China Agrees to Tackle Problem of Trade Imbalance! Is This the Victory Modi Government Was Looking For?

China enjoys a massive trade surplus with India, almost to the tune of $50 billion which is still on the rise. As this is in China’s favour, China has never attempted to seriously address the issue. They’ve been dumping inferior-quality goods in India for a long time now.

Finally, it seems that the Chinese are serious on tackling the problem which India has raised for many years. China has agreed to send a high-level official team led by Commerce Minister Zhong Shan by December-end to address the issue.

China has always sidestepped bilateral talks on the matter. This time they’ve agreed to it which could be seen as a victory in itself for the Narendra Modi government.

Indian products, particularly related to the agriculture and pharmaceutical industry, face difficulties in getting access to Chinese markets. This was one of the main reasons why the trade deficit was rapidly rising. It was just $1.1 billion in 2003-04 and reached a massive $51.1 billion in 2016-17 (China exported $61.3 billion worth of goods while India exported $10.2 billion of goods).

It is being said that Beijing has agreed to address India’s concerns regarding China’s ‘Sanitary and Phytosanitary measures’ (regarding ‘application of food safety, and animal and plant health norms’) hurting Indian farm products exports to that country. Chinese authorities have also decided to look into India’s request to remove the ‘curbs’ on Indian pharmaceutical companies/products.

Why the change in Beijing’s stand?

China expected India to capitulate under its psychological warfare on the issue of Dokla. To its surprise, India didn’t. In fact, India’s resolve to protect Bhutan only strengthened as time went on.

China now fears that the military stand-off will have an adverse effect on the trade surplus it enjoys with India. It is already going through an economic slowdown and dampening economic relations with India is the last thing Beijing can afford. India offers unprecedented investment opportunities to China along with the biggest market in the world for its goods. Besides the $51 billion surplus that China enjoys, it has $60 billion worth of projects going on in India. The cost for China would be massive if a ‘trade war’ is to ensue.

The primary reason why China has agreed to this bilateral is because the Modi government is stepping up economic costs for Beijing amidst relentless threats of war by its state media.

Just recently, India imposed anti-dumping duty on 93 productsconcerning imports from China –from chemicals and petrochemicals, to products of steel and other metals, fibres and yarn, machinery items, rubber or plastic products, electric and electronic items and consumer goods.

If India can come out with something conceivable out of the meet that’ll be held, then the Modi government would’ve made huge headway into tackling a major economic problem.

Vinayak Jain