India and China are adjacent to each other. They are not only the biggest developing countries in the world but also the countries with the fastest growing economies. Over the recent years, China and India business have developed a lot. The volume of trade reached 34.2 billion dollars by November 2007. As early as 2007, China has already become the biggest trading partner of India. Currently, India is the 11th biggest trade partner of China, according to statistics from 2011 from China customs.
India and China: What is traded?
Based on the statistics and categories from the Bureau of Statistics of China, in 2010, the main exports from China to India include: rolled steel, various types of fertilizers, telephone sets, medical and health supplies, agricultural products, chemical products, textile products and furniture. Also, due to the backward infrastructure of India, several experienced China companies like China National Machinery Import Export Corporation, China Petroleum Pipeline Bureau, etc., all sent construction teams to India to do contracted projects. Additionally, in recent years, China’s enterprises, encouraged by the countries’ policies, entered the India market. For example, COSCO, Sinosteel, and IT giants like ZTE Corporation, Huawei, Haier, Lenovo, and TCL all moved to India.
India’s exports to China mainly include iron ore, cotton, plastic products, automobile parts, gemstone and gold. Most of these products are labor-intensive to produce. As can be seen from above, compared to India, China’s exports are mostly finished products with high added value. As a result, China exports a lot more products to India, than Indian does to China. In 2011, the volume of Chinese exports to India was three times imports from India. Some fear that this one-sided trade relation may trigger some unexpected problems in the future.
India’s government has made it clear that they “are going to develop [their] own manufacturing industry”–said Atidra Sen, the secretary for trade and industry in Bombay. China has no comparative advantage in labor-intensive product exports, because India has more cheap labor to fulfill such work. However, infrastructure such as the subway or the airport, gives China a competitive advantage over India. India is considered the world’s center of services while China is the world’s center of manufacturing. However, now India is trying to develop its own manufacturing industry to become less dependent on China for finished goods.
India has taken measures to protect its domestic industries from competition from their Chinese counterparts. The government has restricted the importation of many goods, such as chicken, plaster, and natural gas. Also the tariff is high, despite the fact that the India government has lowered the custom in recent years. For example, China’s air conditioners once were faced with a tariff rate as high as 42.5%, and refrigerators were confronted with 30% tariff.
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Picture Source: India and China