If anybody had doubts regarding where the Indo-Chinese relations were heading, they need to read the report on the size of the delegation which accompanied the Chinese Premier Wen Jiabao on his visit to India. The number kept swelling and many called it the Red Army.

The delegation included the who’s who of the Chinese industry including senior representatives from Fortune 500 com- panies like the petrochemical and agro- chemical company Sinochem, food com- pany Cofco (China Natural Cereals, Oils and Foodstuffs Corp) and steel company Sinosteel. Power, infrastructure, trade and information technology and automobile companies were represented by officials at the president and vice-president levels. This is enough proof that relations are only going upward and it was further reit- erated by the Premier’s comment that In- dia and China are fast growing economies and were partners and not competitors.

The bilateral relationship between the two most populous countries thrived in ancient times with trade binding the two via the Silk Route. Only in the 1950s did border disputes arise between the two ancient civilizations. In spite of various tensions, whether they are regional or in- ternational, the Tiger and the Dragon do seem to get along famously well.

India and China have enjoyed better days from the first century. Buddhism was introduced in China from India, while trade flourished. Chinese silk which was in great demand in India was known as “cinamsuka” during the times of Chanakya, the prime minister of the Mau- rya Empire (350-283 BC) in India. There are references to China in ancient Indian literature and the records of Zhang Qian, a Chinese historian, refers to “Shendu” which may be a reference to Sindhu, the region of the Indus Valley civilization.

Besides trade and culture, there were exchanges of scientific knowledge as well. In the 8th century, the Astronomical Table of Sines devised by the Indian astrono- mer and mathematician, Aryabhata, was translated into Chinese by Gautama Sid- dha, an astronomer and astrologer born in Chang’an. He also translated the Nava- graha calendar into Chinese.

China is now India’s biggest trading partner. Diplomatic and economic ties are strengthening between the two nations with China’s recent move to consider In- dia’s bid for a permanent United Nations Security Council seat. Indian iron ore sati- ates the need for natural resources of Chi- na, while India imports everything from toys to machinery from China.

Bilateral Agreements
The 1950s witnessed diplomatic chan- nels opening up and the then Chinese Pre- mier Zhou Enlai and Indian Prime Minister Nehru came up with the Five Principles of Peaceful Coexistence (Panch Sheel). How- ever, there did exist some hiccups to this peace process, which was later cemented over by the Indian Prime Minister Rajiv Gandhi’s visit to China in 1988 when even the border dispute was discussed.

Among the bilateral agreements signed by Rajiv Gandhi were science and technol- ogy cooperation, an agreement to start direct air links and promotion of cul- tural exchanges. Also the nations agreed to hold annual diplomatic consultations between foreign ministers and steps to encourage economic and scientific coop- eration were mooted. This was followed by the exchange of visits of leaders which further concretised the friendly relations between China and India.

To develop trade relations the two countries signed an agreement to elimi- nate double taxation in 1994. Other agree- ments to enhance health and medical science, for simplifying the procedure for visa application and for banking coopera- tion were also signed.

The decentralisation of the Chinese economy in 1978 ignited rapid economic growth and initiated structural changes in China. World trade was just one percent in China in 1980, but this grew in leaps and bounds to make the nation the sec- ond largest economy in GDP behind the United States. Special economic zones in China also served as growth engines to the country’s productivity.

Wen Jiabao, the Chinese Premier, visit- ed India in December 2010 and proclaimed that trade between the two nations was peaking. Bringing down trade barriers, en- ergy security, infrastructure development and enhancement of bilateral trade were among the salient features discussed dur- ing the leader’s visit.

According to Indian Commerce Minis- ter Kamal Nath, China will soon become India’s largest trade partner in the follow- ing years beside the US and Singapore.

Trade on the right track
In order to expand the spectrum of trade, forays into trade areas such as ser- vices, knowledge-based sectors and other new sources have to be encouraged be- sides traditional manufacturing, opine experts. China’s production base can be leveraged by Indian companies.

Iron ore takes a lion’s share of India’s total exports to China, garnering 53 per- cent. Other exports to China include marine products, oil seeds, salt, organic/ inorganic chemicals, plastic, rubber, op- tical and medical equipment, ores, slag, ash, sulphur, earth, stone, rare earth metals, cotton and yarn, fabric, copper, machinery, hides and skins, artificial flowers, feathers, dye, paint, putty, pre- cious stones, seafood and dairy products, according to the Confederation of Indian Industry (CII).

About 36 percent of Chinese exports to India include value-added items like ma- chinery, including electrical machinery, besides organic chemicals. The countries have also invested in the oilfields in Africa, the Middle East and Central Asia to feed their energy needs. An agreement which entails ONGC Videsh Ltd (OVL) and the China National Petroleum Corporation, or CNPC, to place joint bids for international projects was signed in 2006. However, the two countries have to deal more in high value items, feel experts.

Services and knowledge trade, which should be given impetus, include the ar- eas of biotechnology, IT and ITES, health, education, tourism and the financial sec- tor. The huge Chinese pharma-market should be leveraged by Indian companies as well.

On December 15th 2010, the Tamil Chamber of Commerce (TCC) and China Council for the Promotion of Internation- al Trade (CCPIT) of Shandong sub-council signed a MoU which is expected to foster a business environment to promote busi- nesses at the international level.

B.S. Raghavan, former Policy Advisor to UN (FAO), said that India exported low value items like iron ores, slag, coal, ash and cotton yarn while it should be actually exporting financial services, Information Technology Enabled Services, construc- tion and engineering, pharmaceuticals, agro-production, education, entertain- ment, tourism, health and transport to leverage the huge market they can enjoy in China.

In order to boost trade of high value items, CII operates a special office in Shanghai, China. Cooperative projects in setting up Business Process Outsourcing, or BPO, parks have been mooted by the Jiaxing Municipal Bureau of Foreign Trade and Economic Cooperation in collabora- tion with Indian IT biggies like Infosys, HCL and TCS.

India China Chamber of Commerce & Industry (ICCI) operating from Mumbai, India strives to promote businesses from China, Hong Kong and Macau with India. Areas covered include commerce, invest- ment, industrial collaboration, technol- ogy transfer, joint ventures, international exhibitions, business delegations, eco- nomic cooperation and people to people friendship.

ICCI and the Karnataka Small Scale Industries Association (KASSIA) in Banga- lore, India are trying to synergise trade between Chinese and Karnataka (Indian state) industries.

To make the trade relationship sustain- able it is necessary to reduce or eliminate the trade imbalance, as voiced by Wen Jia- bao during his visit to India in December, 2010.

India exports about 9 million tonnes of iron ore to China which goes through the works in Guangzhou Sea Link Industrial Corporation, and finds its way back to In- dia in the form of locks, castors, door-clos- ers, hand railings for escalators in airport terminals and more.

Hwawei sells telecom equipment to Indian markets. Made in China toys and trinkets also flood the Indian markets. Toys range from superior branded ones to those that are less expensive.

This huge demand for Chinese goods in India made China the largest trade part- ner, but the trade imbalance has to be corrected soon to make this relationship work and last. Today India’s trade deficit with China stands at USD 16 billion which could increase further if corrective mea- sures are not taken soon.

“The deficits with China are a micro- cosm of India’s overall trade deficit,” says Zorawar Daulet Singh of the Centre for Policy Alternatives (CPA) in New Delhi. He is the co-author of “Chasing the Dragon: Will India Catch up with China?”

“The relationship is not sustainable. India is only exporting raw resources like iron ore, and is unable to compete in sell- ing to the China market,” he added.

India can export Information Technol- ogy, pharmaceutical and engineering products, but is hampered by non access to Chinese markets and the lack of proper infrastructure in India and the right sub- sidies in certain sectors. Both the CII and the Federation of Indian Chambers of Commerce and Industry (FICCI) are work- ing on the information gap between the two nations.

Anti-dumping investigations filed by India at the World Trade Organisation (WTO) against China were an area of con- cern, but most cases have been resolved or withdrawn. Indian companies feel that local industry may be affected by the in- flow of Chinese imports and are demand- ing implementation of import duties.

Collaboration in Green Tech and IT
Both China and India face the same mu- sic when it comes to greenhouse emission levels and the burning of fossil fuels. Also, they both depend on coal-based power plants to generate power. Both countries have now adopted green technologies in the mining, metal and energy sectors.

China’s endeavor to reduce carbon emis- sions from power plants can be shared by India. Both nations have also launched re- search projects based on integrated gasifi- cation combined cycle, or IGCC, or clean coal technology.

Companies like Dongfang and Shang- hai Electric of China are desirous to set up their equipment manufacturing units in India. Collaboration in the mining front with the implementation of pollution re- ducing technologies to increase produc- tivity is on the anvil.

Following the Chinese Premier’s visit to India in 2010, both fast-growing econo- mies have shown interest in low-carbon technologies. The Indian Prime Minister Dr. Manmohan Singh and the Chinese Pre- mier agreed upon setting up a platform to discuss and explore non-polluting tech- nologies that will keep up the economic growth envisioned by the leaders for their countries. Both China and India have in- vested a lot in developing wind and solar energy farms.

Dongfang Electric Corporation Ltd., a Chinese power equipment manufacturer, will be supplying equipments for install- ing 28,000 MW capacity mega power projects. The Indian subsidiary has been set up in Kolkata, an eastern Indian city. Dongfang plans to engage India in the ar- eas of renewable energy sources like wind power, hydel power and nuclear power by supplying the equipment to JSW Energy, Lanco Infratech, East Coast Energy, as well as some government-managed companies and others.

In the telecom industry scene, both In- dia and China have been active in 3G roll outs to launch mobile broadband. China Mobile and India’s Bharti Airtel and other companies have been successful in offer- ing wireless broadband services world- wide. The introduction of 4G Long Term Evolution (LTE) technology is expected to help Chinese network equipment manu- facturers like Hwawei.

In the IT sphere there exist tensions as India has restricted imports of telecom- munications equipment from China over security concerns and China is concerned about India’s tightening of work visa stan- dards.

With the IT sector moving to the cloud both nations have to cooperate in the sec- tor, leveraging their traditional business strengths and minimizing their weak- nesses, according to Partha Iyengar, India research director at Gartner, a research firm.

China’s historic strength has been fo- cused on hardware and manufacturing, and India’s on software and services.

“Both countries will lose significant op- portunities if they don’t collaborate with each other and try to reproduce the two things independently,” said Iyengar.

“For China to address the language, cul- ture, process, quality, and mindset issues (required) to move to end-user IT services and for India to address all of its infrastruc- ture issues, from power to real estate to ac- cess...is going to take too long,” he said.

China has become a large manufacturer of daily goods and India is known for its service industries in IT, medical-pharmacy and bio-technology. The strategic alliances linked between China and India will open new gates of friendship and prosperity. Ex- perts feel that the cooperation between the two emerging powers will empower Asian nations and bring global prosperity.