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Indo-China Ties: Cooperation is the key

New Delhi, November 21, 2006

India and China have been undertaking Border Talks for the past 25 years now. With Chinese Prseident Hu Jintao's visit to India a new shell of cooperation may be discovered.Though trade between India & China has become a resounding success story so far, with Bilateral trade spiralling to US $ 24 billion in 2006 as compared to $ 17.5 in 2005, the composition of strategic ties and economic cooperation are still taking shape.

India and China are two Giants which are necessarily confrontationist in nature. Both are different in perceptions on pakistan, Nepal and Tibet.Both can within the ambit of competition also explore areas and opportunities of cooperation.

India and China must have healthy competition and not confrontation, said the Minister of State of Commerce, Mr. Jairam Ramesh, at a Roundtable on "India- China: Drivers of the World Economy" organized by the Confederation of Indian Industry (CII). "We need to change mindsets in our approach to China," he said. Acknowledging that China was a competitor in the global market, he said that India and China have also cooperated with each other in jointly securing contracts in countries like Syria, Sudan and Columbia .

Three years later Balance of Trade which was tilted in the favour of India has now shifted towards China because the Export basket from India to China is not Value added. Majority of Indian exports to China comprise raw materials and primary goods like iron ore etc; and China value adds to these and captures the world market by exporting these products with value addition. For eg India exports mint to China, and China exports mint based products to the rest of the world.

Despite a staggering graph in Trade,the bilateral investment ratio is starking. There is a huge gap between the FDI approvals and actual inflows committed by the Chinese companies. While Chinese FDI in India has been approved upto a limit of US$260 million, only US $3 million has been the actual amount of inflow of FDI from China. In comparison, India which received an approval upto US$ 150 million FDI in China has already calculated actual inflows of US$ 50 to $60 million in the Chinese market.

Both countries which are notoriously slow in fuelling a strategic dialogue have started showing signs of agreement, burying the ghosts of the past on issues of Aksai Chin, Tawang-Ho, Arunachal Pradesh and Border security concerns.Responding to restrictions on certain Chinese companies in investment in ports, telecommunication sector and in bordering states in India, Jairam Ramesh said that security agencies have raised issues in this regard which need to be tackled amicably taking a rational view from both sides.

Contrary to where India was five years ago, it has come a long way in sharing confidence with China. Unlike China, India follows the western method on IPR issues, WTO standards etc. India has a transparent system in business, China has an opaque system. For Chinese, negotiations never end, while in India they hardly begin.China believes it first needs to work on capacities, infrastructure and the demand automatically follows. In India, it is the reverse. Both the countries despite glaring differences have started coming together with a view to substantially revitalize their economies to reach a level where China will be the largest and India the third largest economy in the world.

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