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Abu Dhabi, UAEWednesday 20 June 2018

Prospect of trade war brings China and India closer

Bilateral trade between the countries grew to $71.42 billion in the financial year to the end of March 2017 from $70.17bn in the previous year

Indian Prime Minister Narendra Modi and Chinese President Xi Jinping. Trade relations between the two countries have been strengthening. Danish Siddiqui/Reuters
Indian Prime Minister Narendra Modi and Chinese President Xi Jinping. Trade relations between the two countries have been strengthening. Danish Siddiqui/Reuters

With US protectionist measures on the rise and escalating fears of trade wars, India and China have been looking at ways to boost trade ties.

India's commerce minister Suresh Prabhu and his Chinese counterpart Zhong Shan met in New Delhi this week for a joint economic group meeting, as India strives to address the trade imbalance between the two countries.

Bilateral trade between the countries grew to $71.42 billion in the financial year to the end of March 2017 from $70.17bn in the previous year, according to the Indian government. India's trade deficit with China stood at $51bn.

“A commodity which could be exported from India to China is high-quality pharmaceutical products,” said Mr Prabhu, in a statement issued by the government's press department, highlighting ways in which India could narrow the deficit. “Export of India’s IT and IT enabled services to China and cooperation in the sectors of tourism and health care need to be focused on.”

China, meanwhile, has been increasing its investments in India.

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China's Tencent led a $1.4bn investment into Flipkart, India's major e-commerce marketplace, while Chinese internet major Alibaba has invested $177 million into Indian online technology company Paytm. Chinese smartphone brands including Xiaomi have been expanding their manufacturing facilities in India.

China is now looking at developing industrial parks in India, where Chinese companies could manufacture products.

"Manufacturing those things which are made in China today and are imported by India, so why not make in India itself,” the Press Trust of India news agency reported Mr Prabhu as saying. “For that they have a concrete proposal that they will make industrial parks in India.”

This comes as an HSBC survey recently revealed that Indian companies are the most concerned about rising protectionism.

“The survey data shows that almost nine in 10 businesses in India feel that governments are turning increasingly protectionist, leading to a rise in the cost of doing international business, altering trade routes and raising hurdles to obtaining trade finance,” according to HSBC.

The strengthening economic ties between India and China are emerging despite the fact that India and China's political relations have long been frosty, largely because of disputes over borders.