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Thursday, December 16, 2010

Trade relations are the only way to ease tension ....

India and China are worst of the enemies with border disputes and arms race intensifying the tensions. But both the countries have mutual trade worth $60 billion a year which they plan to boost to $100 billion. The Chinese PM Wen’s charm offensive during his current India visit aims at capturing, not the territory, but maximum slice of its market. Indian aims are no different.

Why is it important to have trade relations between the adversaries? It eases the tension, it raises the stake in each other’s stability and well-being and it is the first step for a tension-free relations. India and China have bitter memories of the past, their disputes are of the nature and scale that they should have fought many wars in the last twenty five years or so but they have put their disputes on the back-burner, only to be resolved with the passage of time. They have focused on boosting economic ties in which they seem to be making progress. Both are trying to become economic and military power, they have developed their military machines to advance their hegemonic agenda in the region but they have not lost sight of the importance of smooth economic ties.

According to media reports, Wen’s visit, the first by a Chinese premier to India in five years, has looked carefully choreographed to improve ties between two countries which, between them, are home to more than a third of the world’s population. Arriving with more than 300 business leaders on Wednesday, Wen said that India and China were not rivals and there was room in the world for both powers to develop. The two sides said they were aiming to raise bilateral trade to $100 billion by 2015 from $60 billion in 2010, partly driven by greater access for Indian firms to Chinese markets. “The two sides agreed to take measure to promote greater Indian exports to China with a view to reduce India’s trade deficit,” the joint statement said. 

India and China are the world’s fastest-growing major economies. But India fears China wants to curtail its rise as a global power, and is concerned about Beijing’s close security ties with Pakistan where Wen arrives on Friday on the second part of his trip. The joint statement outlined Beijing’s support for United Nations Security Council Resolution 1267, which calls for sanctions against the Lakshar-e-Taiba militant group that New Delhi blames for the attack and accuses Pakistan of harbouring. India also fears China wants to restrict its global reach by possibly opposing its bid for a permanent U.N. Security Council seat or encircling the Indian Ocean region with massive projects from Pakistan to Myanmar. 

China reiterated its support for India’s aspirations to play a greater role in the Security Council, but it stopped short of expressing full backing for India. Long wary of Washington’s influence in South Asia, Beijing’s overtures toward New Delhi come just a little over a month after U.S. President Barack Obama’s trip to India, during which he endorsed India’s long-held demand for a permanent seat. Wen’s avuncular style contrasts sharply with that of Singh, who is seen as shy and lacking charisma. Singh is also engulfed in what may be India’s biggest corruption scandal, threatening the stability of the Congress party-led coalition government. Wen announced on Wednesday that Chinese companies would sign deals with Indian firms worth more than $16 billion ranging from power equipment to telecoms gear, underscoring business was driving the relationship, for now. 

Chinese banks will provide the bulk of lending for these deals. Although both India and China have said they are exploring a possible free-trade agreement, no real progress is expected on that front as there is some skepticism in New Delhi that Beijing may only want to dump cheap manufactured goods on India’s booming $1.3 trillion economy. China is now India’s largest trade partner and two-way trade is expected to reach $60 billion in 2010/11 compared with a target of $40 billion. Trade was $13.6 billion in 2004/05 and $3 billion in 2001/02, illustrating the phenomenal growth rate. Still, total investment by China in India is small, amounting to only $221 million in 2009, representing about 0.1 percent of China’s total outward foreign direct investment in that year. That figure is seven times less than what China has invested in Pakistan, according to official data.

While the two are often lumped together as emerging world powers, China’s GDP is four times bigger than India’s and its infrastructure outshines India’s dilapidated roads and ports, a factor that makes New Delhi wary of Beijing’s growing might.

Can India and Pakistan, in spite of tensions, boost their trade ties. They have to fight a common enemy killing them day in and day out; and that is poverty?

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