|
What’s common between India and China? Over-population! Hold on; forget this population story just for a while. Despite overflowing populations, have you ever observed the rising economies of the two countries in the last few years? In a fast rate of growth, China’s economy in the last ten years has increased from US$150 million to US$1.8 trillion last year. In fact, China is becoming Asia’s center stage of fast economic development.
It is universally known that India’s trade relations with China are a civilization-old practice. Following the agreements signed between the two countries in the last few years, India and China have built a great vision of economic development for the next few years. During his India visit last year, Chinese President Hu Jintao highlighted the prospective trade strategies between the two countries. However, many questions marks pop up over various perspectives of Indo-Chinese bilateral relations, especially in the political parameter. Whatever it may be, for policy watchers, other than trade, there has been no breakthrough in relations between the two countries.
It is very obvious that when we talk about Indo-Pak relations, the Kashmir issue appears in the foreground. Likewise, in the case of India and China, the border issue of Arunachal Pradesh would come first. At a seminar ‘India-China Trade Partnership: Is It Sustainable?’ held recently in New Delhi, Mr Vinod C Khanna, former Indian ambassador to China, stated that China’s firm stand on the Arunachal issue is nothing but pending of a proper cordial dialogue between the two sides. In his statement, the former ambassador asserted, “Unless the current situation is resolved China couldn’t give away Arunachal.”
Packed with people from different embassies, institutes, and departments, participants at the seminar opined different downsides of newly accelerating Indo-Chinese economic relations. Of course, recent 21 percent correction—most precisely, erosion—in the Chinese stock market has scared investors in India. But the question is: How many Indian investors really care about the Chinese stock market? Toys yes, but stocks, definitely not. For good reason, the recent correction in the Chinese stock market didn’t affect the Indian market.
As China’s overall growth is based on its comparative advantage, the country is successful in production of goods at relatively low cost by maintaining quality, a stable trading environment, relatively good legal protection, and so on. Most of China’s trade, with the exception of the US, takes place within the region. While the US is China’s number one trading partner, Japan is second, Hong Kong third, South Korea is in fourth place, and Taiwan comes fifth.
As most of China’s economic growth took place in the last two decades, the country is now the world’s largest recipient of FDI, having recently overtaken the US. The growing economy of China causes rise of wages, particularly in coastal areas and in jobs involving advanced industrial production. This means that potential investors are now considering alternative destinations where costs are even lower. In this respect, India is a winner from China’s growth. But it would have to compete with countries like Vietnam, Indonesia, and some African countries. Considered as union of two major powers in Asia, Mr Khanna said, “China and India—two of Asian major powers—should be crafted to create an everlasting power”.
Technology is increasingly impacting the manufacturing processes of Chinese industries. Wages are becoming less of an issue in terms of production costs as more technologies are increasingly used. This is precisely the reason why many high-tech products are not made in China. At last, the days of wage cost advantage will pass away, and the country will have to find other ways to ensure its comparative advantage.
Of course, China is rapidly learning about production systems, business support, and quality control from foreign investors. Such ideas, along with the country’s anticipated capacity to innovate, show that Chinese companies should be able to produce more sophisticated products in the coming years. It is clear that FDI is finding a path into the country’s high-tech sector. Chinese companies learn from foreign corporations in terms of spending offshore to reduce operating costs. This is a gain on India’s side though there is some reluctance in India to accept Chinese investment in sensitive areas. “Looking from Beijing, as an Indian diplomat, I could see that India could make a success with China”, said former ambassador Mr Khanna.
“We should see the positive sides of the things which the two countries could set in a long-run process of future economic development. There would be no predicament in developing trade and economic ties between India and China”, said Prof Mira Sinha Bhattacharjee, former Director of the Institute of Chinese Studies, New Delhi. Well, the ultimate key issue is that that there has been no breakthrough in the relation between India and China, other than trade.
|
