FOCUS: CHINA As two of the fastest growing emerging market economies, India and China together symbolize an economically vibrant Asia. Both countries have experienced rapid economic growth outpacing average rates of growth of developed nations in recent years, with an upswing in trade and investment. They have also emerged as markets with huge untapped business opportunities. On account of their rapid economic progress and growing influence, both countries have also begun to assume significant roles in global economic issues in recent times. China and India have worked together to defend common economic concerns at the WTO, climate change negotiations at the aegis of the UN, and in the evolving global financial regulatory mechanism post the financial crisis. 01 Director General’s Message INSIDE STORIES Message from Indian Ambassador 03 Message from Chinese Ambassador 04 Enhancing Indian Industry's Engagement with China Dr Naushad Forbes, President Designate, CII and Chairman, CII International Council 05 06 Policy Barometer 09 Industry Voices 12 CEO Speak: Dr Pawan Goenka Chairman, CII Core Group on China and President - Automotive & Farm Equipment Sector, Mahindra & Mahindra Ltd. DECEMBER 2015 Mr. Narendra Modi, Prime Minister of India at the India China Business Forum in Shanghai
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FOCUS: CHINA
As two of the fastest growing emerging market economies, India and
China together symbolize an economically vibrant Asia. Both countries
have experienced rapid economic growth outpacing average rates of
growth of developed nations in recent years, with an upswing in trade
and investment. They have also emerged as markets with huge
untapped business opportunities. On account of their rapid economic
progress and growing influence, both countries have also begun to
assume significant roles in global economic issues in recent times.
China and India have worked together to defend common economic
concerns at the WTO, climate change negotiations at the aegis of the
UN, and in the evolving global financial regulatory mechanism post the
financial crisis.
01
Director General’s MessageINSIDESTORIES
Message from Indian Ambassador03Message from Chinese Ambassador04Enhancing Indian Industry's Engagement with ChinaDr Naushad Forbes, President Designate, CII and Chairman, CII International Council
05
06
PolicyBarometer09Industry Voices12
CEO Speak: Dr Pawan GoenkaChairman, CII Core Group on China and President - Automotive & Farm Equipment Sector, Mahindra & Mahindra Ltd.
DECEMBER 2015
Mr. Narendra Modi, Prime Minister of India at the India China Business Forum in Shanghai
The convergence of mutual interests at global economic multinational corporations production networks to
forums serves as a conduit for smoother bilateral leverage Indian manufacturing for exports to China. This
engagements and also deepens the necessity of will of course involve bringing in substantial changes in
maintaining strong economic ties. Sino-Indian economic the manufacturing ecosystem in India, to make it globally
cooperation is set to scale new heights in the aftermath competitive.
of the recent high level visits of the Chinese President HE
Mr Xi Jinping to India and Hon’ble Prime Minister Shri CII has been actively engaged in promoting Indo-China
Narendra Modi to China. PM Modi’s visit to China in May business ties. The CII led CEOs delegation to China
2015 has imparted significant new dynamism and during the PM’s visit in May 2015, was extremely fruitful.
momentum to Sino-Indian economic engagements. In the presence of the Prime Minister at the India-China
New areas of cooperation are being embraced, including Business Forum in Shanghai, Indian and Chinese
manufacturing, railways, industrial townships, etc, while companies exchanged 24 agreements for cooperation
people to people linkages are being accorded high totaling US$22 billion. CII signed an institutional
importance. agreement with the Provincial Government of Guizhou
for promoting participation of Indian IT companies in local
China is expected to play a growing role in the PM’s IT projects. CII also signed a tripartite agreement with
signature economic initiative “Make in India”. China has Zhisland and Xifu, business institutions in China, for
already pledged US$ 20 billion worth of investments in institutional cooperation in B2B engagements.
India’s infrastructure sector over the next five years.
China has also agreed to set up two industrial parks, one CII has a China Core Group, which focuses on building
each in Gujarat and Maharashtra. The latest Sino-Indian commercial ties and B2B linkages with China through its
initiative aims to raise bilateral trade value to the US$ 100 manifold initiatives. A Report on China prepared recently
billion mark and the two sides have pledged to address at the aegis of the Core Group has made specific
trade barriers through a task force. recommendations on leveraging opportunities with
China. In order to provide further thrust to the economic
The agreements on establishing a provincial partnership engagements with China, CII also recommends creation
between Karnataka and Sichuan and sister-city of a special China Cell cum Knowledge Centre within the
relationships between Aurangabad-Dunhuang, Prime Minister's Office or Ministry of Commerce and
Chennai–Chongqing and Hyderabad – Qingdao are Industry with both Government and industry
welcome gestures. Mr Modi’s announcement of participation, to direct and monitor the achievements of
electronic visas for Chinese tourists to India has been the CII Core Group goals.
another strategic takeaway.
The India-China economic engagement will be one of the
Coming to business specifics, India will need to engage most significant as the two large economies progress on
with China with a definite economic agenda and push for their development paths. We must jointly leverage the
specific actions for market access in certain identified huge opportunities and forge closer business
sectors like IT services, pharmaceuticals, auto partnerships.
components, tourism and entertainment. Around 18
sectors have been prioritized after detailed industry level
discussions for Chinese FDI in areas under capital
goods, specialty products, consumer goods and
infrastructure. Interactions with Indian industry will help in Director General
detailing sector specific actions to attract Chinese FDI in Confederation of Indian Industry
these areas. India also needs to look at attracting
Chandrajit Banerjee
FOCUS: CHINA 02
DIRECTOR GENERAL'S MESSAGE
FOCUS: CHINA 03
MESSAGE FROM AMBASSADOR
The landmark visit of Prime Minister Narendra Modi to China in May
2015, coming just eight months after the successful visit of
President XI Jinping to India, has provided fresh impetus to the
India-China relationship. The two leaders noted that bilateral
relations are poised to play a defining role in the 21st Century in Asia
and indeed, globally, and affirmed that this constructive model of
relationship between the two largest developing countries and two
major poles in the global architecture provides a new basis for
pursing state-to-state relations to strengthen the international
system.
The all-round expansion of relations is particularly visible in our
economic and commercial engagement as developmental
partnership is a core component of our Strategic and Cooperative
Partnership. India and China are two of the fastest growing major
economies in the world today. Our bilateral trade has grown rapidly
in the last decade with trade volume crossing US$70 billion in 2014.
Chinese investments into India are poised for a major expansion as
major projects have been announced recently and many more are in
the pipeline. The Chinese economy too offers large potential for
Indian exporters and investors across sectors and many Indian
companies have established successful operations in China.
Such two-way investment flows and enhanced access to the
Chinese market for Indian products and services would help to
balance the large trade deficit and make bilateral trade sustainable,
Indian industry can plug into vibrant East Asian supply chains by
leveraging ‘Make in India’ while Chinese companies may look into
investing in India in alignment with their ‘ Going Global’ strategy.
India with its large labour pool, big markets and investor-friendly
environment welcomes Chinese companies in its infrastructure and
manufacturing missions.
I commend CII and its office in Shanghai for partnering with the
Indian Embassy for building mutual synergies between businesses
of India and China I believe that this edition of Global Watch is timely
and provides valuable information and suggestions for further
strengthening our economic engagement.
H.E. Mr Ashok K. KanthaAmbassador of India to China
FOCUS: CHINA 04
MESSAGE FROM AMBASSADOR
I congratulate the Confederation of Indian Industry on this issue of
Global Watch which focusses on India – China Relations.
Bilateral relations between India and China are poised to play a
defining role in the 21st Century in Asia and indeed, globally.
Profound changes are taking place in the global landscape, and the
Asia Pacific is undergoing new developments. China-India relations,
with growing breadth and depth, have gone beyond the bilateral
scope and are acquiring increasing global significance. As major
players, we must take up our due responsibility with a sense of
purpose and mission. As ancient civilizations, we can and should
leverage our potential and contribute our wisdom to regional and
global development.
Commercial and economic engagement has been a core dimension
of the burgeoning relations between India and China, which have
witnessed an all-round expansion in recent years. Bilateral trade has
grown rapidly in the last decade with the aggregate touching $70
billion in 2014. The economic engagement is immensely diverse,
dynamic and vibrant, with new sectors being added continuously,
including renewable energy, telecommunications, and media and
entertainment.
We have only tapped the tip of the iceberg in terms of potential
investment. Given the size of both economies and their global
engagement, investments in particular can reach much higher levels
in both directions and across all sectors.
With growing passion, closer cooperation, and deeper mutual
understanding, our relationship is poised for great success and
mutual enhancement.
H.E. Ambassador Le YuchengAmbassador of the
People’s Republic of China to India
FOCUS: CHINA 05
VIEWPOINT
ENHANCING INDIAN INDUSTRY’S ENGAGEMENT WITH CHINA
The India-China relationship in recent years has attracted
global imagination, not least because both countries are
demographically-dominant and large developing
countries of Asia, grappling with common issues of
poverty alleviation and development. The two
economies have adopted different growth models -
China, which commenced its reform journey ahead of
India, has recorded impressive growth rates for more
than three decades and India too is rapidly catching up.
Inevitably, the economic relationship of the two giant
nations has gathered momentum over the last decade.
From just about $3 billion in trade at the turn of the
century, the countries are now eyeing $100 billion worth
of merchandise trade. However, the imbalanced nature
of this engagement raises issues of sustainability. In this
context, the summit-level engagements over the last
year or so evoke hopes of a more sustainable trade
trajectory. It is noteworthy that Prime Minister Narendra
Modi and President Xi Jinping have met as many as five
times in this period with two bilateral visits as also on the
sidelines of multilateral meetings.
Prime Minister Modi’s visit to China in May 2015 was a
seminal opportunity to discuss economic engagement,
and many new initiatives were decided upon by the two
governments. Interestingly, the PM’s closed-door
interaction with top Chinese companies is said to have
been very encouraging, and we are seeing this translated
on the ground as these large enterprises begin to
develop their India strategies. In addition, at Shanghai,
the PM addressed business communities of both sides,
for which CII had organized a high-level delegation.
Businesses from the two countries exchanged 26
agreements totaling $22 billion on this platform,
including trade, investments and financing.
A key outcome of the visit was the establishment of a
task force that would address market access issues
faced by Indian companies in their sectors of interest.
Several policy matters have been pending with the
Chinese government for protracted periods. For
example, approvals for pharmaceutical ventures in China
take a long time, raising costs for Indian investors,
including for products that are already acceptable to the
USFDA. In the IT sector, preferences for Chinese state-
owned companies discourage Indian companies from
applying for contracts.
Encouraging signs of cooperation are visible in the
agreements inked for railway cooperation, smart cities,
and skill development. The Chinese government
expressed desire to engage in India’s high-speed rail
project and has already commenced training for railway
personnel. It would also take up station modernization in
India. For skill development, a university is proposed in
India with Chinese expertise.
The agreement regarding co-production of films was a
major step forward. India’s media and entertainment
sector enjoys vast viewership across the world, but is
impacted in China due to restrictive policies for foreign
films. The co-production agreement has already resulted
in several film ventures being signed, and this would
hopefully open up the market for more Indian films and
television programs.
Indian companies are challenged by the size and
diversity of the Chinese market as well as language and
regulatory issues. However, they would need to be much
more active in China if the trade balance is to be
redressed. With their successes in other markets, Indian
companies can be confident about their operations in
China as well. CII’s China office in Shanghai can be an
excellent starting point and our China desk in New Delhi
is ready to assist in every way.
As the Chinese economy slows down and the Indian
economy opens up, the two countries can embark on
new economic cooperation paths. We look forward to a
robust and well-rounded economic engagement with
China in years to come.
Chairman, CII International Council
Naushad Forbes
President Designate, CII and
FOCUS: CHINA 06
CEO SPEAK
Need to Adopt a “China-Specific” Policy to Gain Greater Market Access in China
Q. Could you share your views on the current
patterns of India’s trade with China?
A predominant feature of bilateral trade has been the
rising trade imbalance with China which raises much
concern. This also induces fears of cheap Chinese
imports flooding the Indian market with adverse effect
on local producers. In fact, Chinese imports have
frequently been the target of anti dumping actions by
India.
There has been a rapid growth in bilateral trade
between India and China over the past decade.
Bilateral trade exhibited a very robust growth during
2003-04 till 2008-09, with remarkable average annual
growth rate of 52.2% – years which were also marked
by high GDP growth rates in India. Bilateral trade shrank
in the aftermath of the economic crisis and has again
picked up. In 2014, aggregate trade stood at $72
billion, of which China’s exports to India crossed $60
billion and India’s exports to China totaled $12 billion.
Despite the pace, the trade engagement has been
relatively small as a proportion of total trade in both
countries. Imports from China constituted 13.5% of
India’s total imports and exports to China constituted a
low 3.8% of its total exports in 2014.
The Chinese President Mr Xi Jingping’s recent
perspective that the two countries should forge a batch
of demonstration projects in areas such as
infrastructure construction like railways and industrial
investment, broaden cooperation in fields such as
services trade, investment and tourism, and gradually
realize a general balance and sustainable development
of bilateral trade indicates that China is sensitive to
India’s concerns over the skewed trade deficit.
While concern regarding Chinese imports and bridging
the trade gap assumes crucial significance, a closer
analysis of the imports from China which are topped by
items like electrical machinery and equipments etc.
reveal that these imports have majorly been used by the
Indian telecom industry and private power producers in
India to meet domestic supply gaps. This also raises the
issue of the necessity to address these supply
constraints to reduce the overt dependence on
imports. While Indian manufacturing needs a revamp,
an option could well be to seek Chinese FDI in these
selective areas.
Regarding India’s exports to China, raw material like
cotton, minerals and metals dominate the export
basket. “Cotton” tops the list as China has a
tremendous demand for raw cotton which cannot be
met from its domestic supplies. Copper imports from
India are also increasing due to China’s fast pace of
urbanization and increased production of electric or
hybrid cars. Of late, a gradual structural shift in India’s
exports to China is also becoming evident with the rise
in exports of items like electrical machinery &
equipment which is one of India’s leading global
exports. However, with the high domestic demand for
raw materials in the Chinese economy, minerals, cotton
and metals may well continue to be among the top
export items from India in the near future. Exports to
Interview with Dr Pawan Goenka,Chairman, CII Core Group on China and President - Automotive & Farm Equipment Sector, Mahindra & Mahindra Ltd.
FOCUS: CHINA 07
CEO SPEAK
China are also not consistent with India’s global trade
profile, where engineering goods, agricultural produce
and pharmaceuticals have been making rapid strides.
Q. What are the major road blocks which impede
trade with China ?
Indian exports face restrictive market access in China
due to several non tariff barriers (NTBs). Technical
products, and fruits & vegetables in recent times. At the same
time, China’s imports of such products from the rest of the world
have been increasing, now touching $100 billion annually. India
could well cater to the Chinese market. However, China has been
slow to accord Indian products the necessary phytosanitary
approvals and permit Indian products to enter the market.
The Chinese government should send a team to India and identify
products that it can import competitively, while according the
necessary market access permissions.”
FOCUS: CHINA 16
Source: World Integrated Trade Solution (WITS), World Bank, 2013; Asian Development Bank, Basic Statistics, 2015; China Statistical Yearbook 2014, National Bureau of Statistics, China
FACT SHEET
Table 1: Key Economic Indicators, China
GDP
Population
Technology
Nominal GDP (constant 2005) 5.27
$ Trillion 2014
Real GDP 10.36
$ Trillion 2014
GDP per capita 7,593.9
Current $ 2014
GDP Growth 7.40
% 2014
Inflation Rate 1.99
% 2013
Population 1,367.82
Million 2014
Annual Population Growth Rate 0.49
% 2009-2014
Population Density 142.53
Persons per sq. km of total surface area 2014
Cellular Subscriptions 88.71
Per 1,000 population 2013
Internet Users 45.80
Per 1,000 population 2013
Table 2: Key Trade Statistics, China
Exports
Total 2,209,000
$ Million 2013
Export Growth 7.8%
Top Partners
Imports
Total 1,949,900
$ Million 2013
Import Growth 7.2%
Top Partners
Hong Kong17%
US17%
Japan7%
Korea4%
Germany3%
Other, partners
52%
Korea10% Japan
8%
Other Asia8%
US8%
China8%
Other partners
58%
• Coal • Motor Vehicles
• Oil & Gas • Refrigerators
• Cement • Air Conditioners
• Steel • Washing Machines
• Primary Aluminum • Television sets
Key Industrial Goods
2013
FOCUS: CHINA 17
Figure 1: India's Exports to China, 10 Year Trend, $ Million
Figure 2: India's Imports from China, 10 Year Trend, $ Million
Source: Trade Figures, Ministry of Commerce & Industry, Government of India