Wen concedes trade worries with India Inc

Last Updated: Mon, Sep 26, 2011 19:50 hrs

India and China concluded the first round of their strategic economic dialogue in Beijing on Monday, with the Indian delegation, led by Planning Commission deputy chairman Montek Singh Ahluwalia, meeting Chinese premier Wen Jiabao.

According to a senior Indian official who was part of the meeting and who spoke on the condition of anonymity over the phone from Beijing, Wen agreed that the two Asian powers did have trade concerns, but it was equally their responsibility to address these.

“We hope Chinese companies will import more information technology (IT), pharmaceuticals and farm produce from India,” Wen said, according to the Indian official, carefully addressing the three most sensitive areas in which Delhi has been lobbying the Chinese for greater market access.

Considering the strategic economic dialogue is the brainchild of the Chinese premier and Prime Minister Manmohan Singh, the Indian officials said they hoped his identification of the three issues that have been most bothering India will “send the right signals” to the Chinese establishment.

At the end of 2010, two-way trade according to Chinese custom statistics (evidently, the Indian establishment relies on these statistics, too), was $61.7 billion, of which Indian exports only amounted to $20 billion.

Over the last couple of years, since commerce minister Anand Sharma went to China in January 2010, Delhi is being pummeled with the realisation that the India-China trade deficit is growing bigger and bigger and for one reason or another, Beijing is refusing to take full notice of the issue.

According to a second senior Indian official, “India has been telling their Chinese counterparts at every level that there are far too many non-tariff barriers and several market access issues for Indian goods, especially in the pharmaceutical and IT sectors, and that the Chinese have to open up.

“We are telling the Chinese that this is becoming a political hot potato back home in India, and that they have to address our concerns if Asia’s largest powers have to continue to have a convivial relationship,” the Indian official said.

Earlier this month in the capital, commerce secretary Rahul Khullar had told reporters that China was “not listening” to Delhi’s repeated pleas to address the hugely skewed trade basket.

Indian leaders had also told the Chinese, the officials said, that while studies had recommended the two countries enter into a regional trading arrangement (RTA), it would be “very difficult to drive this politically in India” if Beijing did not alter the way it did business with India.

The officials pointed out that none other than the Prime Minister had pressed Wen on this matter when he came last December : More than 50 per cent of India’s exports to China constituted of iron ore and this had to change.

The PM had, in fact, even pointed out that this was unlike the composition of India’s export basket with any other country in the world, and that Beijing was not allowing any Indian pharma or computer software imports into that country.

Asked if India believed the Chinese premier and if things would now change, the Indian officials cautiously replied, “some encouragement to improve things is better than nothing at all.”

The Indian officials pointed out that in the pharmaceuticals sector, the regulatory process was so long and complicated that it took anywhere between two and three years for Indian products to be launched in the Chinese market. Moreover, Indian pharma companies were hugely dependent on Chinese APIs (Active Pharmaceutical Ingredients), which had been facing several quality control issues in recent months.

As for third-country pharma companies, the officials conceded that they faced the same problems to a “certain extent”, but they probably had greater stamina to see themselves through.

The story with Indian software, on the other hand, was that most Indian companies — with the exception of TCS, which had a $100-million order from the Bank of China — were working for western software MNCs in China, which had won contracts through their joint venture partners.

In fact, Delhi had pointed out to Beijing that to create a level playing field, it was important to give software contracts to Indian companies as well. The Indian officials admitted: “There is no simple solution…we have to continue to keep up the pressure.”

The day-long conversation in Beijing on Monday between Ahluwalia and Zhang Ping, chairman of China’s National Development and Reform Commission (NDRC), pretty much followed a set agenda in which both co-chairs outlined their respective plan priorities, as well as their monetary, fiscal and export policies.

Officials from the ministries of external affairs, commerce, water resources, power and non-conventional energy, IT, the planning commission and the Railway Board were part of Ahluwalia’s delegation.

The two keynote addresses were followed by three working group meetings, on industrial policy and cooperation, which focussed on industrial policies, infrastructure (for example, expanding railways networks), market access and information technology; on energy conservation and environmental protection, which sought to look at energy efficiency as well as wind and solar renewables in these terribly energy-hungry times; on water resources, with the focus on water management, as well as water-saving technologies.

According to India’s ambassador to China, S Jaishankar, “With China already the world’s second-largest economy, we need not only regular exchanges with them, but also need to talk to the Chinese on more and more issues.”

The just-launched strategic economic dialogue, he said, was intended to become a cross-ministerial problem-solving body which also looks at newer areas in their respective countries.

According to the press release issued at the end of the talks, the two sides shared views on the world economic situation (“it is picking up, with weak momentum”), promised to learn from each other and conduct mutually beneficial cooperation in formulating and carrying out respective mid- and-long-term development plans.

Despite the “in-depth and frank exchange of views”, both sides are believed not to have discussed the recent controversy over India’s joint venture with Vietnam in drilling for gas in the South China seas, which China claims, although it allows several US companies like Crestone and Mobil to do so.

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