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October, 2013

  • Li-Singh_1628394gA confidence building measure was all that Prime Minister Manmohan Singh’s visit to China was. Sandwiched between corruption scandals and a floundering economy at home, the Indian prime minister failed to make waves in China. While the governments signed nine agreements on his short 1.5 day visit, neither held much water. While headlines screamed a border pact between the sweet and sour neighbors, the fine print reveled little substance to the story. Same was the case with the proposed visa on arrival for Chinese tourists, the proposed SEZ’s or the river pact between the countries – no big step forward, just an assurance that each had one anothers backs.

    While it is significant for China and India to publicly mention that they will support each other internationally and not interfere in each others foreign affairs, the meeting should have also outlined confidence building measures for the economy and trade. Fast floundering from the Indian side, it would have been prudent for Dr. Singh to have also thrown in a clause for international, regional and bilateral trade, economic and financial co operation.

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  • jinping_singhIndian Prime Minister Dr. Manmohan Singh is quite familiar with Beijing by now. Where he needs a guiding light is India China trade. The disproportionate skew towards China, is so dismal that it has the Chinese worried. In order to create inroads and persuade productivity, China has now upped the ante in increasing Indian exports and India has conceded. This means that soon, India will create five Special Economic Zones within her territories which she will lease to Chinese firms flush with funds and machinery to build her infrastructure within her borders. This grand plan of boosting trade seems on the outset to serve the purpose of both nations, India to gain infrastructure at Chinese prices and China a market almost as big as hers, which is almost saturated. The plan however could come with several divots and might not be as smooth sailing as expected. Although India is nowhere close to agreeing to China’s proposal of creating a large SEZ herself within Indian territory, by allowing a majority of Chinese companies to establish themselves in India, the South Asian nation is bartering away her bargaining power.

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  • china india borderSure, its the meeting of heads of state of Asia’s largest economies, yet maybe we shouldn’t be making such a big deal about it. Prime Minister Manmohan Singh’s two day trip to Beijing from Moscow isn’t expected to bolster trade or solve our age old border issue. Its not expected either that the bonhomie between the brothers who share the Himalayas will significantly improve relations between our countries. Yes steps will be taken, deals signed and hands shaken in the glare of a million news flashes, but it will continue to be more of the same – diplomacy at her best.

    We’re not trying to be pessimistic, but considering the sweet and sour relations our nations share, it will take much more than a milestone visit to alter history. Indian analysts especially don’t expect much to change with the Border Defence Cooperation Agreement, much touted by the Chinese and expected to be signed during the visit. They however warn of one particular clause withing the BDCA, which states that No new construction can can take place along the Line of Actual Control. While the move is more political than military, China has the might to get India to agree to signing this clause because of her economic strength, however the agreement will severely jeopardize India’s plans on her side of the border. While both nations do favour a speedy and effective resolution to our border issue which has been a thorn in our relations, agreeing to dis empower a neighbour shouldn’t be ratified.

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  • inflationBoth India and China saw a seven month spike in inflation rates in the ninth month of this year. Reuters reported on both nations – China’s annual consumer inflation rate rose to a seven-month high of 3.1 percent in September as poor weather drove up food prices, limiting the scope for the central bank to maneuver to support the economy even as exports showed a surprise decline. Inflation in India unexpectedly hit a seven-month high in September as food prices climbed, increasing the odds for yet another central bank interest rate hike even as the economy stumbles through its worst crisis since 1991.

    With spending on food being the prime expense of an average Chinese and Indian’s disposable income, this hike in inflation rates is sure to pinch the common man. In India where menu’s have already altered to keep out the once essential onion, consumers are gaining extremely weary of what they eat. Prices of onions jumped 322 percent annually as crop supply dropped and wholesale merchants hoarded the bulb for higher prices.

    Food prices in India rose to an annual 18.40 percent last month, the fastest clip since July 2010 and triple the 6.1 percent rise seen in China, according to Reuters. In China, Food prices gained 1.5 percent in September from August due to droughts and floods in some areas, pushing up the CPI by 0.51 percentage points, Yu Qiumei, a senior statistician at the bureau, said in a statement.

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  • A woman rides a bicycle past a row of neLong gone are the days when a Mumbai wanted to be a Shanghai, today Xiamen might be too much competition for the Indian commercial capital. Located on China’s South Eastern coast, in Fujian Province, Xiamen boasts to be China’s highest car ownership metro at present, with 30.5 cars for every 100 residents, leading many car manufacturers to increase distribution to smaller Chinese cities instead of large Indian metros.

    Armed with a high disposable income, good roads and poor public transport, Chinese in inland provinces and smaller coastal towns are rising up to become the largest group to purchase privately owned cars. So much so that auto manufacturers such as Volkswagen, which sells more cars in China than any other carmaker, will expand its joint venture manufacturing capacity there by at least a third to 4 million units by 2018. That is more than the entire manufacturing capacity for four-wheeled vehicles in India.

    Besides raising issues from the environment to oil consumption, the dilemma also poses a more serious question of inland China becoming more attractive to manufacturers and investors than metropolitan India. Reasons range from India’s sagging rupee rates to poor infrastructure, from high interest rates to rising  political ambiguity, yet when Indian cities compete with second the third tier Chinese cities our bilateral and multilateral trade face a serious problem.

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