India unlikely to give China market economy status

Written by Arun S | New Delhi | Updated: Sep 16 2014, 07:18am hrs
Xi JinpingAhead of Xi Jinping?s visit to India, New Delhi has indicated that it was not inclined to grant China the coveted ?full-fledged market economy? status. (Reuters)
Ahead of Chinese President Xi Jinpings visit to India beginning Wednesday, New Delhi has indicated that it was not inclined to grant China the coveted full-fledged market economy status in the near future.

Also, though China is keen to make huge investments, especially in industrial parks, railways, telecom and infrastructure, India is unlikely to considerably relax the security norms for any of these investments.

For not granting market economy status, New Delhi cites factors such as China's lack of transparency in minimum wages, property rights, huge government subsidies and loan rates, besides alleged absence of proper business accounting standards/principles in the country. Lack of a 'free market' and significant government interference in the market are also concerns.

Discussions that we are having now is with the understanding that we (India) will not recognise them as a market economy in the near future. In the telecom sector, they (Chinese companies) agreed to reveal the 'source code' for their systems to assure that there is no security threat. Many foreign companies do not offer to reveal source code. But we will deal with it on a case-to-case basis. There could, however, be no relaxation of security norms for any Chinese investment, an official said.

China considers grant of the market economy status as a pre-requisite for greater trade and investment ties with countries. Though 60-odd countries, including Brazil, have recognised China as a market economy, the remaining, including India, the US and the European Union, have not done so despite pressure and persistent demands from Chinese authorities.

Due to the Chinese economy having a strong government influence, the members of the World Trade Organisation (WTO), as per interpretations of Chinas WTO accession protocol, can till 2016 treat China as a non-market economy for the purpose of anti-dumping probe.