CHANAKYA NATIONAL LAW UNIVERSITY

PATNA







Final Draft
SUBJECT: -ECONOMICS-I
TOPIC: - INDO CHINA TRADE RELATIONS


Submitted by:-
NEERAJ KUMAR
ROLL NO: - 340
III
rd
SEMESTER, 2
nd
year.






CONTENTS
1. Introduction--------------------------------------------------------------------------------------3
2. Acknowledgement------------------------------------------------------------------------------4
3. Research Methodology-------------------------------------------------------------------------4
4. The rise of press---------------------------------------------------------------------------------5
5. Rise of vernacular press----------------------------------------------------------------------5to7
6. Chronology of Burmas law restricting freedom of opinion expression& press------7to9
7. Newspaper report---------------------------------------------------------------------------10to11
8. Indian newspaper report-------------------------------------------------------------------11to14
9. Conclusion---------------------------------------------------------------------------------------15
10. Bibliography-------------------------------------------------------------------------------------15

















INN

INTRODUCTION
Among the most encouraging recent developments in India China Economy and
India-China ties is the rapid increase in bilateral trade. A few years ago, India Inc had a fear
of being swamped by Chinese imports. Today, India enjoys a positive balance of trade with
China.In 2004, India's total trade to China crossed US $13.6 billion, with Indian exports to
China touching $ 7677.43 million and imports from china at US $ 5926.67 million. But
major industry players in India feel there is no need to give the Chinese a free ride into the
domestic market so early. This is particularly, when India and China have been directly
competing across several product categories. And that too, when both the applied and bound
import tariffs are higher in India compared with China. Indian industry's ambivalence over
the proposed Indo-China FTA stems from concerns over previous FTAs signed by the
government. There's a feeling that some of these FTAs were signed in haste, and without
adequate homework. Result: There has been confusion about the country of origin issue as
well as the items to be put in the early harvest lists.










ACKNOWLEDGEMENT
It gives me incredible pleasure to present a research work on INDIA CHINA TRADE

RELATIONS. I would like to enlighten my readers regarding this topic and I hope I
have tried my best to pave the way for bringing more luminosity to this topic.
I am grateful to my faculty MISS SHIVANGI MOHAN who has given me the
idea and encouraged me to venture this project.
And, finally yet importantly I would like to thank my parents for the financial
support.

RESEARCH METHODOLOGY
The researchers have used doctrinal method in their research, that is, extensive use of
literary sources and materials. The researchers mainly used secondary sources to
provide substance to the research analysis. The researchers have also put down
immense effort in order to understand the terms and concepts related to the subject
which enriched the study to a great extent.












ESTABLISHMENT OF DIPLOMATIC RELATION BETWEEN INDIA AND CHINA
1

China and India established diplomatic relations on April 1, 1950. India was the second
country to establish diplomatic relations with China among the non-socialist countries. In
1954, Chinese Premier Zhou Enlai and Indian Prime Minister Nehru exchanged visits and
jointly initiated the famous Five Principles of Peaceful Coexistence. Indian Prime Minister,
Rajiv Gandhi's visit to China in December 1988, facilitated a warming trend in relations.
The two sides issued a joint statement that stressed the need to restore friendly relations on
the basis of the Panch Sheel and noted the importance of the first visit by an Indian prime
minister to China since Nehru's 1954 visit. India China Economy agreed to broaden bilateral
ties in various areas, working to achieve a "fair and reasonable settlement while seeking a
mutually acceptable solution" to the border dispute.
Rajiv Gandhi signed bilateral agreements on science and technology cooperation, on
civil aviation to establish direct air links, and on cultural exchanges. The two sides also agreed
to hold annual diplomatic consultations between foreign ministers, and to set up a joint
ministerial committee on economic and scientific cooperation and a joint working group on the
boundary issue. The latter group was to be led by the Indian foreign secretary and the Chinese
vice minister of foreign affairs. As the mid-1990s approached, slow but steady improvement in
relations with China was visible. Top-level dialogue continued with the December 1991 visit of
Chinese premier Li Peng to India and the May 1992 visit to China of Indian president
Ramaswami Venkataraman.
Border trade resumed in July 1992 after a hiatus of more than thirty years, consulates reopened
in Bombay (or Mumbai in the Marathi language) and Shanghai in December 1992, and, in June
1993, the two sides agreed to open an additional border trading post. Though, Rajiv Gandhi's
visit to China in December 1988 is usually identified as a turning point and break-through
in India-China relations, it should also be noted that many years of previous effort had a
contribution to it.. In 1976, the two countries decided to restore ambassadorial-level
diplomatic ties after a gap of 15 years. The next major step was foreign minister Vajpayee's visit
to China in February 1979 -
The first high-level visit between the two countries since 1960. In 1984 India & China signed a
Trade Agreement, providing for Most Favoured Nation Treatment. In 1994 the two countries

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signed the agreements on avoiding double taxation. Agreements for cooperation on health and
medical science, MOUs on simplifying the procedure for visa application and on banking
cooperation between the two countries have also been signed.
The Chinese economy was decentralized in 1978 and major economic reforms were introduced
which created conditions for rapid economic growth and structural changes in China. In 1980,
China's share in world trade was less than one percent, and it started permitting foreign direct
investment (FDI). In 1999, China had grown to become the world's second largest economy
after US in terms of GDP. The high growth rate of China is attributed to high levels of trade and
greater investment effort. Strong exports growth from China has helped push China's economy
to 9.1% growth rate in 2003-2004. China is the world's second largest recipient for FDI with
total FDI inflows crossing US $ 53 billion in 2003. Growth in Special Economic Zones (SEZ)
has also helped China increase its productivity.
Recently Chinese premier Wen Jiabao visited India, where he said that India and China
must take their trade to $30 billion level by 2010. Seeing the whopping growth in Sino-Indian
trade, China outlined a five-point agenda, including reducing rade barriers and enhancing
multilateral cooperation to boost bilateral trade.
Chinese Premier Wen Jiabao said "We have set an objective (in the joint statement) to increase
the two-way trade volume from 13.6 billion dollar at present to 20 billion dollar by 2008.....we
plan to take it to 30 billion dollar by 2010." Addressing Indian business leaders at New Delhi on
April 11, he said that the two countries agreed for a joint feasibility study for a bilateral Free
Trade Agreement.
India China Economy have also agreed to work together in energy security and at the
multilateral level at the WTO to support an "open, fair, equitable and transparent rule-based
multilateral trade system", the joint statement signed by Prime Minister Manmohan Singh and
Wen said. Wen also offered to cooperate with New Delhi in its infrastructure programme.
Indian Commerce Minister Kamal Nath said China was poised to become India's largest trade
partner in the next two-three years, next only to the US and Singapore.
TRADE PATTERN (value in USD millions)

Year China's Exports to India China's Imports from India 2000 1560.75 1353.48 2001
1896.27 1699.97 Percent Growth 21.5 25.6 2002 2617.73 2274.18 Percent Growth 40.9 33.8
2003 3343.59 4251.49 Percent Growth 22.2 87 2004 5926.67 7677.43 Percent Growth 77.3 80.6
According to a CII study, special focus on investments and trade in services and knowledge-
based sectors, besides traditional manufacturing, must be given, in view of the dynamic
comparative advantage of India. Indian companies could enter the $615 billion Chinese
domestic market by using it as a production base.
Presently, Iron ore constitutes about 53% of India's total exports to China. Among the potential
exports to China, marine products, oil seeds, salt, inorganic chemicals, plastic, rubber, optical
and medical equipment and dairy products are the important ones. The study said that services
and knowledge trade between India and China have significant potential for growth in areas like
biotechnology, IT and ITES, health, education, tourism and financial sector.
Value added items dominate Chinese exports to India, especially machinery, including electrical
machinery, which together constitute about 36% of exports from that country. The top 15
Chinese exports to India have recorded growth between 29% (organic chemicals) and 219.89%
(iron and steel).


INDIA CHINA TRADE RELATIONS: OVERVIEW
2

India China trade relations are the most important part of bilateral relations
between India and China. From a temporary decline in the the influx of Chinese imports in
the Indian markets, the scenario seems to have changed - India is enjoying a positive
balance of trade with China. The India China trade relations are regulated by the India
China JBC, which ensures a free exchange of products and services between the two
nations.
India & China signed a Trade Agreement in 1984 which provided for Most Favored
Nation Treatment and later in 1994, the two countries signed an agreement to avoid
double taxation. The bilateral trade crossed US$13.6 billion in 2004 from US$ 4.8 billion

2


in 2002, reaching $18.7 billion in 2005. The India China trade relations have been further
developed from 2006, with the initiation of the border trade between Tibet, an autonomous
region of China, and India through Nathu La Pass, reopened after more than 40 years. The
leaders of both the countries have decided to enhance the bilateral trade to US$ 20 billion
by 2008 and further to US$ 30 billion by 2010. According to the Indian Commerce
Minister, Kamal Nath, China would soon become India's largest trade partner within the
next 2-3 years, after the US and Singapore.
INDIAN EXPORTS TO CHINA UNDER THE INDIA CHINA TRADE RELATIONS
3

The principal items of Indian exports to China are ores, slag and ash, iron and steel,
plastics, organic chemicals, and cotton. In order to increase the extent of exporting Indian
goods to China, however, there should be a special emphasis on investments and trade in
services and knowledge-based sectors. The other potential items of trade between India
and China are marine products, oil seeds, salt, inorganic chemicals, plastic, rubber, optical
and medical equipment, and dairy products. Great potential also exists in areas like
biotechnology, IT and ITES, health, education, tourism, and financial sector.
Items of Indian exports to China
The principal items of Indian exports to China comprise of ores, slag and ash, iron and
steel, plastics, organic chemicals, and cotton. In order to increase the extent of exporting
Indian goods to China, however, there should be a special emphasis on investments and trade
in services and knowledge-based sectors.

At present, iron ore constitutes about 53% of the total Indian exports to China. The other
items that have potentials are marine products, oil seeds, salt, inorganic chemicals, plastic,
rubber, optical and medical equipment, and dairy products. Not only this, great potential exists
in areas like biotechnology, IT and ITES, health, education, tourism, and the financial sector -
all of which will contribute to the services and knowledge based sectors.

The need is to shift the focus from primary exports to the export of diverse range of high value
added products, including -
Auto engine components and automobiles

3


Organic and inorganic products
Pharmaceuticals
Metal and metal based products like alloy steel bars and rods
Agricultural products like grains, tobacco and oilseeds
Engineering goods like diesel engines and compressors
Marine foods
Fresh and processed fruits and vegetables
Medical and optical diagnostic equipment and laboratory equipment
Consumer durables
Textile yarns
Such diversification of Indian exports to China clearly indicates that there exists a steady
demand for these products in the Chinese market.
Impediment for Indian exports to china
There are certain obstacles faced by Indian exporters in their attempts to capture the
markets of China. Lack of information on customs procedures, imposition of excessive
customs and other levies with frequent rate changes, complex customs valuation procedure,
absence of a specified nodal agency, lack of transparency regarding technical standards,
differentiated testing norms for imported and domestic products, unfamiliarity with regard
to provincial rules and regulations, and frequent change in policies without any advance
information on those changes are just some of those problems.
Potential for Indian exports to China
In order to increase the level of Indian exports to China, there should be a continuous
interaction through exchange of delegations, enhancing participation in each other's trade
fairs and seminars and facilitating trade through positive initiatives.

CHINESE EXPORTS TO INDIA UNDER THE INDIA CHINA TRADE RELATIONS
4

Chinese exports to India focuses on resource based exports as well as the exports of
manufactured products. China has emerged as a global manufacturing center and India as
the most lucrative market in the world.

4


The main items that comprise Chinese exports to India are electrical machinery and
equipment, cement, organic chemicals, nuclear reactors, boilers, machinery, silk, mineral
fuels, and oils. Value added items like electrical machinery dominates Chinese exports to
India. This exhibits that Chinese exports to India are fairly diversified and includes
resource-based products, manufactured items, and low and medium technology products. It
is said that if India is to capture the markets of China and enjoy profits, then it would have
to discover new merchandise and branch out its exports to China.
In 2004, the Chinese exports to India stood at US$ 5926.67 million. However, it
industrialists in India were not in favor of China being given free access to the domestic
markets. But bilateral trade relations between India and China have increased over the
years, reaching US$18.7 billion in 2005 from US$ 4.8 billion in 2002. However, the
bilateral trade is to be increased further to US$ 20 billion by 2008 and further to US$30
billion by 2010.
Items of Chinese exports to india
The main items to be exported from China to India are electrical machinery and
equipment, organic chemicals, nuclear reactors, boilers, machinery, silk, mineral fuels, and
oils. Value added items also dominate Chinese exports to India, like machinery, specially
electrical machinery, which forms about 36% of Chinese exports to India.
Recent developments regarding Chinese exports to India
In the beginning, Chinese firms were keen on exporting cheap electronic items,
garments, and toys to the Indian markets. But recently, Chinese exporters have been focusing on
the cement market. Two Chinese cement companies, Yingde Dragon Mountain Cement
company Ltd. and Longkou Fanlin Cement Company have been authorized to sell cement in
Indian market. The reasons behind the sudden interest of the Chinese cement companies in
penetrating the Indian market are that China is the world's largest cement producer and that the
per capita cement consumption is relatively low in India - around 150 kilogram per annum, less
than one-third of China's per capita consumption, as in 2006. An Ahmadabad-based textile
company is acting as the local agent of the Chinese firms in India.
The prospects for Chinese exports to India have been enhanced from 2006, with the
opening of the prospective Indo China border trade. Trade has been initiated between Tibet,

an autonomous region of China, and India through Nathu La Pass, reopened after 44 years.
From then onwards, nearly 15 items are being exported from China to India.
INDIAN IT EXPORTS TO CHINA
5

Indian IT Exports to China is an integral part of the total Indian exports to china, with the
bilateral trade between the two countries amounting to US $ 11.3 billion during the year
2005 which under joint efforts is to be increased to US$ 20 billion or higher by the year
2008. The bilateral trade have significant growth potential in areas like IT and ITES.
Regarding the Indian IT Exports to China, the recent laws of china on restricting the
foreign software companies selling software in China has been a set back for Indian
software companies. The cordial bilateral trade relations however will soon ease out such
tensions and there is a great possibility that Indian software companies will be allowed to
sell software services to Chinese companies.

Indian IT Exports to China has become a new bridge between the two countries
facilitating the growth of bilateral trade and co-operation between the two countries. Not
only software products, the Indian software companies also export IT- based know-hows
to the Chinese software firms. Chinese officials and executives of almost all major
Chinese software companies travel to the Silicon Valley of India or the city of Bangalore in
order to learn the essence of India's software industry.

Many Indian software firms under the Confederation of Indian Industries signed a
Memorandum of Understanding with the Shanghai-Pudong Software Park of china to
promote Indian and Chinese co-operation in software. Moreover in order to accelerate the
Indian IT Exports to China many Indian software firms have moved into the park.

Some of the major Indian software houses like NIIT, Mphesis, Infosys, Satyam, and Tata
Consultancy Services have been outsourcing in China. They on one hand in an
advantageous position due to their superior traditional skills in terms of management
compared to the weaknesses of Chinese developers. Moreover with the help of the local and
language-specific expertise of Chinese professionals, the Indian firms can capture the
Chinese domestic market as well as other ones in the far east Asian countries. Moreover the

5


conducive conditions of china like the upcoming opportunities in China, her economic
growth, political stability, and human resources makes China an ideal place for establishing
a second global delivery center for Indian software firms.
POTENTIAL OF INDIA CHINA BORDER TRADE