Prepared by: LIU Yun Kai Egon (HIH1067), TING Chun Hing, (HIH1056), CHAN Kwok Hung, Peter

(HIH1098)

Trade relationship between China & India Why them?

ChinaIndia relations, also called Sino-Indian relations. Historically, India and China have had relations for more than 2,000 years Both of them are Members in BRICS Two most populous countries and fastest growing major economies in the world China and India's international diplomatic and economic influence has also increased the significance of their bilateral relationship In 2013, the bilateral trade was estimated to be US$73.9 Billion

Mineral Products and Base Metal (Especially Iron ore) constitutes about 66% of Indias total export to China Among the potential exports to china: salt, inorganic chemicals, plastic, rubber, optical and medical equipment and dairy products are the important ones

Value added items dominate Chinese exports to India, especially machinery (Including Electrical Machinery, which together constitute about 49% of exports. Also, Top exports to India are also included Machinery, Alloy and fertilizers (Products of Chemical)

Land Size Population Natural Resource Labour Force Status Country's Development Direction

India is the World's third biggest exporter of Iron ore as in 2013 Minor minerals available are Building stone, Brick earth, Quartzite, Marble, Granite, Gravel, Clay and Sand, etc.

Some of Chinas metallic minerals such as tungsten, tin, molybdenum, antimony and rare earth have large reserves, and are of high quality and competitive in world markets. However, many important metallic minerals such as iron, manganese, aluminum and copper are of poor quality, with ores lean and difficult to smelt. Most of the metallic mineral deposits are small or medium-sized, whereas large and super-large deposits account for a small proportion.

"Employing Workers - 2011data (based on input from ILO, OECD, local governments and private employers)". The World Bank. 2012.

Over 94 percent of India's working population is unorganized sector India's Ministry of Labor, in its 2013 report, classified the unorganized labor included: small farmers, landless agricultural laborers, building and construction workers, personal service, and workers in stone quarries

Source: Planning Commission of India (2007). "Labour Laws and Other Labour Regulations". The Government of India.

Indian employment chart for 2012, using data from: Economic Survey

In 2012, Chinas total population stood at 1.35 billion. The working age population (those aged between 15 and 59 years) was 937 million The number of SOE employees in China has remained relatively stable at just over 60 million In 2012, around 33.6 percent worked in primary industries, 30 .3 percent in secondary industries (manufacturing and heavy industry, included Products of Chemical & Machinery) and 36.1 percent in tertiary industries such as services, finance, information technology, sales etc.

China
Mineral Products (Ore) Base Metals & Articles of Base Metal Product of Chemical Machinery & Machinery Appliance Mineral Products (Ore) Base Metals & Articles of Base Metal Product of Chemical Machinery & Machinery Appliance

USD $ (Million)

52.7 167.2 941.2 2340.9 211.4 861.3 127.4 26.5

India

*Data is extracted from World Bank

In China, they can produce a unit of Products of Chemical or Machinery & machinery appliance, but it CAN NOT PRODUCE SAME UNIT of Mineral Products or Base Metals under same resource On the other hand, In India, they can produce a unit of Mineral Products or Base Metals under same resource, but it CAN NOT PRODUCE SAME UNIT of Products of Chemical or Machinery & machinery appliance

China has a lower opportunity cost of producing Products of Chemical or Machinery & Machinery Appliance India has a lower opportunity cost of producing Mineral Products or Base Metals & Articles of Base Metal.

Labor Law
India to have the most restrictive labor laws in any major economy of the world (e.g. Companies need to obtain government permission to lay off workers) Legal provisions on working hours and wages in China ( the minimum wage is slated to increase at an average rate of 13 percent a year )

India and China officially resumed trade in 1978 and in 1984, the two sides signed the Most Favoured Nation (MFN) Agreement. In 1994, both countries signed a Double Taxation Avoidance Agreement and the prevention of fiscal evasion with respect to tax on income. Further by deciding to offer some trade benefits to each other both countries signed the Bangkok Agreement in 2003. According to the Agreement, China extended concessions on 217 products from India while India offered concessions on 188 products exported by China. After this deal India-China bilateral trade got a boost and it surpassed US $ 10 billion in 2004, China became Indias largest trading partner by 2008 In June 2012, Wen Jiabao, the Premier of China and Manmohan Singh, the Prime Minister of India set a goal to increase Bilateral trade between the two countries to US$100 billion by 2015

As shown in the above figure Indias export to China mainly consist of raw materials, whereas Chinas export consists of manufactured and value added goods But, It is not easy for Indian goods to enter China and the most restrained are the Indian pharmaceutical products which find it difficult to reach the Chinese market. On one side Indian firms and value added goods are restricted from entering China and on the other hand Chinese manufactured goods are invading Indian markets this has adversely affected growth of manufacturing Industry in India.

By taking into account Chinas ability to produce low cost manufacturing goods and Indias inability to do the same, the fiscal deficit is likely to persist in near future. As a result in the current decade, Indias top economic priority should focus on infrastructure building to develop its industrial sector. On the other hand China is aggressively developing its service sector and if the growth continues it is likely to take over Indian service sector in future

The study said that service and knowledge trade between India and China have significant potential for growth in areas like IT related and Financial sector