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RANJIT BHUSHAN | New Delhi, May 25, 2013 18:00
Tags : China | Ladakh | Li Keiqang | Manmohan Singh | Bilateral trade | Getting China and India right |

For those concerned about China crossing the line in Ladakh, do also consider the big dragon’s multi-splendoured talents in spreading its gargantuan business and economic wings in this country in a way that could hardly have been taught at any management school.

China is one of India’s biggest trading partners. Commerce between the two countries has flourished over the past decade, with bilateral trade increasing 20-fold in 2010. It is expected to reach the $100 billion mark by 2015.

But India’s gripe, best expressed in Manmohan Singh’s meetings with Chinese premier Li Keiqang last week in Delhi, is the unfavourable Balance of trade, currently pitched heavily in favour of the Peoples’ Republic. Her growing trade deficit with China—an estimated $27 billion in 2011—has become a source of concern in New Delhi. Bilateral trade between the two Asian giants grew to $73 billion in 2011, up from $63 billion in 2010 and less than $3 billion in 2000 – amounting to a Chinese surplus of $23.9 billion last year.

Yet some experts believe that public debate on this imbalance is largely `misguided’. Write Anil Gupta and Hayan Wang, co-authors of `Getting China and India right’, ``The deficit with China accounts for less than 20 percent of the country’s total trade deficit, with India importing Made-in-China toys, consumer electronics, telecommunications gear, and power equipment. More damaging to India’s trade numbers, though, is reliance on imported oil, gas, and coal from such places as Saudi Arabia, Iran, Australia, and Indonesia. Energy accounts for more than 65 percent of the trade deficit. In sum, the primary trade challenge for India is rooted in its rapidly growing need for energy coupled with the rapidly increasing price of energy resources.’’

According to them, ``Children’s toys may be a highly visible symbol of China’s seeming invasion of India. They account for less than 1 percent, however, of India’s imports from China. Of China’s total 2010 exports of more than $40 billion to India, more than 60 percent came from capital goods, such as electrical machinery, nuclear reactors, boilers, iron and steel products, ships and boats, and project goods.’’

Despite the large commercial delegation which accompanied premier LI to India, only one major business pact was signed, a $1 billion debt-for-fuel deal between China and Essar Energy PLC Lt, part of India's Essar group. Other smaller pacts added a total $500 million in deals.

Just how political and business lines are getting crossed is best revealed in growing business engagements between the two countries. The $8.29 billion order that India’s Reliance Power placed in 2010 with Shanghai Electric to supply equipment that would generate nearly 24 GW of electricity annually, equals about a fifth of India’s total electricity production. The agreement included a financing deal with a consortium of Chinese banks, such as Bank of China and China Development Bank, providing low-cost financing as well. Experts believe that if Reliance had bought this equipment from non-Chinese suppliers, the price would have been a few billion dollars higher and the company would have faced difficulties figuring out how to pay for the purchase.
Which is why China’s upping the ante on the border a few days before Li’s arrival remains a bit of a mystery. But what’s a little incursion in remote Ladakh which is likely to bother a fellow Indian conducting trillion dollar deals between Mumbai and Shanghai?

(Disclaimer: The views expressed in the blog are that of the author and does not necessarily reflect the editorial policy of The Sunday Indian)
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Issue Dated: Feb 5, 2017