China’s export of key commodities, consumer goods and services, along with robust investment, is contributing to burgeoning Sino-Indian trade, which can help in stabilizing overall ties between the two nations, analysts said.
China has edged out US to become India's largest trading partner in the fiscal year ended March 2024, with total two-way trade of $118.4 billion during the period, according to data released by the economic think tank Global Trade Research Initiative (GTRI) earlier this month.
The strong trade partnership can serve as a building block to steer bilateral ties onto a positive trajectory, according to analysts.
While China is projected to become the world’s largest economy in the future, India is all set to become the world’s third largest economy, said Swaran Singh, a professor for diplomacy and disarmament at Jawaharlal Nehru University in New Delhi
While China is projected to become the world’s largest economy in the future, India is all set to become the world’s third largest economy, said Swaran Singh, a professor for diplomacy and disarmament at Jawaharlal Nehru University (JNU) in New Delhi.
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“So, expansion of their economic engagement is natural given the size of their population, rapidly growing economies and consumerism of youth and middle class on both sides,” he said.
According to Singh, the reason for China-India two-way trade surpassing India’s trade with the United States lies in the nature of India’s over $100 billion in imports from China.
India’s imports from China are largely low-tech consumer products coming in large volumes, compared to India’s expectations of high-end imports form the US, he said.
“Small-town, small-time traders of India have ensured this by importing cheap commodities across various sectors,” said Singh.
He cited the popularity of Chinese mobile phone brands, which have grabbed huge market share in India by offering advanced products at affordable prices.
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Singh noted the general reluctance of the US to share advanced technologies, which is not the case when it comes to China’s exports to India. “As world’s largest trading nation for nearly last two decades, this also underlines increasingly competitive nature of Chinese exports in general,” he said.
Robert Carnell, chief economist and head of research for Asia-Pacific at Dutch bank ING, said that with China being both geographically nearer and its products typically cheaper, it is no surprise that India’s trade with China is marginally higher than the India-US trade.
Carnell noted that India always imports a lot more from China than it does from the US, and exports a lot more to the US than it does to China. Taking exports and imports combined, the total trade from India with the two countries is currently almost even, with China having the edge.
“Around 50 percent of India’s imports from China are for machinery, including electronics and computers,” he said.
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The economist said that one thing that should be noted is that India is moving up the value chain in terms of its global trade.
“China produces and exports a lot of high value-add machinery, including electronics, and as India develops, it is going to require more of these, and fewer low value-added imports,” Carnell said.
Aditi Dave, a Mumbai-based business journalist, said that China surpassing the US as India’s top trading partner can be attributed to increased Indian imports from China in crucial sectors and a decline in trade with the US.
The re-emergence of China as India’s top trading partner underscores the deep economic interdependence between the two Asian giants, said Timir Baran Chatterjee, mentor and managing partner at TCN Global, a leading advisory firm dealing with economic and allied activities
The re-emergence of China as India’s top trading partner underscores the deep economic interdependence between the two Asian giants, said Timir Baran Chatterjee, mentor and managing partner at TCN Global, a leading advisory firm dealing with economic and allied activities.
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“This shift highlights China’s dominant role in India’s import sector, supplying crucial goods such as electronics, machinery, pharmaceutical and chemicals, which are pivotal for India’s manufacturing and technological sectors,” he noted.
“This trade dynamics also indicates potential areas for collaboration and conflict mitigation (as) both nations navigate their complex relationship amidst global economic shifts and regional security concerns,” Chatterjee said.
What is interesting is how India’s imports from China have been expanding despite India’s national security filters that disincentivize imports from China, said Singh, the professor at JNU.
Dave, the Mumbai-based journalist, said evolving trade dynamics between China and India have the potential to impact bilateral relations in several ways.
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Carnell from ING said that it is premature to come to any conclusions about potential improvement of overall ties.
“I think that it (the increased trade) certainly won’t hurt, and it is a first step,” he said. “But it is quite a leap to think that a gradual improvement in trade links will deliver a meaningful improvement in ties between these two economies,” he said.
Arunava Das in Kolkata, India contributed to this story. He is a freelance journalist for China Daily.
