bilateral trade to the level of $100 billion from its present level of below $70 billion, when he went on to explain "I really wonder that despite each of our two countries having a one billion population and being emerging markets, the combined trade is below $70 billion. China is speeding up efforts to expand trade and investments in India and I know similar efforts are being made by India. I welcome Indian companies to China to make their dream true and also expect Chinese companies to make their investments in India," Li said.
The Chinese Premier pointed out that China's rich infrastructure experience can be of great help to India which is planning to invest heavily in infrastructure development.
He noted Chinese companies could take part in India's efforts to upgrade its infrastructure.
Complementarily of Indian and Chinese Strengths
"We (China and India) are huge markets, with huge potential. Our industrial structures are highly complementary. Our markets are connectedWe will remain committed to market-oriented reforms. China will provide cooperation to increase India's exports. By exploring the market, we will be able to identify competitive products in each others markets. I also urge Chinese companies to look at India more carefully. We have the ability to mitigate trade imbalance," Li said at an event organised by the Indian Council of World Affairs.
Financial sector
Another major point which the Joint Statement made is, "The two sides agreed to strengthen cooperation between their financial regulators, and support their banking institutions in setting up representative offices, branches or subsidiaries, and carrying out business activities subject to relevant laws and regulations. The two sides agree to promote cooperation between their financial institutions to provide funding for bilateral economic cooperation projects."
Our Views
I have gone through the Joint Statement made by both the Prime Ministers as also studied the speeches that the Chinese Premier made in Delhi and Mumbai. One can see a clear strategy on the part of China first to address the biggest problem of highly skewed balance of trade in favour of China, which has been the subject matter of serious concern and discussion at each of the meetings that Indian and Chinese commerce people had had, anywhere and anytime. They know that this is sitting very heavily on our heads. So, the best policy for Chinese Premier was to help (or least appear to be helping) India to correct its balance of trade figures. He identified certain sectors like IT and pharmaceuticals where Indians could explore and mount efforts to promote their exports in a big way.
On the other hand, India had nothing to suggest; perhaps we were not ready or perhaps given even a thought as to what proposals we need to place before Chinese Premier for consideration.
I think credit must again go to China to offer help to invest and develop Indian infrastructure. Our Prime Minister has been lobbying for, whenever he has gone abroad, for investment in Indian infrastructure, which according to him, is of the order of 1 trillion dollars. There has hardly been any response from anywhere including from those like the US and the EU, who were capable of extending that help to us, but for their own recent and continuing problems.
But here, a word of caution. While allowing Chinese investment in infrastructure sector, we need to exercise precaution that these areas are not the ones, which compromise with Indian security concerns, as has been brought out in some recent cases.
Third, BCIM (Bangladesh, China, India and Myanmar) corridor, which should be integral part of India's Look East Policy, on which the views of our Foreign Secretary have already been referred to earlier. We should, I feel, give a push to such a corridor, which could be in the interest of all the four countries involved in this.
There could a RTA with China included, but then, this would be fraught with the danger of China giving us much more tougher competition, under the membership of such regional alliance. But if we can safeguard our interests adequately, we could go in for the same.
Advantage China
From the Chinese point of view, the "first visit of Chinese Premier" after assuming charge, has been a resounding success. While making note of and referring to the unacceptable level of unfavourable balance of trade against India which China knows is hurting India the most - Chinese Premier has included a non-committal and non-specific agreement to have this matter looked into. China and probably India know that how difficult it would be for India to push up their exports to China to a level, where we could achieve a reasonable balance of trade. There is no clear-cut direction or announcement of a joint working group or any mechanism being set up to ensure a time-bound solution to this problem and I personally feel that over a period of time, this will come to its natural end, without giving the results it is intended to give. But, a clear target of bilateral trade of $100 billion by 2015 is something very specific, without in any way specifying whether it would still be a case of continuing highly unfavourable balance of trade for India or not.
On the question of Chinese investment in infrastructure, it is more in China's interest to keep its activities expanding to make up for the slowdown which China is facing internally. China, for quite some time, has set up capabilities that can take up infrastructure projects in a big way. With the slowdown within the country as also possibly outside China too, their spare capacities can be usefully used. Further, getting into infrastructure projects in India would give them access into areas, where they could never had an opportunity even to peek, if we take into account what skeptics have been saying.
On the third point of BCIM being activated and promoted, China too will share the advantage of increase trade traffic which is likely to be availed of by all the countries involved.
Each of the three points, which are the highlights of the Chinese Premiers visit, has gone in favour of China.
In contrast, what has India got ? Unclear and uncommitted understanding of "the two countries agreeing to take measures to address the issue of the trade imbalance", which is just not enough. Chinese help in infrastructure, if it comes true, would be of equal advantage to both the countries; perhaps more to the advantage of China so will be activation of BCIM corridor.
To sum up, it has been China all the way; whether it is in terms of understanding, appreciating and trying to (appear to be doing so) extend all possible help to correct the highly negative balance of trade; or it is offer of investment in infrastructure and or it is BCIM. All proposals came from Chinese side and we are only being appreciative, without any suggestions from our side on these and other important bilateral or multi-lateral issues. China has and will get away whatever it wanted, while appearing to be quite helpful to Indian cause, which, I personally very much doubt.
This article was originally published in the Stitch Times by Dr. H.K. Sehgal
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