India-China to hold first Strategic Economic Dialogue soon
September 3, 2011

India’s Planning Commission deputy chairperson Montek Singh Ahluwalia will lead a delegation to Beijing from 26th-28th September to define the broad contours of a framework for enhanced economic cooperation in the energy, steel, telecommunication, banking, technology and pharmaceutical sectors, among others. His counterpart Zhang Ping, chairman of the National Development and Reform Commission, will lead discussions on behalf of Beijing. The idea of such a high-level meeting between planning and development heads of both China and India was first spearheaded by Premier Wen Jiabao when he visited India in December last year.

The idea is to create a ‘Strategic Economic Dialogue’ to sort out trade disputes and barriers and increase bilateral trade to the projected US$100 billion by 2015. China-India bilateral trade crossed the US60 billion mark in 2010, a year ahead than planned. However, the trade in US$20 billion in favour of China. India-China bilateral trade is expected to rise above US$70 bn this year. The strategic economic dialogue will also aim to get a better view of the medium-term prospects of both economies and whether ongoing political problems in the Asian powerhouses will have any sustained impact on economic growth.

India is strategically looking at rebalancing the basket of goods currently traded between the two countries. While India continues to export most raw materials and import finished goods from China, New Delhi has been lobbying hard to promote other sectors of Indian excellence in China. The industries that are being pushed include – pharmaceuticals, agriculture, IT and renewable energy. India’s 12th five-year plan (2012-16) calls for generating more power through these sources, such as wind and solar power. Likewise, China’s 12th five-year plan (2011-15) focuses on a greener approach to economic growth. India has also sought market access for 17 fruits and vegetables. China is expected to create 15,000 jobs in the pharmaceutical space by the end of this year, but its yet unknown how much of this will go to Indian companies. In the process of drafting a new healthcare policy, Chinese officials have made several trips to India to understand the scale and depth of rural healthcare.

As regards China’s trade with India, the Middle Kingdom, exports finished goods and equipment to her Southern neighbour. Chinese companies which already have strong ties with Indian conglomerates are taking trade ties a notch up. While Indian firms complain they don’t have the resources to purchase Chinese equipment to light their streets and warm their stoves, Chinese companies are now providing financing and lending options, to Indian companies to enable them to purchase Chinese goods. While analysts expect this to widen the trade deficit between the neighbours, India is also becoming more aggressive in her exports.  Further, while nobody can object to suppliers’ credit, per se, there is a growing disquiet in the Indian system about these companies’ exposure to China and what that might mean in the future.

Besides the ‘Strategic Economic Dialogue’, Dai Bingguo, China’s special representative for boundary talks, is also scheduled to come to Delhi for the 15th round of border talks with national security adviser, Shivshankar Menon, in October.

India is also getting ready to welcome Xi Jinping, who will take over from Hu Jintao in 2012 as the next president of China. Xi has indicated he will visit India sometime this year, though officials said no dates have yet been finalized. India wants to engage with China’s next leader to not only get a feel for the man and his mission, but also sensitize him on India’s own interests and concerns.

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