Column: China’s India inclination

May 20 2013, 02:04 IST
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Summaryhinese Premier Li Keqiang is visiting India within two months of the conclusion of the formal process of change in Chinese leadership.

Besides being an attractive market/investment destination, India can also be a strong partner at BRICS & in multilateral trade

The Chinese Premier Li Keqiang is visiting India within two months of the conclusion of the formal process of change in Chinese leadership. He would be the first Chinese Premier to visit India within such a short time of assuming office.

What is the implication of the visit?


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There is little doubt that India has gained more importance in the Chinese strategic calculus. The importance stems from primarily economic reasons. China is one of India’s topmost trade partners. Similarly, India’s economic importance has steadily increased for China. The importance is largely on account of the bilateral trade. The size of the trade has increased enormously, albeit in an unbalanced fashion. India is a huge market for Chinese products and is expected to remain so in the foreseeable future.

Indeed, from a Chinese perspective, India is a rather unique market. The large trade surplus that China runs with India is similar to the nature of the trade balance it has with Europe and North America. But it is different from China’s trade balances with Japan, South Korea, Taiwan and Southeast Asian countries like Malaysia, the Philippines and Thailand. China runs large trade deficits with these countries. These deficits are unlike its deficits with African countries like Angola, Congo, Libya and South Africa, or Latin American countries like Brazil, Chile and Peru. These latter deficits are all results of resource-driven trade with China importing large energy and primary resources from these countries. Similar deficits are seen with parts of the Middle East too, for example, Saudi Arabia and Qatar.

On the other hand, China’s deficits with countries in Northeast Asia and Southeast Asia are driven by large imports of intermediates and semi-finished products, mainly parts and components, which are assembled and beaten into shape in China, for further exports elsewhere. Among the latter destinations, India is an important market.

Over the years, and particularly the last decade, the Indian market has grown in importance for China. In entire Asia, China’s trade surplus is highest with Hong Kong followed by India. Given that Hong Kong is a special administrative region of China, the trade flows reported and recorded

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