A purely statistical analysis can be misleading.
The current euphoria over the expanding Sino-Indian economic relations, the galloping bilateral trade and the mushrooming analytical studies triggered off by this euphoria are coming in the way of an adequate focus on certain emerging characteristics of these relations, which have already started redounding more to the benefit of China than of India.
These characteristics could have positive as well as negative impact on the over-all Sino-Indian relations.
The first emerging characteristic is that China is increasingly the beneficiary of the expanding Sino-Indian economic relations during the last five years, just as it has been the major beneficiary of the expanding Sino-United States economic relations during the last two decades.
Initially, as India and China embarked on their policy of expanding bilateral trade, India benefited more than China because of growing Chinese demand for iron ore for its steel industry. Consequently, in the first four or five years after this expansion started, the balance of trade was in favour of India. This balance in favour of India quietened fears of a possible dumping of moderately-priced Chinese goods into the Indian market.
Now, there is a greater flow of goods and services from China to India, than the other way round. The result: the balance of trade is increasingly tilting in favour of China. The large manufacturing base in China enables it to offer a large basket of manufactured goods to the Indian market. The inadequate development of the Indian manufacturing sector is coming in the way of expanding the basket of Indian exports to China, which continue to depend on raw materials -- with iron ore constituting nearly 60 per cent of India's exports.
The galloping bilateral trade -- already touching US $40 billion and racing towards the newly-set target of US $60 billion -- has already made China the second largest trading partner of India after the US. More importantly, in the coming five years, it is likely to make the Indian market the second largest market for Chinese consumer goods after the US market.
The continued prosperity of the Chinese manufacturing industries would depend on the continued availability of this market.
This would have a positive as well as a negative impact just as it has happened in the case of Sino-US economic relations. The dependence of Chinese manufacturing industries on the US market has introduced a certain moderation in Chinese policies towards the US in strategic areas due to the Chinese anxiety to avoid unnecessary tensions in its relations with the US in matters such as Taiwan, lest these tensions affect trade, which is overwhelmingly in favour of China.
Similarly, the growing dependence of Chinese manufacturing industries on the Indian market could moderate Chinese policy-making towards India in non-economic fields. Unnecessary political tensions in Sino-Indian relations could affect the growing economic benefit to China arising from the vast Indian market.
As against this, a likely negative impact is that the dependence of the Indian market on Chinese manufactured goods and the fascination of the Indian consumers for Chinese goods could come in the way of our being able to develop our own manufacturing industries.
The flood of Chinese goods flowing into the US market is not triggering off any undue concerns --- apart from some proforma expressions of concerns from time to time -- because both the US and China are almost equal beneficiaries of the expanding economic relations.
Many of the Chinese consumer goods flooding the US market are manufactured by enterprises set up in China by American capital flows. If the Chinese are earning more money by flooding the US market with consumer goods, the Americans are earning more money by flooding China with American direct investment flows and getting high returns for them.
This has not been happening in the case of Sino-Indian economic relations. The trickle of Indian capital flow into China has been in the services sector-- mainly information technology. There has been hardly any Indian investment in the sector of manufactured goods. Thus, the benefit to China from the flow of its manufactured goods into India has not been compensated by attractive returns for Indian investors.
The second emerging characteristic is in respect of the flow of skilled manpower. There is a greater flow of skilled Chinese manpower to India than the other way round. The over-fascination for the IT
