India secures China pledge on trade surplus

India has claimed Wen Jiabao, the Chinese premier, has given his personal commitment to rebalance a booming bilateral trading relationship skewed overwhelmingly in China’s favour by non-tariff barriers.

New Delhi asked Beijing to take “corrective steps” to address a growing trade imbalance between the world’s two fastest-growing large economies in high level meetings in the Chinese capital this week.
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Among the corrective steps recommended by Anand Sharma, India’s commerce minister, was the abolition of restrictions on Indian exports to China of products including information technology, Bollywood films and fresh food.

In the first Joint Economic Group meeting between the two countries for four years, China undertook to buy more value-added goods from India, according to the Indian delegation. India’s commerce ministry also said it had extracted a commitment from Mr Wen “that both sides could work together to ensure more balanced trade”.

The concern over the difficulty of exporting to China is one of a number of grievances that have marked a deterioration in relations between New Delhi and Beijing over the past year. Amid the global economic slowdown, India restricted the import of a variety of Chinese products, including toys, chocolates and non-branded mobile phones. More recently, Manmohan Singh, India’s prime minister, expressed surprise over China’s growing “assertiveness” over its territorial claim to Arunachal Pradesh, a state in India’s far north-east.

China has recently dislodged the US as India’s largest trading partner. But New Delhi is irked by a rising trade deficit with China that has widened over the past decade to $16bn last year. Indian officials and industrialists are concerned that raw materials are shipped from India to China, whereas trade in the other direction is of manufactured goods that are undercutting India’s small and medium-sized business.

China’s exports to India were worth about $29.5bn last year in a total bilateral trade of $43.4bn.

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China is increasingly concerned about a backlash over its exports from a number of developing economies. While the US and the European Union have long called for China to allow the renminbi to appreciate, China is facing growing criticism about the level of its currency from developing nations. They argue that Chinese exports have become even more competitive over the past year as the government has allowed its currency to follow the dollar lower.

According to Ha Jiming at China International Capital Corporation, the renminbi depreciated by 14 per cent against the main emerging markets currencies last year and along with Indonesia, Brazil and Mexico, India was one of the countries that saw the most rapid rise in Chinese exports, he says.

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Mr Sharma, during his visit to China, highlighted the need for China to remove restrictions on the import of power equipment, rice and Indian television content. He also complained about time-consuming bureaucratic procedures blocking India’s drugmakers.

“The issue of non-tariff barriers is an issue that refers to the World Trade Organisation but it would be mutually favourable to sort this out at the bilateral level,” said Amit Mitra, the general secretary of the Federation of Indian Chambers of Commerce and Industry. “The problem is: how do we get market access?”