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Reconciling rivalry

Growing from the global trade war, India and China are rebuilding their strained diplomacy with renewed interest in developing trade and commerce partnerships

Reconciling rivalry

While the ongoing US-China trade war has holistically botched global trade, it has also opened a new gate for India's export expansion plans to China. Hitherto, China had never blinked in India's radar of viable export destinations, despite the glaring trade deficit with that country. Under the MIES scheme in the Exim policy – a specific market-oriented export promotion measure – China had never figured in the scheme of things.

In an annual review, the Ministry of Commerce and Industry has decided to open its first-ever Trade Promotion Centre in Beijing, to promote export from India to China. Besides, the trade conflict has nudged the country to also formulate the first-ever agricultural export policy.

Amidst the global trade turmoil due to US' imposed tariff war against China, both India and China have inched closer in joint efforts to increase exports to China, which needs India to offset the loss in imports of its essentials from the US due to the various retaliatory measures. India has further hailed the action as an opportunity to counter-balance the huge trade deficit it shares with China – China accounts for more than one-third of India's global trade deficit.

Given the protracted inimical political relation that was triggered by the Doklam stand-off and India's vehement refusal to be party to Chinese BRI (Belt and Road Initiative), supplemented by growing trade imbalances, the relation between India and China was tending towards outright bitterness. Against this, in a surprise move, the trade war led China into a volte-face by unleashing a fresh look for a good neighbourhood economic partnership with India. Gao Feng, the spokesman of the Ministry of Commerce, China, said, "As two large developing countries and major emerging market economies, China and India both have huge domestic market." He further added, "the economies of both countries are highly complementary to each other, creating enormous potential for cooperation"

To this end, the after-effects of US-China trade war can be reckoned as the first-ever realistic attempt to dilute the intransigent stand between neighbours India and China, and sway the trust deficit for the betterment of relations between the two countries. Chinese media mellowed its ire against India and instead, highlighted factors for improving existing strained relations. Global Times, the official English media of China – cited three advantages, which both nations share. First is the large and low-cost labour force, available at easy disposition in both countries which share a massive chunk of the world's population. Second, is the large domestic market which gives readied access and, third, a great supply of high-quality human capital, which refers to Indian IT services and skills resourced in science and engineering talents.

The trade war has opened a new gate for India to exercise a stake in the global export market for agricultural products. The Ministry of Commerce and Industry formulated India's first-ever Agricultural Export Policy, with a focus to boost India's agriculture exports to USD 60 billion by 2022. The Ministry is ensuring that all avenues are tapped to diversify India's export basket region-wise and commodity-wise.

India held three inter-ministerial meetings with the Ministry of Commerce, China (MOFCOM) for exports post the trade war. The General Administration of Custom, China, has approved 24 Indian rice mills for exporting non-basmati rice and five rapeseed mills for export of rapeseed meal. In 2012, China had suspended the import of rapeseed meal from India.

The volte-face of China was not limited to only the Chinese government. It also extended to the country's diverse and powerful entrepreneurs. Hong Kong-based billionaire and Chairman of Li & Fung group of companies was hopeful that China would look to India for a big investment, where products can be finished and exported to the US in the wake of high tariff on imports from China. He asserted that the US-China trade truce is a short-term phenomenon. He was further assertive that Vietnam and Bangladesh could not act as replacements and reposed a higher hope on India for finished goods production, which is gifted with infinite capacity. He reiterated that the trade war would pave the way for correcting the severe trade imbalances existing between China and India.

Alongside, there is a parallel growing momentum for Chinese support to the development of infrastructure in the country. Three big Chinese companies have decided to invest nearly USD 15 billion in Indian infrastructure. Cross-border e-commerce would be another potential area for joint cooperation between India and China. India has become the fastest market in e-commerce, with about 100 million internet connections being added every year. According to a report by Tracxn, a start-up research company in India, a whopping USD 5.2 billion was invested by Chinese internet companies in 2017, like Alibaba, Fosun, Baidu and Tencent. This implicated a five-fold jump from USD 930 million investment in India in 2016.

(The views expressed are strictly personal)

Subrata Majumder

Subrata Majumder

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