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Are trade concerns softening China’s stance towards India?

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After the Trump administration came down heavily and imposed import tariffs on Chinese goods, the dragon is taking steps to insure itself against the US trade aggression. One of the steps is to look at India as a potential trade ally. Easing tensions along the border and resolving other political issues between the two countries will also help.

China is India’s largest trade partner and if US tariffs force Chinese exporters to depend more on markets outside the United States, India can be seen as a natural extension.

How does Sino India bonhomie impact you an me?

India’s economy is growing but jobs are not increasing that fast, warn the World Bank and the IMF. To simplify the complex world of trade deficit – an increase in exports leads to job creation, growing imports have the opposite effect. If the tariff barriers imposed by the US and China contract global trade it will negatively impact India’s exports, which have been rising. This can be offset say experts as there is a possibility that both US and China consider other countries, including India, for their import necessities.

Before this can happen India and China will need to have a more transparent and clearer political as well as economic roadmap. India has filed a number of anti-dumping cases in the WTO against China and has imposed import duties goods that are imported from China.

ALSO READ: PM Modi started Make in India but every product in the market is Make in China, says Rahul Gandhi

 

When Prime Minister Narendra Modi meets Chinese President Xi Jinping later this week in Wuhan for an “informal summit”, they could discuss these issues. The two premiers have met more than 5 times over last 4 years, the last being September 2017 and are scheduled to meet again in June for the Shanghai Cooperation Organization. Both leaders have strong domestic reasons to put tensions aside. China is looking at opportunities in a post US- imposed tariffs world and India is looking for growth in an election year.

ALSO READ: Modi-Xi ‘informal summit’, a milestone in Indo-China relations

Snapshot of trade ties

India bought close to $70 billion of goods from China in the first 11 months of the previous fiscal year. However, Indian exports to China were less than $12 billion. Though minuscule in front of the $375 billion trade surplus that China has with the United States, Indian government is not very happy with this trade deficit.

Electronics, machines and chemicals lead Chinese exports to India, while India sends China goods like cotton, copper and precious metal. Sino-Indian trade had already reached $65 billion by 2013, more than 10 times the figure of a decade earlier.

A close trade relationship with India would mean more opportunities for China, as India is expected to be the fastest-growing economy for the next decade. It would also keep China’s ear close to the ground as it is a little wary of India’s economic growth, especially as India is not be burdened by U.S. tariffs as they are aimed at China. Moreover because wages in China a rising while they remain static in India, the latter becomes the lower labour cost  economy.

It will be interesting to see how two of the world’s most populous nations shake hands in a changing world economic order.

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