SPECIAL

Feature
Economic Strengths of China
Mr. Huang Quanbeng, Consul General of the Peoples Republic
of China, Mumbai
Since the implementation of the reform and opening up policy in 1978,
Chinas comprehensive national strength has grown markedly. otal
economic output has kept increasing. !n 1998 Chinas "#$ reached 9%c&
'illion (S), which was a nearly &* times increase than that in 1978.
Chinas "#$ was the seventh 'iggest in the world. he national economy
has kept growing at a sustained, rapid and healthy pace, over the past &*
years, the average growth rate of "#$ has increased 'y 9.8+ annually, it
was the fastest,growing economy in the world. Shortages of goods on the
market in China for along period of time have 'asically disappeared and
the supply and demand relation of market has reali-ed a historical change
that a 'uyers market has replaced a sellers market. Chinas national
economy en.oys good situation with high growth and low inflation. China is
now a ma.or industrial and agricultural producer in the world. Chinas grain
i.e/e
i .e/e
reserves has e/ceeded 'y far the highest level in history, the food of
nearly 1.0 'illion population has 'asically 'een solved.
1oreign e/change reserves were the second 'iggest in the world, growing
from a mere *.17 'illion (S) in 1978 to 123 'illion (S) 'y the end of last
year. he e/change rate of Chinese currency 4enmin'i 5uan is 6uite
sta'le. 7hen it decided to reform the national economic setup in 1978, the
Chinese government implemented on a policy of opening to the outside
world in a planned way and step 'y step. 8ow, an all,round opening
pattern has taken shape in China. 9pening to the outside world has
generally promoted the development of Chinas foreign trade. he value of
foreign trade increased from &*.% 'illion (S) in 1978 to 0&2 'illion (S) in
1998, at an average growth rate of over 13+, which was nearly one time
than the annual growth rate of the world trade. !n terms of foreign trade,
China ranked 0&
nd
in the world in 1978, and rose to 1*
th
in 1997.
9ver the past &* years, great changes have taken place in Chinas import
and e/port trade. 1irst, the structure of import and e/port commodities has
'een constantly improved. he e/port volume of primary products with
food, agriculture and sideline products, and crude oil as the main stay, has
'een reduced 'y a large margin: and the proportion of industrial products
increased from 2%.3+ in 1978 to 88.8+ in 1998. 4emarka'le progress
has 'een achieved in the e/port of machinery and electrical products,
rising from 1.21 'illion (S dollars worth in 198* to %%.3 'illion (S dollar
worth in 1998. Second, foreign,invested enterprises, which grew from
nothing, have 'ecome new factors contri'uting to the growth of Chinas
foreign trade. !n 1981, the e/port of volume of foreign,invested enterprises
made up *.1+ of Chinas total e/port volume, and *.3+ of the import
volume. ;y 1998, the e/port of volume of foreign,invested enterprises
made up 22.1+ of Chinas total and the import volume, 32.7+. hird,
Chinas international trade market is 'ecoming more diversified. !n 198*,
nearly 18* countries and regions had trade e/changes with China, a figure
which rose to &&8 in 1998. !n 1998, though Chinas e/port to other <sian
countries and regions shrank somewhat, the trade e/changes 'etween
China and the (nited States, the =uropean (nion, >atin <merica and
<frica have constantly increased. 1ourth, foreign trade has 'een
e/panded through various fle/i'le trading forms. $rocessing trade and
small,scale 'order have increased 'y a large margin. < situation in which
ordinary trade processing and assem'ling trade are competing with each
other for development has 'een formed.
"reat progress has 'een made in attracting direct foreign investment. So
far, foreign 'usiness people from more than 17* countries and regions
have made investments in China. Since the founding of the first Sino,
foreign .oint venture in 198*, China has taken the utili-ing of foreign
capital as an important aspect of 'asic state policy, and great efforts have
'een made to promote it. !n the 'eginning Sino,foreign .oint ventures first
entered the processing industry, and later they e/panded toward the 'asic
industries and e/port,on,ented enterprises, commerce, finance,
information, consultation, real estate and other fields.
he <sian financial crisis has caused some negative impact on Chinas
foreign trade. he Chinese government resolutely introduced a positive
fiscal policy which used e/panding investment and enlarging domestic
demand as important measures, to keep sustained, fast and healthy
development of national economy. ?owever we are fully aware that China
is confronted with a great deal of difficulties and pro'lems in the course of
its economic and social development. China is still a developing country,
with a low per capita income of 7** (S). here are distinctive disparities
in the development of China especially in western part, the economy still
far 'ackward. he restructuring of large and medium,si-ed state,owned
enterprises is an arduous task. $opulation growth and economic
development have 'rought a'out huge pressure on resources an
environment.
@aintaining friendly relationship with !ndia is a diplomatic component of
Chinas foreign policy of good neigh'orliness. !n the past 3* years or since
the esta'lishment of diplomatic relations 'etween China and !ndia, the
Chinese leaders of three generation have all along upheld developing
good neigh'orly and friendly relations with !ndia on the 'asis of the 1ive
$rinciples of $eaceful co,e/istence. here e/ist good 'asis for
cooperation 'etween our two countries. <t present, 'oth China and !ndia
are facing the common tasks for developing economy, eliminating poverty
and improving the 6uality of peoples life. he two countries share a similar
or identical views on many ma.or international issues. herefore, there
e/ists 'road similarities. he economic and trade relations 'etween China
and !ndia needs to 'e further enhanced.
7e are pleased to see that !ndia has en.oyed faster economic growth
since adopting reform policy in 199*. 9ver the recent year, through
concerned efforts from the 'oth sides, Sino,!ndian 'ilateral trade has kept
increasing. Statistics show that the total trade 'etween China and !ndia
was only &%3 million (S dollars in 1991, whereas in 1997 it rose to 1,80*
million (S dollars. he average annual growth of trade 'etween two
countries increased 'y 0*+. <lthough 'eing other reason since last year,
the total trade volume reached 1.9&& 'illion (S dollars with an increase of
8.9+ compared with the previous year.
!t is worth nothing that although trade and economic cooperation 'etween
China and !ndia have 'egun taking shape, they are still incompati'le with
general economic strength of either China and !ndia. he 'ilateral trade
volume is still small and the product scope needs to e/pand. <ccording to
statistics, in 1998, the mutual trade volume accounted for only &.2+ of
!ndias total trade volume, and *.%+ of that of China. heir respective
markets, are attractive to each other, and have great potential to tap.
7hile enhancing 'ilateral trade, we should also strengthen cooperation of
economic technology. 1rom the industrial structure view, !ndia is advanced
ion information industry and software technology and China has an
advantage of world competition in technology and price of mechanical and
electrical products and infrastructure. <t the same time, we should
research the market of mutual investment. !ndia has already had some
investment in China. China needs the help and cooperation from !ndian
personalities of commerce and industry. <s two 'iggest developing
countries, neigh'ors and ancient civili-ation countries, China and !ndia
e/ist not only traditional friendship, 'ut also face, common task to 'uild its
own country.
=C989@5
1ocus
China
!ndia China trade 4elations
!ndia,China trade has grown at a rapid pace since 1991. he rapid growth
in 'ilateral trade reflects the e/ponential increase in commercial and
economic interaction since the 'eginning of this decade. oday !ndia is
Chinas largest trading partner in South <sia. ;ilateral trade and economic
cooperation 'etween !ndia and China continued rapid growth in 1997.
!ndias imports from China during 1997 amounted to (S) 900.*% million.
!ndias e/ports to China during the same year were (S) 897.&% million.
he total trade turnover during 1997 was (S) 1.80 'illion. he annual
growth rates in turnover, !ndia e/ports to China and !ndian imports from
China were 0*.&+, &2.7+ and 0%+ respectively.
!n 199&,90 and 199% !ndia en.oyed a trade surplus with China. !n 1997
China had a marginal 'alance of trade surplus with !ndia amounting to
(S) 03.8 million.
a'leA op $erforming =/ports of !ndia to China B1997C
!tem Dalue in (S #ollars "rowth rate in
1997
@ineral products &9*.%* 0%+
<nimal and vegeta'le fats
17.30 &9+
India's Exports to China
OTHERS
10%
MINERAL
PRODUCTS
30%
RAW HIDES AND
SKINS, LEATHR
ETC.
3%
TEXTILES AND
TEXTILE ARTICLES
22%
PRODUCTS OF
CHEMICALS OR
ALLIED
INDUSTRIES
7%
LIVE
ANIMALS/ANIMAL
S PRODUCTS
2%
ANIMALS/VEGETA
LE FATS ETC
2%
PREPARED
FOODSTUFFS ETC.
21%
ASE METALS AND
ARTICLES OF ASE
METAL
3%
he increase in the e/ports of mineral ores was mainly due to increased
iron ores and chrome ore e/ports. !n prepared foodstuffs the fast moving
items was oil cake and solid residues of soya'ean. 7ithin the category
te/tiles the sharpest growth was in cotton and cotton yarn whose e/ports
to China grew 'y 80+ over 199%. !n the category chemicals the main
increase was that of 193+ in inorganic chemicals e/ported to China,
mainly aluminum o/ide.
!n the category 'ase metals and the articles of 'ase metals the decline
was mainly due to increased e/ports of iron and steel products to China. <
positive feature is the reduction of e/ports of raw hide and skins from !ndia
to China. he category lives animals and animal products showed a
decline in !ndias e/ports mainly due to the 28+ decline in the e/ports of
marine products.
India's Exports to China
OTHERS
10%
MINERAL
PRODUCTS
30%
RAW HIDES AND
SKINS, LEATHR
ETC.
3%
TEXTILES AND
TEXTILE ARTICLES
22%
PRODUCTS OF
CHEMICALS OR
ALLIED
INDUSTRIES
7%
LIVE
ANIMALS/ANIMAL
S PRODUCTS
2%
ANIMALS/VEGETA
LE FATS ETC
2%
PREPARED
FOODSTUFFS ETC.
21%
ASE METALS AND
ARTICLES OF ASE
METAL
3%
Table: Top Performing Exports from China to India (!!"#
!tem Dalue in (S #ollars "rowth rate
Chemicals and allied
products 0*7.9 19+
<nimal and vegeta'le
fats
17.30 &9+
he increase in the Chinese of chemical e/ports was due to an increased
import of organic chemicals and pharmaceuticals raw materials. !n mineral
products increased Chinese e/ports were contri'uted mainly a 20+
increase in steam coal and coke. 7ithin the category machinery,
mechanical machinery showed the sharpest increase of 1*%+. his may
have 'een contri'uted 'y pro.ect e/ports to Coal !ndia >imited.
Export Strateg$ for the China %ar&et
China is one of the ma.or trading nations of the developing world. !n 1997
its foreign trade volume e/ceeded (S) 0&3.1 'illion. 9ur e/port strategy
towards China has 'een conceived 'oth within the 'ackground and
present trends in !ndia China trade descri'ed a'ove as well as in the
conte/t of the present situation regarding Chinas glo'al imports. he
graph 'elow sets the conte/t for crystalli-ing our strategy of promoting
e/ports to China.
Principal Indian Import from China
C!"#$%&'
1%
V($%)!(* + E,-%./(&#
0%
M1)$%&(23 4&"#
(!()#2%)1!5
20%
E!()#2%)1! M1)$%&(23
26%
C$(/%)1!* + P2"7-)#*
11%
F""7*#-88 +
T"91))"0
3%
M%&(21! 8-(!*
11%
F""#:(12
0.36%
T(;#%!(* + T(;#%!(
A2#%)!(*
1<%
he focus of our e/port strategy therefore would have to 'e a two pronged
approach to e/pand the e/port of e/isting products sold in the China
market and to diversify 'y e/ploring and developing new products that
could 'e e/ported to China
Focus Products for Promoting India's Exports to China
Agriculture and Allied Products : @arine $roducts, 9il meals, 4aw
Cotton, Cashew, Spices and 9leoresins, Coffee, 7heat, 4ice, ;asmati
4ice, 1ruits and Degeta'les, Castor 9il, "uargum @eal, $rocessed 1oods
and Euices, o'acco F @anufactured and un,manufactured, $oultry and
#airy products.
(re and %inerals : !ron 9re and Chrome 9re, "ranite and mar'le
%anufactured )oods: leather and >eather $roducts, Cotton e/tiles,
"ems and Eewellery, #rugs, $hanna and 1ine Chemicals, #yes and #ye
Principal Indian Import from China
C!"#$%&'
1%
V($%)!(* + E,-%./(&#
0%
M1)$%&(23 4&"#
(!()#2%)1!5
20%
E!()#2%)1! M1)$%&(23
26%
C$(/%)1!* + P2"7-)#*
11%
F""7*#-88 +
T"91))"0
3%
M%&(21! 8-(!*
11%
F""#:(12
0.36%
T(;#%!(* + T(;#%!(
A2#%)!(*
1<%
!ntermediates, !norganic, 9rganic and <gro Chemicals, !nstruments,
@achinery, =ngineering !tems, and @achine ools, =lectronic Components
and $roducts, $ro.ect =/ports, ransport =6uipment, Computer Software,
$lastic and >inoleum $roducts, 4u''er manufactured $roducts, $rimary,
Semi,finished !ron, Steel and !ron and SteelG;ar 4ods and high grade
steel, <luminum, $aperG7ood $roducts, 1urniture, ?andicrafts e/cluding
handmade carpets, Sanitaryware, Class, glass,ware, hand ceramics,
Cosmetics toiletries.
Import *estrictions in China
Chinese regulations divide imports into three categoriesA Contra'and
goods which may not 'e imported: restricted goods which re6uire a import
license and general goods which do not re6uire a license unless imported
'y entities specifically not authori-ed to import such goods.
< total of 0% categories of goods are currently su'.ect to import licensing
and most of them are su'.ect to 6uota management as well. he 6uota
system applies to 10 categories of general commodities and 13 categories
of machinery and electronic products. he general commodities su'.ect to
import 6uota management include refined oil products, wool, polyester,
polyester chips, acrylic fi'res, natural ru''er, vehicles tyres, sodium
cyanides, chemical fertili-ers, sugar, to'acco and to'acco products,
acetate tow Bfor cigarettesC and cotton.
@echanical and electronic products su'.ect to 6uota management include
motor vehicles and parts, colour televisions, audio cassette recorders,
refrigerators and their compressors, washing machines, video cassette
recorders and their key parts, cameras, watches, air conditioners, audio
and video tape duplicating machines, crane lorries and their chassis,
electronic microscope, open,end spinning machines and electronic colour
scanners.
here are also variations on the 6uota system. Some products which have
'een taken off the 6uota system with effect from 8ovem'er 1993 have
'een put under a ariff 4ate Huota System. (nder this system prohi'itive
tariffs are applied to Chinese importers who dont have a state sanctioned
6uota. here have 'een persistent reports that a ma.or !ndian import item
to china Soya'ean Cake is to 'e put under the ariff 4ate Huota system.
he annual 6uota for general commodities is set 'y the State $lanning
Commission in ;ei.ing. he import 6uotas for machinery and electronic
are allocated 'y the @achinery and =lectronics $roduct !mport and =/port
9fficer under the State =conomic and rade Commission. !n addition the
@inistry of 1oreign rade and =conomic Cooperation also retains stringent
regulatory control over imports to licensing, registration re6uirements,
commodity inspection and 6uarantine.
1oreign rade Corporations which operate under a general license to
import commodities must o'tain special licenses for the import of goods
outside there. <pproved 'usiness scope.
1oreign !nvested =nterprises can import e6uipment and raw materials for
a .oint venture or a wholly foreign owned enterprise and these imports are
governed 'y the investment contract signed with the State <dministration
for !ndustry and Commerce and therefore are e/empt from import
licenses. 1!=s that do not 6ualify for import licensing e/emptions must
su'mit an import plan to @91=C or its local agent every si/ months.
@91=C issues licenses upon e/amination for 'ulk imports of listed
items.
Source =/port Strategy for China @arket F "uide for !ndian ;usiness
<ugust 1998.
Commercial Information
%inistr$ of Foreign Trade and Economic Cooperation (%(FTEC#
#epartment of !nternational rade and =conomic <ffairs
&, #ong Changan <venue
;ei.ing 1**701
elA B8%1*C %7*813&%
1a/A B8%1*C %7*81310
=mailA we'masterImoftec.gov.cn
+ei,ing International Trade
4esearch !nstitute
rade !nformation #ivision
ower 8um'er 1&, 13
th
1loor
J
;ei.ing 1***&&
elA B8%1*C %3**1%%1
1a/A B8%1*C %3**&**3
China Council for the Promotion of International Trade (CCPIT#
#epartment of !nternational 4elations
1, 1u King @en 7ai Street
;ei.ing 1**8%*
elA B8%1*C %8*&0332
1a/A B8%1*C %8*1107*
=mailA lianluoIpu'lic.east.cn.net
(rlA httpAGGwww.ccpit.org
+ei,ing Foreign In-estment Enterprises Centre
01, 8orth hird 4ound 4oad,
1*
th
1loor, ?aidian #istrict
;ei.ing 1***88
elA B8%1*C %3**1%%1
1a/A B8%1*C %3**&**3
.Trade Point +ei,ing
19*, Chaoyang @en nei Street
#ongcheng #istrict
;ei.ing 1***1*
elA B8%1*C %3&287%9
1a/A B8%1*C %3&%*37%
=mailA /uItp'.c.gov.cn
(rlA httpAGGwww.tp'.c.gov.cn
.Shanghai Trade Point'
&7, Lhongshan 4oad, =.!.,
1
st
1loor, Shanghai &****&
elA B8%1*C %0&0&188
1a/A B8%1*C %0&0&209
=mailA tpsftccIpu'lic.sta.net.cn
(4>A httpAGGwww.tpsha.gov.cn
China Chamber of International Commerce Tian,in Chamber of
Commerece
>egal <ffair #epartment
!nternational rade ;ldg., 4oom 7*2
83, Hu 1u 4oad, ?eping #istrict
ian.in
elA B8%&&C &0011891
1a/A B8%&&C &7280%8%
=mailA panglinnIpu'lic.tpt.t..cn
FIE( /E0S
!ndia,China rade in Calendar 5ear 1998
1igher Exports from +oth Sides *aise +ilateral Trade
Chinas high rate of economic growth since 1978, grant of mutual @18
reatment in 1982, a degree of complementarily 'etween the two
economics, and the growing economic and commercial relationship with
!ndia have led to increase in !ndia,China trade seven,folds since 1991
when it was of the value of (S) &%2.8 million. he Chinese Customs
Statistics, indicate that 'ilateral trade reached (S) 1.9&& 'illion in 1998,
an increase of 3+ over the 1997 figure of ) 1.80* 'illion. !ndia continues
to 'e Chinas largest trade partner in south <sia for the fourth year in
succession.
Changes in export trends and possible reasons
1998 was an year of slowdown of international trade worldwide B7orld
rade showed a negative growth of 1+ during the periodC and this
slowdown had its impact on 'oth !ndia and China. he optimistic
economic prognosis of the Chinese "overnment presented earlier in the
year coasted sharply with the economic reality. Chinas e/ports in 1998,
which were e/pected to grow at a respecta'le 9+ from 1997s heady
&*+, grew only 'y *.3+. Chinas world,wide imports declined 'y B,C 1.3+.
?owever, growth in Chinese e/ports to !ndia 'y 8.9+ was an achievement
in itself Bagainst 0%+ during 1997C, while !ndias e/ports remained more or
less static Bgrowth at the rate of *.9+ against average
Table I : +asic Facts of India2China Trade (!!2!!3#
(million 4S5#
$eriod !ndian !mports !ndian =/ports rade ;alance rade Dolume
"rowth
8.9+ *.9+ 3+
rate of growth of &2.7 in 1997 and 8*.9+ in 199%C.
?owever, trade surplus continued to 'e in Chinas favour and it increased
to (S) 11*.89 m during 1998 from (S) 03.8 m during 1997. !ndias trade
deficit with China in 1998 could 'e ascri'ed to a growth of !ndian imports
of chemicals and allied products, silk and machinery in 1998 from China
B(S) 0&9 170 mm, (S) 1*1.*87 mm, and (S) 127.%%% mm.
4espectivelyC, while !ndian e/ports, with the e/ception of oil cake of
soyameal, and chemicals, could not keep the trade surplus in !ndias
favour. <lthough !ndia has an adverse 'alance of trade, many of its
imports from China such as coal, chemicals and machinery are essential
imports for the domestic industry, and result in greater price
competitiveness of !ndian products.
(nlike in 1997, when growth in 'ilateral trade was entirely fuelled 'y
!ndian e/ports, in 1998 growing e/ports from 'oth sides contri'uted to the
rise in trade. !t also meant that in 1998 !ndia increased its share of Chinas
international trade to *.390+, as against *.3%0+ in 1997. !n terms of
e/ports, !ndia increased its market share to *.%2%+ as against *.%0+ in
1997, while Chinas e/ports to !ndia increased to *.33+ of her world,wide
e/ports from *.31+ during 1997.
!t may 'e noted that !ndias e/ports are concentrated in the low value,
added sector. he slowing down of the economics of 'oth the countries
during 1997, the financial crisis of South,=ast <sia, and the resultant
ad.ustment in the economies and trade of 'oth the countries have
contri'uted in cur'ing the high growth path en.oyed 'y trade in the past
few years. he initiation of anti,dumping proceedings and imposition of
punitive duties against many Chinese products like metal lurgical coke
etc., in !ndia also dampened trade.
9ver the last few years, there has 'een consistent increase in intake of
iron and chrome ores from !ndia, which seems to have 'een reversed
during 1998. Chinas total import of iron ore during 1998 was 31.77 million
tones, a decrease of %.1+ over the corresponding figures for 1997. !n
value terms, China imported iron and chrome ores worth (S) 1.2%7 and
(S) 8*.887 mm respectively, a decrease of 91+ and &7+ respectively
over last years figures. #uring 1998, Chinas intake of iron ore from
<ustralia, !ndia and South <frica decreased, whereas its imports from
;ra-il seems to have increased.
?eavy imports of iron ore, a raw material used for the production of iron
and steel, has made China one of the worlds ma.or iron ore consumers
following Eapan and =urope. !t is e/pected that in the future China will
continue to rely on imported high,grade iron ore to support the sustained
development of her iron and steel industry.
Chinese companies and the State <dministration of @etallurgical !ndustry
BS<@!C are looking at neigh'ouring countries to develop mines there to
meet its needs for high grade iron ore. China has already ac6uired, or
plans to ac6uire such mines in countries like $eru.
1urther, it is understood that some companies in ?ong Mong and
Singapore are also sourcing these products from !ndia for e/port to China,
and to that e/tent, !ndia,China e/ports are underestimated. !t is clear that
there is great scope for increasing e/ports to China.
4ecent forays 'y !ndian e/porters in the Chinese markets seem to have
succeeded in increasing !ndias profile in the local market, and mar'le,
6uart- and granite e/ports from !ndia have already made a niche in this
market. !n this conte/t, there is scope for the !ndian 'uilding industry to
participate in construction activities in China. Some !ndian companies
have started following up opportunities in this sector in a meaningful
manner. #uring 1997, China imported granite B'oth crudely cut and sla'sC
worth (S) 23.032 mn out of which &9+ was sourced from !ndia B(S)
10,&9* mnC. he market for the decoration and furnishing industry in
China is up'eat and, according to Chinese sources, it is e/pected to hit
)&2 'illion 'y the years, the decoration industry has 'een rising at an
annual rate of 0*+, this year, total revenue is likely to top (S)1& 'illion.
herefore it is suggested that !ndian industry should also e/plore
possi'ilities for !ndian interior decoration materials and products as
Chinas decoration su',sectors output has increased 'y 0*+ annually in
the last five years.
< niche has 'een carved 'y !ndian,worked monumental stones of mar'le
and granite B?S Code %8*&&11* and %8*&&0**C e/ports from !ndia have
increased 'y %7+ to amount to (S) %.%%7 mn in 1997.
$repared 1oodstuffs had shown the largest growth of 11,&31+ from a
negligi'le figure of (S) 108.&3 mn in 199%. #uring 1998, !ndian e/ports
reached (S) &01.8*9 mn, an increase of 17+ over the figure of (S)
197.937 mn, in 1997. he Customs classification under this head ascri'es
this entire amount to Nwaste of food industries and prepared animal foodO.
he 'ulk of the items under this head is oil,cake and other solid residues
of Soya,'ean. his item is used as an input in animal feed in China.
Chinas import of soya'ean from !ndia have 'een increasing consistently
since 199%. #uring 1998, due to 'ad soya'ean crop in ;ra-il, and
increased realisation on the part of Chinese entrepreneurs, the possi'ility
of importing soya'ean from !ndia in smaller containers, !ndia was poised
for 'igger orders. ?owever, complaints a'out poor 6uality of soya'ean
supplied from !ndia, seem to have taken away some of market share
which would have come to !ndia.
FIE( /E0S
!ndia,China rade in Calendar 5ear 1998
1igher Exports from +oth Sides *aise +ilateral Trade
Chinas high rate of economic growth since 1978, grant of mutual @18
reatment in 1982, a degree of complementarily 'etween the two
economics, and the growing economic and commercial relationship with
!ndia have led to increase in !ndia,China trade seven,folds since 1991
when it was of the value of (S) &%2.8 million. he Chinese Customs
Statistics, indicate that 'ilateral trade reached (S) 1.9&& 'illion in 1998,
an increase of 3+ over the 1997 figure of ) 1.80* 'illion. !ndia continues
to 'e Chinas largest trade partner in south <sia for the fourth year in
succession.
Changes in export trends and possible reasons
1998 was an year of slowdown of international trade worldwide B7orld
rade showed a negative growth of 1+ during the periodC and this
slowdown had its impact on 'oth !ndia and China. he optimistic
economic prognosis of the Chinese "overnment presented earlier in the
year coasted sharply with the economic reality. Chinas e/ports in 1998,
which were e/pected to grow at a respecta'le 9+ from 1997s heady
&*+, grew only 'y *.3+. Chinas world,wide imports declined 'y B,C 1.3+.
?owever, growth in Chinese
e/tiles and e/tiles <rticles at (S)1%7.3*1 mn showed a decrease of
10.19 over (S)19&.9%9 mn, in 1998. Cotton and cotton yarn at (S)
129.379 decreased 'y 1%+ over (S) 178.%%8 mn in 1997, while other
items of note,silk e/ports at (S) 0.%11 showed decrease of &9+ over
(S) 3.*19 mn in 1997: <rticles of apparel F knitted or crocheted at (S)
7.&%& mn. an increase of 9&+ over (S) 0.782 mn. in 1997.
=/ports of chemicals in 1998 reached (S) 9%.&30 mn, an increase of
23+ over (S) %%.23 mn in 1997. =/ports of inorganic chemicals from
!ndia amounted to (S) 3*.9&0 mn, an increase of 12*+ over (S) &1.&
mn in 1997. he figures of organic chemicals e/port to China increased 'y
02+ to reach (S) 02.823 mn from (S) &3.9 mn in 1997. he main
inorganic chemical imported 'y China is <luminum o/ide. $harmaceutical
e/ports reached (S) 1.8& mn, a decline of 1*+ from (S) &.*1 mn, in
1997. =ssential oils and resinoids, perfurnery, cosmetic or toilet
preparations reached (S) &.77* mn, a decline of 73+ from (S) 1*.90
mn in 1997. #yes reached (S) &.&08 mn, a decline of 73 from (S) &.21*
mn in 1997 whereas miscellaneous chemicals had a positive growth of 3+
to reach (S) 0.283 mn from (S) 0.018 mn in 1997.
here has 'een an increase in activities 'y !ndian chemical companies in
China. led 'y C?=@KC!>, some !ndian companies had participated in an
!nternational Chemical. 1air at ;ei.ing last year. ;esides, a num'er of
!ndian companies had visited the fair. he growth in trade in these items
seems to 'e partly due to the contacts made 'y !ndian 'usinessmen at the
fair. =/ports of chemicals to China need to 'e further e/plored for
e/pansion of our 'ilateral trade.
he declining trend in e/port of animal and vegeta'le oils, mainly castor
oil, has 'een arrested and, during 1998, imports 'y China of castor oil and
its derivatives reached (S) 0&.8*9 mn, an increase of 87+ over (S)
17.30 mn in 1997. he demand for this product in China is due to use of
castor oil in manufacture of chemicals. 8early 993 of Chinese demand is
met from !ndia.
=/port of raw hides and skins, leather etc. reached (S) &8.3%0 mn in
1998, an increase of 10+ over (S) &3.08% mn during 1997. !ndias
e/ports to China of these items are mainly tanned hides. he (.S., 4ep. of
Morea, aiwan are main suppliers of hides to China. Chinas e/ports of
leather articles are dependent upon import of hides and therefore there is
great potential for !ndia to increase its market share in China. !ndian
e/porters need to make forays to leather e/hi'itions in china and ?ong
Mong to make the local entrepreneurs aware of their products.
!ndian e/ports of precious stones and precious metals had reached (S)
&*.&03 mn during 1998, an increase of 1*7+ over (S) 9.732 mn in 1997.
he actual increase should 'e seen in the light of an increase of our
e/ports of this item to ?ong Mong Bfrom (S) 989 mn in 1992 to (S) 1&0*
mn in 1993C and the possi'ility of large re,e/ports to China from ?ong
Mong. he China Customs descri'es this item as industrial diamonds.
he declining trend in e/port of live animalsGanimal products seems to
have continued during 1998 as !ndian e/ports fetched (S) 13.&91 mn, a
decline of &&+ over (S) 19.%0 mn during 1997. @arine products e/ports
netted (S) 13.1&% mn, a decline of &&+ over (S) 19.011 mn during
1997. ?owever, China imports during the period had increased 'y &&.%+
worldwide and reached (S) %%%.028 mn. Chinas seafood imports are
mainly from <ustrailia, 8ew Lealand, the (nited States, Canada, hailand
and some other south,east <sians nations, including !ndia. ?owever,
!ndian e/ports of seafood items to China are much higher as most of the
seafood is e/ported through ?ong Mong.
Since 1997, !ndian e/ports of seafood have 'een affected to a large
e/tent due to non,realisation of dues from local importers on 6uality or
other grounds.
<s China is a vast market for seafood, and its future potential is even
greater, most traders, local and foreign, have confidence that this difficult
period will pass and that they will once again 'e a'le to meet the strong
domestic demand for high,6uality imported seafood.
=/port of vegeta'le products in 1998 decreased 'y &*+ to reach (S)
9.2&7 mn over (S) 11.7& mn in 1997. !ndian e/ports of her'al plants etc.,
netted (S) 3.%3% mn, a decrease of 21+ over (S) 9.%% mn in 1997 while
e/ports of lac and other resin increased 'y 182+ to rech (S) &.92& mn
from (S) 1.*07 mn in 1997.
he declining trend in e/port of 'ase metals and articles of 'ase metal
continued. #uring 1998, there was a decrease of %%+ with e/ports
reaching (S) 9.2*0 mn. !ndian e/ports were (S) 83.28 mn during 1997.
=/ports of !ron and Steel, declined steeply, from (S) 177.23 mn in 1990
to (S) 29 mn in 1992, to .ust (S) 17.3 mn in 1993, the third year of
consecutive decline. <s a result of representation 'y ma.or !ndian iron and
steel companies at a 1993 metallurgical fair in ;ei.ing. !ndian e/ports
picked up to reach (S) 77 mn in 199%. he decline in e/ports of another
item N<luminum and <rticles thereofO, continue and !ndian e/ports touched
only (S) *.10& mn, a decrease of 93+ from (S) &.%% mn in 1997. #uring
199% !ndian e/ports had amounted to (S) 7.3 mn.
here is good scope for !ndian e/ports of speciality steels. China re6uires
6uality steel. ;ut more intensive effort is re6uired. <fter specific needs in
different industrial and construction sectors have 'een identified and the
right contacts esta'lished.
otal machinery e/ports were of the value of (S) 9.*7% mn in 1998, an
increase of &1+ from (S) 7.291 mn in 1997. !ndian e/ports of machinery
and parts thereof increased 'y &+ to reach (S) 0.8&2 mn an increase of
&+ over the figure of (S) 0.700 mn during 1997. ?owever, !ndian e/ports
of electrical machinery and e6uipment and parts thereof increased 'y 2*+
to (S) 3.&3& mn from (S) 0.737 mn in 1997.
Chinese e/ports of machinery to !ndia are growing at a very fast pace.
his is 'ecause the Chinese have aggressively 'id for ma.or pro.ects in
!ndia, and have 'een e/tremely active in pushing technology e/ports.
;esides their success in sales of mini,'last furnace technology, they have
targeted mini,hydel, ceramics, construction materials and other items for
e/port promotion.
!ndia too should e/plore the possi'ilities of e/porting machinery and
China, and participate in local tenders for the pro.ects funded 'y <#; and
the 7orld ;ank. 7ith this end in view, since 1997, the !ndian =m'assy
has started providing information on tenders pu'lished in local =nglish
newspapers on a daily 'asis 'y e,mail to ma.or industry federations,
organisations, e/port promotion councils and enterprises in !ndia. ;ut
much more needs to 'e done to improve !ndias e/port profile. Disits 'y
!ndian delegations have not lead to a 'reak through in machinery e/ports.
!nstead, all these delegations felt that China had cost advantages in low,
technology capital e6uipment and machine tools for mass production of
end items, though !ndian technological levels were more advanced.
Electronics and Electronic Components6 Soft7are
hough the Chinese have shown interest in cooperation with !ndia in
software development, so far nothing su'stantive has emerged. China has
identified electronics and electronic components and software as one of
the thrust areas, and a num'er of industry delegations plan to visit !ndia
during 1999.
!n the area of software development, 8!! has already esta'lished a .oint
venture in Shanghai in the field of computer education. <$=C?
=ducation Centre is also planning to do so in the near future. < delegation
from !nfosys echnologies visited China in 9cto'er 1998 with a view to
e/plore the possi'ility of investing in China.
=/ports of 1ootwear, ?eadgear etc., articles of human hair registered a
growth of 7+ and reach (S) 7.800 mn from (S) 7.0&3 mn in 1997.
=/port of human hair and wigs, which are the main items under this
category, recorded a growth of 9+ to reach (S) 7.789 mn from (S)
7.122 mn. !ndia has emerged as one of the main suppliers of human hair
and wigs to China over the last few years. !t may 'e noted that during
1998 Chinese glo'al e/ports of these items reached (S) 2*.*79 mn, an
increase of 1&+.
he declining trend in e/port of $lastics and articles thereof has continued
as !ndian e/ports touched (S) 0.283 mn, a decrease of 2*+ from (S)
3.7*2 mn in 1997. he main products under this head is poly,chips. China
is sourcing these item from Eapan, ?ong Mong, aiwan, !ndonesia, (S<
and !ndia. !ndia should vigorously e/plore raising e/ports of plastics.
0T(: China's /e7 Economic 1ope
SP Seth
PPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPP
PPPPP
<s China opens its economy, especially after its entry into the 79, it
stands to gain through increased foreign investment, technology transfers
and e/ports. ;ut it will also have to face greater unemployment and
conse6uent social unrest.
PPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPP
PPPPP
7hen $aul Mrugman wrote his 1992 article, Qhe @yth of <sias @iracle in
1oreign <ffairs, he appeared like a party pooper trying to de'unk the
tremendous economic success of <sias Qtiger economies. ?is 'asic
thesis was thatA N=conomic growth that is 'ased on e/pansion of inputs,
rather than on growth in output per unit of input, is inevita'ly su'.ect to
diminishing returnsO. ?e maintained that the growth of the Soviet economy
and its su'se6uent inevita'le decline were due to this factor. <nd this was
going to 'e true of <sian economics as well.
<s he wrote with great prescience, N$opular enthusiasm a'out <sias
'oom deserves to have some cold water thrown on it. R'ecauseST the
future prospects for that growth are more limited than almost anyone
imaginesO. <nd lo and 'ehold, come 1997, most of <sias tiger economics
were facing economic meltdown. Baiwan, along among these economics,
managed to escape largely unscathed 'ecause of its core technology
e/ports, healthy foreign reserves as a deterrent and for emergency
intervention to ward off and manage currency raiders, not,too,'loated
'anking system, and a versatile economyC.
!n the midst of <sias general economics malaise at the time, China
seemed an oasis of sta'ility. Simply 'ecause its engagement with the
glo'al economy was limited. !ts currency and stock market Bstill in its
infancyC were largely insulated from the glo'al market. here was,
therefore, no raid on its currency and no stock market upheaval. B?ong
Mong, though, was an e/ceptionC. ?owever, it was only a mi/ed 'lessing.
Chinas relative insulation has only made its economic pro'lems
intracta'le. 7hile the rest of <sian economics are undergoing a radical
overhaul to regain their competitiveness and economic health Bal'eit with
tremendous social painC, China is stuck with its archaic system.
rue, it has undertaken the task of reforming, restructuring, merging and
privatising its state economic enterprises, the process is slow, hapha-ard
and erratic. ;ecause of the social cost of rising unemployment from these
measures, the government has had to 'acktrack to rein in radical surgery.
he 'anks are, therefore, directed to e/tend loans to keep alive sick
enterprises to ward off a generalised social upheaval. his is despite the
fact that the loan situation of these 'anks is already very precarious.
he point to make here is that Chinas economy has entered a state of
diminishing returns. !ts Qsocialist market economy is not growing army of
unemployed and underemployed. !ts e/pansionary policy of state
spending on pu'lic works is simply not kicking off. he economy is in a
deflationary spiral with falling prices and weak demand. <s one
commentator has point out, NT the economy is now in its &2
th
straight
month of falling prices or deflation.
!n other words, Chinas socialist market economy, has reached its
plateau. <nd, like its communist cousins in the erstwhile Soviet =mpire, it
too is facing diminishing economic prospects. ;ei.ing was hoping that its
relatively Brelative to the Soviet (nionC li'eral economy would create its
own growth momentum. 9'viously, that doesnt seem to 'e happening. !n
short, it is not possi'le to 'e half,pregnant.
;ei.ing 'adly needs a circuit 'reaker. #eng Kiapoings economics reforms
in the 198*s acted as one. <pparently, it 'elieves that Chinas entry into
the 7orld rade 9rgani-ation B79C might do the same in the new
millennium. here are difficulties though. 1irst, there are the procedural
issues. <t the moment, China and the (S have simply signed a 'ilateral
agreement. his is important 'ecause it will remove (S opposition to
Chinas entry. !t was a ma.or hurdle. ;ut it still has to 'e ratified 'y the (S
congress. 7ith presidential elections around the corner, it might not 'e all
that easy or 6uick.
<t the same time, China has to enter into 'ilateral agreements with the
=uropean (nion, Canada and some other countries, still not covered.
1ollowing the conclusion of 'ilateral agreements, 79 will draw the
formal multilateral framework for Chinas entry, thus making it su'.ect to an
international legal framework in glo'al trade. hese procedural matters will
take time, even if everything were to go smoothly F an unlikely prospect.
?owever, the 'ilateral (S,China agreement is 6uite su'stantive. !t will
open up Chinas market, with su'stantially reduced tariffs, su'sidies, and
other o'stacles across the economic spectrum to include industry,
agriculture, 'anking, insurance, telecommunication, retail trade and
!nternet services. <nd if implemented Bthe devil will 'e in the detail and its
conflicting interpretationsC over a phase,in period of up to si/ years, this
will mean 6uite a radical change in Chinas economic landscape.
9n the positive side, it will force Chinas inefficient and loss,making state
enterprises to choose 'etween greater efficiency andGor e/tinction. his
will, of course, lead to greater unemployment and conse6uent social
unrest. <griculture sector is likely to 'e most adversely affected, with .o'
losses estimated in millions. !t will force more rural people into ur'an
migration in search of .o's, with even fewer opportunities than at present.
<n estimated floating rural population of 13* million people might grow
e/ponentially, causing tremendous strain on an already that gains in
la'our,intensive e/port industries, such as te/tile, clothing, footwear and
toys, will help.
Chinas 'est hope, after its entry into 79, will lie in increased foreign
investment, with greater technology transfers and increased e/ports.
;ei.ing commitment to an international legal framework will reassure
foreign investors. (nder its present ar'itrary legal system, it is a .ungle out
there. <t the same time, China wouldnt need to undertake the painful task
of putting together a transparent domestic legal regime with unpredicta'le
conse6uences.
Contrary to e/pectations that Chinas 79 entry will somehow 'e good in
terms of its democratic prospects, it might not work 6uite like that. !t will
initially reduce international pressure for political reforms, 'ecause of the
new optimism. !n the interim, China will have more time to deal with the
domestic conse6uences of a li'eralised economic regime. !n any case,
once it is inside the 79, it will 'e a'le to control the pace through a
welter of dispute mechanisms. !t is a gam'le for China, with unforeseen
conse6uences for the communist system and the leadership.
!n the short term, the economic 'enefits to China of .oining the 7orld
rade 9rgani-ation this year will 'e limited depending on the terms of
entry, there could 'e some negative shocks to the Chinese economy. !n
the long term, efficiency gains will 'e the economic 'enefits. ?ong Mong
will also 'enefit in long terms through increased foreign investment inflow
to China.
=ven if China were to receive a five,year phased in period for li'eralising
the trade regime, there will 'e some negative short term shocks to its
economy due to the removal of the protective 'arriers. <ccording to the
7orld ;ank, if the impact of non,tariff 'arriers is 'uilt into the nominal tariff
rate, Chinas import tariffs for many products could 'e &,2 times higher
than the average nominal tariff rate of 1%.7+. !t is estimated that industries
such as stell, automo'iles, electronics, machinery and heavy chemicals
would 'e especially vulnera'le to the elimination of non,tariff trade
'arriers. "iven the shaky foundation of Chinas financial system,
introducing significant foreign competition in that sector could threaten the
sta'ility of the domestic system in the short term. he concessions that
China has pledged so far also suggest it would even welcome foreign
capital into formerly protected areas, such as retail trade, distri'ution,
telecommunication and insurance. Chinas trade sector, 'eing only 0*+ of
"#$, has high potential to grow further under the freer 79 regime. <ll
this result in efficiency gains for the economy.
>ast year %*+ of ?ong Mong re,e/ports originated in China ?ong Mongs
re,e/ports 'usiness would also 'enefit in the long term from a possi'le
increase in the volume of Chinese e/ports. he S<4s te/tile 'usiness in
China, nota'ly those ?ong Mong te/tile firms that act as middlemen
'etween overseas 'uyers and mainland manufacturers, could also gain.
he 79 deal would ?ong Mongs elecom sector too, which has a
Chinese language customer 'ase and the cash and e/pertise to e/pand.
9ne condition for China to enter the 79 is to increase access for foreign
companies to its telecom market, and ?ong Mong firms are treated as
foreign companies 'y the mainland. !f China fails to get into the 79 this
year, ;ei.ing might pull 'ack on concessions it had made, many of which
are 6uite sensitive in China. ;ut the 'iggest risk would 'e a potential
policy reversal 'y the Chinese, which could worsen and prolong the
financial crisis that has swept <sia. 8evertheless, the ?ong Mong and
Shanghai ;anking Corporation B?S;CC remain, cautiously optimistic that
China will .oin the 79 this year, so that the potential risks discussed
a'ove would 'e contained.
<nalysis of !ndias =/ports o U !mports from ?ong Mong in 1998 A !ndias
e/ports to ?ong are dominated 'y & ma.or items namely pearls, precious
U semi precious stones and te/tiles. hese two items accounted
respectively for 39+ and 1%+ Btotal of 73+C of total e/ports from !ndia
during 1998. he other top 8 commodities which together account for 10+
of e/ports are leather, .ewellery, medicinal U pharmaceutical products,
cotton, flat rolled products of alloy steel, synthetic organic colours,
organic,inorganic compounds, clothing accessories and other articles of
apparel.
@ore than 9*+ of ?ong Mongs e/ports to !ndia are re,e/ports from China
and other countries. he 1* top items of re,e/ports account for 71+ of
total re,e/ports. !n the period of 1998, total re,e/ports declined 'y 2+ and
amounted to (S) %13 million. !mportant commodities such as pearls,
precious and semi,precious stone B,%+C, semiconductors and valves B,
12+C, office machine U computers B,19+C, manufacture articles B,13+C
electrical machinery B,17+C, silk B,3%+C have declined during this period.
he only item to show an increase in the top 1* items of re,e/porters is
telecommunication e6uipment B7+C. 9ther items of re,e/ports which have
grown apprecia'ly are <udio U Dideo 4ecorders B1%%+C, toys U games
B2+C, te/tile and leather machinery B&%+C, plastic articles B&&+C, non,
electric parts and machinery B07+C, glassware B23+C, optical goods
B1&%+C.
India21ong 8ong +ilateral Trade B!n @illion (S)C
199% 1997 1998
=/ports 1929 &11* 1890
rade ;alance
118% 12&3 1&*8