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A business boost for Sino-Indian ties

Sheela Bhatt in New Delhi | June 21, 2003

During the past 2200 years, we have devoted about 99.9 per cent of the time to friendly cooperation between our two countries. -- Wen Jiabao, China's Premier during his meeting with the visiting Indian Defence Minister George Fernandes in April 2003.

It is, thus, quite ironic that the Confederation of Indian Industry is only now opening its first office in China's largest city, Shanghai.

The CII office will be opened during Prime Minister Atal Bihari Vajpayee's visit to China from June 22 to June 27. A 30-member CII delegation, and equally big trade teams from other top Indian business associations, will accompany the prime minister, even as the world's two most populous nations look to boost bilateral trade.

On the eve of Prime Minister Atal Bihari Vajpayee's visit to China, a CII survey on Sino-Indian business relations reflects growing interest of Indian companies in the Chinese market.

The sectors surveyed include stainless steel, information technology, banking, pharmaceuticals and consumer goods. IT has been identified as a high potential area for further business development.

Other areas in services sector where both countries could work together included tourism and hotel industry, healthcare, educational services and technical education.

The survey reveals that over the past one year many Indian companies have shown the interest in foraying into the Chinese market.

The Federation of Chambers of Commerce and Industry and the Associated Chambers of Commerce and Industry of India too are sending high-level delegations along with the prime minister's entourage to China.

FICCI already has a functional office in Beijing and is led by executive director Atul Dalakoti.

Talking to, Dalakoti says: "China is a challenge. For India, huge potential exists is there in the areas of pharmaceuticals, minerals, textiles and, of course, information technology."

"India's brand equity is IT. China wants synergy between its hardware sector and India's software industry. Now, all we need is confidence in each other," he says

Experts say that business sections in both the countries are abuzz with anticipation, hoping that Vajpayee's diplomacy will help improve political relations with China and, in turn, provide the much-needed impetus to trade.

Some positive signals have emanated from China. In a recent article, Hua Junduo, Ambassador of China, wrote that "trade has become a most dynamic area in our relationship."

"Thanks to the joint efforts of the two sides over the past decade, our two-way trade volume reached $5 billion last year, which was an almost 20-fold increase over the $200 million-odd trade in the early 1990s. Such a boost is indeed outstanding," he wrote.

But Sino-Indo trade relations still have a long way to go, comparative figures shows that the trade volume is actually quite marginal.

China's trade with India accounts only for 0.8 per cent of its total external trade. The share of India's external trade in 2001-2002 was just around 3 per cent.

Huge trade potential

However, a preliminary analysis by FICCI reveals that India-China bilateral trade has the potential to expand to $10 billion over the next 5-6 years provided an annual growth rate of at least 17 per cent is maintained.

Indian exports to China include iron ore, plastic, marine products, cotton yarn and fabric. Organic and inorganic chemicals and drugs and pharmaceuticals.

According to the FICCI report low value-addition items are catering to increased demand, while high value-added items are in need of greater thrust. The report says that textile and seafood markets offer great potential, where joint ventures could be a win-win situation.

Thanks to the World Trade Organisation, significant development is in the offing in terms of trade with China and access to its vast markets. Indian exporters stand to benefit from this.

China's accession to the WTO will result in tariffs being reduced. Fruits like mangoes and grapes have a huge market in China. Imports of grapes have been dramatic in China after 2002. India should not miss the opportunity, says FICCI.

China, the biggest mobile market in the world, also holds tremendous potential for Indian telecommunication businesses.

Telecommunication services in Beijing, Shanghai and Guangzhou, which carry around 75 per cent of all domestic traffic, will be thrown open to foreign competition once China accedes to the World Trade Organisation.

Foreign carriers would be permitted up to 25 per cent ownership in mobile services and 30 per cent in value-added services, the statement said.

Opportunities galore

Meanwhile, CII says non-traditional areas and a gamut of old and new economy sectors like telecommunication equipment and medical equipment hold great potential for Indian companies.

China has also opened up its energy sector to larger foreign participation due to its growing requirements. Opportunities for Indian businesses are also bright in the natural gas infrastructure development and offshore oil exploration and production.

Even as the two countries aim to strengthen ties further, trade seems to have picked up and is gaining momentum.

Bilateral trade has already witnessed a growth of 70.8 per cent in first four months of this year, over the same period last year. Indian exports to China increased by 100.5 per cent against during this period. Trade surplus stood at $350 million in India's favour, reveals the FICCI report.

This month, CII is also launching an India Club to boost small- and medium-sized businesses and their trade with the Asian giant. It will unveil a Web site on China. The trade body will also organise 'Made in India' and 'Hi Tech' shows in China in October.

Some problems

FICCI, meanwhile, has launched an extensive study to 'understand the Chinese market.'

However, FICCI also has a few words of caution amidst the excitement and lists some problems faced by Indian companies.

Language barrier: Dalakoti, who speaks Mandarin, says: "Language is one of the biggest problems. Most of the documents are in Chinese and English translations are not easily available. This hampers business negotiations. It is difficult to understand the Chinese mind."

Tough market access: Due to the control on distribution and retail channels, Indian exporters find it difficult to penetrate Chinese markets. Market information is not handy. In most sectors, middlemen dominate.

Few banking channels: More Indian banks need to strengthen their presence in China. SBI and Bank of India have their representatives in Shanghai and Shenzhen. ICICI's top managers are joining Vajpayee's entourage.

Unclear policy framework: In areas like agriculture and seafood exports, Indian suppliers have faced setbacks. Buyer-seller movements need facilitators. Many Indian seafood exporters suffered losses because the quality of their products was considered suspect.

Lack of mutually acceptable standards: In many sectors in China, standards are not available. This causes big problems for Indian exporters. For example, the Chinese claim that Indian granite has a high radiation level. The Indians have refuted these claims.

Arduous registration process: In some sectors, like pharmaceuticals, registration process is cumbersome. Yet, Ranbaxy has shown the way, but attaining an outstanding success.

The firm had started its China operations in 1990. Its product Cifran is a household name there. Today, Ranbaxy reaches out to 500 hospitals and more than 20,000 doctors in China. China, however, has raised the cost of registration to American levels. The registration process now acts as a barrier for the new entrants in to the pharma arena.

Lack of information: China imports goods worth over $250 billion. But exporters have to find out their own 'niche' markets. Mapping of potential large markets is not easily available.

The fears of WTO regime and the scare of China flooding Indian market have receded. While commenting on Indian businessmen, Ambassador Junduo wrote : "They are now full of confidence, believing in immense opportunities in trading with China."

"The confidence of the Indian side is increasing, but the same is not true of the Chinese. The chips are down on their side," claims Dalakoti.

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Number of User Comments: 4

Sub: india china ties

is our prime minister following the same old path of mr.jawaharlal nehru. we indians yelled out ' hindi cheeni bhai bhai' following sri jawaharlal . ...

Posted by subu

Sub: China and India

I think China is trying to improve its relations, as it has reliased that India is going to be a super power, it really wants ...

Posted by Girinath Managari

Sub: Sino-Indian Business Ties

The article makes exciting reading and makes one conjure up visions of mega trade between China and India. The Chinese Ambassador even admits that Indian ...

Posted by Giri Girishankar

Sub: India China

This is indeed a good development. Betterment of Indo-China ties can only help the two countries. India can share its expertise in some areas and ...

Posted by Saurabh


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