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    China Business
     Apr 19, 2006
China-India trade grows amid friction

BEIJING - Trade between China and India is growing so quickly that China is expected to supplant the US as India's single largest trading partner within just a few years, analysts say. But areas of conflict within the growing relationship remain, including a demand from China that India grant it "market economy" status, and recently failed negotiations between the two states over a new long-term contract for iron ore.

China to overtake US as top Indian trade partner
China will likely emerge as India's largest trading partner, overtaking the United States within a few years, with two-way

trade hitting US$100 billion in the near future, predicts a senior Indian businessman.

Saroj Kumar Poddar, president of the Federation of Indian Chambers of Commerce and Industry (FICCI), said on Monday in Beijing that "tremendous potential" exists with regard to trade between the world's two fastest-growing economies. Trade between China and India last year hit a record of $18.7 billion, jumping 38% year-on-year.

If the growth is sustained, the bilateral trade could soon overtake Indo-US trade, which is hovering around $30 billion, said Poddar, who is leading a FICCI delegation of Indian executives in China this week.

But Poddar said that to carry on the robust growth, it is crucial to diversify the Indian export basket from primary products to manufactured items and processed products. India's exports to China now are largely restricted to primary and resource-based products, such as iron-ore exports, which constitute more than half of India's total exports to China.

"One of my tasks this time in China is trying to find ways to diversify the export basket, especially [by] increasing the proportion of high-value-added products," Poddar told China Daily.
This week's visit by the FICCI delegation, which is composed of a dozen representatives from modern Indian industries, is regarded as a crucial step for the sustainable long-term growth of Sino-Indian trade. Poddar said the delegation members come from a wide range of industries, including fertilizer, energy, food-processing, petrochemicals, textile and tobacco sectors.

"We have diversified interests and are looking for opportunities in different fields," Poddar said, adding that the delegation would visit Xian, capital of northwestern China's Shaanxi province, and Shanghai, exchanging views with local business people on the Chinese economy.

Poddar said India and China, dubbed the "double engines" of economic development in Asia, would further benefit if they had a closer relationship with each other.

"The two countries have many complementary aspects and we can learn from each other," he said. "China's development depends highly on foreign trade and investment, while India mainly lies on the growth of domestic enterprises. Each of us can draw experience from the other."

Poddar called it "very natural" for the two populous countries to be rivals in the world's economic arena. "Even Indian companies themselves are competing [against] one another. Competition makes us have the best Chinese enterprises and the best Indian enterprises."

When talking about the feasibility of reaching a free-trade agreement (FTA) between India and China, Poddar said it would happen in the future, but the idea is still premature for now. "We need to understand each other better before such an agreement is reached. It takes time."

China demands 'market economy' status from India
China's leading trade body on Monday demanded early Indian action to grant "market economy" status to the communist giant, the world's third-largest trading nation, and additionally called for the opening up of India's retail sector, according to the Press Trust of India (PTI) news agency.

"India should [seriously consider recognizing] the market-economy status of China to further the business relationship between the two countries," said Wang Jinzhen, the assistant chairman of the China Council for the Promotion of International Trade (CCPIT).

"I can tell you that 95% of the commodities in China are regulated by ... market forces without any intervention by the government," Wang said while addressing a chief executive officers' business summit in Beijing, organized jointly by the FICCI and CCPIT.

"Chinese enterprises are responsible for their gains and losses themselves without financial support from the government. Normally, they cannot buy or even export lower than their cost. This is the fact in China right now," he said.

India has not yet granted market-economy status to China, which became a full-fledged member of the World Trade Organization (WTO) in 2001, he said, while noting that nearly 50 countries, including members of the Association of Southeast Asian Nations (ASEAN) have recognized China as a market economy. Other countries and regions, such as the United States and the European Union, also have not granted market-economy status to China.

Qingdao iron ore talks fail
China and India failed to reach a long-term agreement on the supply of iron ore at the Sino-India Iron Ore Summit held recently in Qingdao, a coastal city in eastern China's Shandong province.

At the summit, Luo Bingsheng, deputy director and secretary general of the China Iron and Steel Association, said the iron-ore trade between China and India should be established on the basis of long-term and stable cooperation, taking long-term contracts as the major trade mode.

Luo said that the two sides should make common efforts to strive for a globally unified open price and long-term contract. As a first step, he suggested, mining firms, steelmakers and middlemen could sign long-term contracts.

(Asia Pulse/XIC/PTI)

China could overtake US's India trade (Apr 15, '06)

China willing, India shy (Apr 14, '05)

India, China unite with flying colors (Mar 31, '05)

China, India move closer in trade (Feb 11, '05)

China, India: Difference in the details (Apr 30, '04)


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