Date: 26/04/2023

Relevance: GS-2: Bilateral, Regional and Global Groupings and Agreements involving India and/or affecting India’s interests; Effect of Policies and Politics of Developed and Developing Countries on India’s interests.

Key Phrases: China-India, G-20, Shanghai Cooperation Organisation (SCO), ASEAN, Modernization, Samarkand Declaration, Secure and Stable, Trade Relations, Constructivist Approach, Indian Ocean Region, Emerging Economies.

Context:

• As two neighbouring and ancient civilisations, with a combined population of 2.8 billion, China and India are representatives of developing countries and emerging economies.

Key Highlights:

• China is the only country with which India has had an army-to-army confrontation in recent times resulting in deaths and injuries on both sides.
  • A robust military response to Chinese aggression, some deft diplomacy and the forging of critical partnerships with the West without annoying Russia have kept the Chinese under check.
• The year 2023 marks an important step in India’s diplomacy, with its Presidentship of the Shanghai Cooperation Organisation (SCO) and the G-20.

China-India Trade Relations:

• China and India are important trading partners, with bilateral trade volume reaching $135.984 billion in 2022.
• Though there is a trade deficit, India’s import of equipment and materials from China does reduce the overall cost of “Made-in-India” products.
• It benefits Indian downstream industries and consumers, enhances the competitiveness of Indian exports, and in turn facilitates India’s integration into global industrial and supply chains.
• India’s pharma industry, like so many others, is excessively dependent on Chinese supplies.
  • Even India’s vaunted Vande Bharat trains roll on Chinese wheels.
• For China, India’s trade, currently at around $100 billion, is inconsequential compared to what it does with other economic blocs and countries of the world.
• The numbers in China’s Statistical Year Book - 2021 inform for themselves.
  • At $646 billion the EU is only China’s second largest trading partner while America at $586 billion is third and Japan at $317 billion a distant fourth.
  • ASEAN, comprising countries in China’s backyard has, at $676 billion, emerged as China’s largest trading partner.
    • Vietnam’s trade with China at close to $200 billion is almost double India’s while Malaysia’s is a little over $131 billion and Thailand’s close to $100 billion.
• Investments by Chinese enterprises have created a large number of jobs for the Indian people and contributed to India’s economic development.

India as Manufacturing Hub:

• China, like the rest of the world sees India’s rising and more youthful population as a promise and a tremendous present and future business opportunity.
• Infrastructure-wise and as a manufacturing base, India has also matured tremendously over the last couple of decades.
  • It is this fact that is leading to the gradual relocation of iPhone manufacturing to India.
  • Big chip manufacturers from Taiwan are seriously considering setting up manufacturing bases in India as are foreign aircraft, locomotive and truck manufacturers.
• For China too, today's India is an ideal place to relocate many of its industries that are becoming unviable, especially due to rising wages at home.
  • Despite being kept out of the PLI scheme, Chinese smartphone makers are leading India’s phone exports.
  • Indians see Chinese products as not only competitive price-wise but also to be high quality, value-for-money ones too.

Way Forward:

• Rather than continue with a proven counterproductive policy of shunning China, India should do well to robustly engage it economically and negotiate better deals.
• If India’s trade with China continues to rise touching $300 billion over the next few years with the possibility of exceeding ASEAN’s within a decade, China could be a much more accommodating neighbor than it is today.
• Countries like Indonesia and Vietnam have maritime disputes with China which are no less serious than the ones India has across its Himalayan borders with that country.
  • This has not stopped any of them from deepening their economic relations with China.
• For all its posturing China is unlikely to get into any kind of military conflict with any country, especially the US when it has come this far economically but still has some way to go before it matches America in power and influence even in its own backyard.
  • When every major country in the world is reaching out to China and more than willing to trade with it, India should not be the lone exception and deny itself the benefits of doing business with a country as big or as important to us as China is.
• China is advancing modernisation on all fronts.
  • The path to modernisation is based on China’s practices with a focus on high-quality development.
  • It means the modernisation of a huge population, where there is common prosperity for all, material and cultural-ethical advancement, harmony between humanity and nature, and peaceful development.
  • This will spell new opportunities for all countries in the world, especially neighboring countries.
• India and China are both in the process of national rejuvenation and a crucial period of modernisation where challenges need to be overcome and problems need to be solved.

Conclusion:

• The development and revitalisation of China and India embody a boost to the force of developing countries.

Source: The Hindu

Mains Question:

Q. Examine the trade relationship between China and India and also evaluate the potential of India as a manufacturing hub. (250 Words).