India and China Hold High-Level Trade Talks

August 27, 2012Emerging Marketsby EW News Desk Team

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Indian and Chinese commerce ministers meet in New Delhi today for the ninth instalment of the India-China Joint Economic Group. However, India is expected to raise concerns that China is benefitting more out of their trading relationship that reached $74 billion last year.

While the two countries remain upbeat on their $100 billion bilateral trade target for 2015, this year’s JEG is taking place against a backdrop of seven consecutive months of declining trade volumes.

In particular, India is crying foul over its rising trade deficit with China, which jumped 42 percent to $40 billion last fiscal year.

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According to a report by the Economic Times, one of India’s strategies to bridge the deficit is to encourage Chinese investments while discouraging imports.

An Indian government official told the Times:

We are going to tell the Chinese that it will now make more sense to invest in the power sector as it is now not so profitable to export equipment anymore.

China is India’s second-largest trade partner, behind the United Arab Emirates.

At the same time, India pledged to “assure the Chinese that it is in our interest to make things smooth for them.” “We will certainly listen to the issues that they raise and take measures to make it easier for Chinese companies to invest,” said an official.

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China, who has in the past accused India of trade protectionism –a charge that India vehemently denies – is expected to ease concerns over the growing strains in their trade relationship.

In a written interview with The Hindu, the Chinese Commerce Ministry said the “relatively strong foreign exchange reserves of both countries and an increasing desire of businesses to go overseas should drive the future of trade ties.”

The ministry added that there is “great space for China and India to cooperate in mutual investment.”

According to sources, Beijing is also eager to discuss a five-year development plan for trade and economic cooperation with India as part of its strategy to increase its presence in Asia.

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