China-India bilateral trade doubled in 2007

By Chris Devonshire-Ellis

Jan.14 - Dr. Manmohan Singh, India’s Prime Minister, addressed the India-China Economic, Trade & Investment Summit this morning and reminded the delegates that a resumption of Chinese and Indian global trade was just a return to the previous global balance of the 18th century.

His full comments at the summit are reproduced below

Ladies and Gentlemen,

India and China are today the fastest growing large economies in the world. We should remember that China, India and Europe had almost equal shares of world income in the early 18th century. As the 21st century unfolds, both India and China stand poised to regain their weight in the global economy.

Our two countries will need to work together to ensure that we contribute to, even as we benefit from, the economic resurgence and integration of Asia. Our two economies are becoming engines of economic growth and must use our natural and human resources, technology and capital for the common benefit of the region.

The Indian economy has witnessed growth rates of close to 9 percent per year in the last three years. Our macro-economic fundamentals are strong. We have undertaken a series of economic reform measures to facilitate investment and growth. Our savings and investment rates have increased to 35 percent of our GDP and are rising. With a predominantly young population, there is potential for further increase in these rates.

Although India is more integrated with the global economy than ever before, the growth has been largely fuelled by an expanding domestic market. All these factors give us confidence that we will be able to step up our annual growth rate to 10 percent within the next five years.

Our bilateral trade with China has doubled in the last two years. Our trade target of US$20 billion by 2008 was reached two years ahead of schedule. The revised target of 40 billion US dollars by 2010 is also likely to be achieved two years ahead of schedule.

This makes me wonder whether our two Governments have been underestimating the capabilities of our respective industries and their strong urge to do business with each other. We therefore propose to set more ambitious targets.

In the area of trade, the challenge before us is to diversify our export basket to China. I would urge Indian business to vigorously pursue opportunities for expanding non-traditional items of export. Such efforts, when matched by greater market access for Indian goods in China, will help to bridge the rising trade deficit between us.

In addition to our competitive manufacturing industries, India has a diversified agricultural production base. Our food processing industry is also growing rapidly and we can supply quality agricultural and marine products to the Chinese market. A conducive environment should be created for this trade to expand.

The services sector accounts for more than 50 percent of India’s GDP and more than 40 percent of China’s GDP. India has had considerable success in positioning itself in hi-tech services in world markets. There are enormous opportunities for both India and China to expand trade in services, particularly in construction and engineering, education, entertainment, financial services, IT and IT enabled services, transport, tourism, and health. We will work together with the Chinese government to remove administrative barriers and simplify regulatory regimes in order to move forward in these areas.

Chinese companies have been actively engaged in the Indian market. I understand that Chinese firms have contracted projects in India worth over US$12 billion. Indian majors have set up a number of joint ventures or subsidiaries in China in the pharmaceuticals and software sectors, among others.

We must strengthen the base of our economic cooperation through business alliances and collaboration in technology transfer and development. We seek to promote bilateral investments in traditional sectors such as petrochemicals, steel, healthcare, IT and automobiles. Equally, our entrepreneurs should explore opportunities in new areas such as biotechnology, advanced materials, renewable energy and low carbon technologies.

I would suggest a three-pronged strategy for the chambers of industry and commerce of both countries to achieve these objectives. Firstly, you should jointly develop a strategic plan for the future so that you have a vision of our economic cooperation and a road map for its implementation. This will ensure that a long-term strategic perspective that looks ahead to future challenges and opportunities guides our ties.

Secondly, you could develop profitable business models that factor in our complementarities and competitive strengths and the special needs of large markets like ours. The opportunities are many and innovation is the key to exploiting them.

Lastly but equally importantly, you need to acquire insights into each other’s markets, business customs and management styles. In the final analysis, doing business is about developing understanding and trust in your partners. Additionally, the business communities of our two countries should develop a deeper understanding of the macro-economic outlook, the regulatory regimes and of factors that have a bearing on the competitiveness of enterprises.

I am glad to know that the number of visitors exchanged between our two countries approached the half million mark last year and direct flight connections have risen to 22 a week. We need to encourage this growing interaction, including through easier grant of visas.

I would like to assure this gathering that both governments will work together to put in place an enabling environment for greater trade, investment and economic interaction. This has to include creating a level playing field by addressing such issues as non-tariff barriers, IPR protection and market-related exchange rates.

All countries must compete in global markets and such competition is not inconsistent with co-operation nor is it adversarial. The industrialised countries constantly compete with each other and they see this competition as constructive and mutually beneficial.

Economic cooperation between us has become a principal driver of our strategic and cooperative partnership for peace and prosperity. Several bilateral understandings and agreements are already in place to address different sectoral aspects which impact on our economic cooperation. India and China working together should develop a habit of mutually advantageous cooperation.

In 2003, our two Governments had established a Joint Study Group to examine the potential for economic engagement. Pursuant to this, a Joint Task Force has finalized its report on the feasibility of a India-China Regional Trading Arrangement. During my visit, I look forward to discussing further steps in this regard with the leadership of China.

In conclusion, I would like to congratulate the dedicated and hard-working people of China for the rapid economic progress that they have made. I would also like to thank the China Council for the Promotion of International Trade for organizing this event, and making this partnership of the business communities of our two countries possible.

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