China PM on India charm offensive, offers trade boost

Published: December 16, 2010
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Chinese Prime Minister Wen Jiabao (L) shakes hands with India Prime Minister Manmohan Singh (R) prior to a meeting in New Delhi on December 16, 2010. PHOTO: AFP

Chinese Prime Minister Wen Jiabao (L) shakes hands with India Prime Minister Manmohan Singh (R) prior to a meeting in New Delhi on December 16, 2010. PHOTO: AFP

NEW DELHI: Chinese Premier Wen Jiabao pressed on with a charm offensive in India on Thursday, offering support for New Delhi’s bid for a greater role in the United Nations and agreeing on an ambitious target of $100 billion in trade between the rising Asian powers by 2015.

Relations between the Asian giants are tense, despite the booming trade relationship between them. Nearly 40 years after they fought a war, there are still rifts over disputed borders, and suspicion in New Delhi over China’s regional ambitions and its close ties with Pakistan.

But both Wen and Indian Prime Minister Manmohan Singh exchanged vows of amity and goodwill ahead of brief bilateral talks in the capital, appearing to brush under the carpet a series of differences that have long dogged relations.

“I believe with our joint efforts, through the visit, we’ll be able to raise our friendship and cooperation to a high level in the new century,” said Wen, standing alongside Singh at the Indian presidential palace after a formal red-carpet welcome ceremony.

“With the joint efforts of the prime minister and I, we’ll be able to reach (an) important strategic consensus during my visit and the visit will yield important outcomes.”

Wen’s visit, the first by a Chinese premier to India in five years, has looked carefully choreographed to improve ties between two countries which, between them, are home to more than a third of the world’s population.

Arriving with more than 300 business leaders on Wednesday, Wen said that India and China were not rivals and there was room in the world for both powers to develop.

“There is a trust deficit, a trade deficit but certainly not a charm deficit,” said broadcaster CNN IBN Deputy Editor Sagarika Ghose.

Singh responded in kind to Wen’s effusive words before they went into a meeting behind closed doors: “A strong partnership between India and China will contribute to long-term, peace, stability, prosperity and development in Asia and the world.”

Boosting trade

The two sides said they were aiming to raise bilateral trade to $100 billion by 2015 from $60 billion in 2010, partly driven by greater access for Indian firms to Chinese markets.

“The two sides agreed to take measure to promote greater Indian exports to China with a view to reduce India’s trade deficit,” the joint statement said.

India and China are the world’s fastest-growing major economies. But India fears China wants to curtail its rise as a global power, and is concerned about Beijing’s close security ties with Pakistan where Wen arrives on Friday on the second part of his trip.

“Terror of any kind… cannot be an instrument of state policy. I think that is the message we will convey to Prime Minister Jiabao and hopefully he will convey that to Pakistan,” Indian Foreign Minister S.M. Krishna told CNN IBN.

The joint statement outlined Beijing’s support for United Nations Security Council Resolution 1267, which calls for sanctions against the Lakshar-e-Taiba militant group that New Delhi blames for the attack and accuses Pakistan of harbouring.

India also fears China wants to restrict its global reach by possibly opposing its bid for a permanent U.N. Security Council seat or encircling the Indian Ocean region with massive projects from Pakistan to Myanmar.

China reiterated its support for India’s aspirations to play a greater role in the Security Council, but it stopped short of expressing full backing for India.

Charm offensive

Long wary of Washington’s influence in South Asia, Beijing’s overtures toward New Delhi come just a little over a month after U.S. President Barack Obama’s trip to India, during which he endorsed India’s long-held demand for a permanent seat.

Wen’s avuncular style contrasts sharply with that of Singh, who is seen as shy and lacking charisma. Singh is also engulfed in what may be India’s biggest corruption scandal, threatening the stability of the Congress party-led coalition government.

Wen announced on Wednesday that Chinese companies would sign deals with Indian firms worth more than $16 billion ranging from power equipment to telecoms gear, underscoring business was driving the relationship, for now.

Chinese banks will provide the bulk of lending for these deals.

Although both India and China have said they are exploring a possible free-trade agreement, no real progress is expected on that front as there is some scepticism in New Delhi that Beijing may only want to dump cheap manufactured goods on India’s booming $1.3 trillion economy.

China is now India’s largest trade partner and two-way trade is expected to reach $60 billion in 2010/11 compared with a target of $40 billion. Trade was $13.6 billion in 2004/05 and $3 billion in 2001/02, illustrating the phenomenal growth rate.

Still, total investment by China in India is small, amounting to only $221 million in 2009, representing about 0.1 percent of China’s total outward foreign direct investment in that year. That figure is seven times less than what China has invested in Pakistan, according to official data.

While the two are often lumped together as emerging world powers, China’s GDP is four times bigger than India’s and its infrastructure outshines India’s dilapidated roads and ports, a factor that makes New Delhi wary of Beijing’s growing might.

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Reader Comments (12)

  • Sankalp
    Dec 16, 2010 - 5:19PM

    Given the mutual distrust, it was very well expected of beijing not to come out in open about supporting India’s claim for a permanent seat on the UNSC. Also, there is indeed, too much of trade deficit between these two asain giants. India should look forward to bridge the gap by appeasing China to open its market for a greater access to Indian Companies. Moreover an FTA at this moment is the least India would want, whose booming economy/market is already flooded too much with cheap chinese products resulting in such huge trade deficits.Recommend

  • Raju
    Dec 16, 2010 - 5:34PM

    Nice to see only economic issues overpowered all other issues None of the side want to loose a business partner If it could happen in case of indo -pak relationsRecommend

  • Rajat
    Dec 16, 2010 - 6:57PM

    The title- “Chinese Premier Wen Jiabao pressed on with a charm offensive in India on Thursday, offering support for New Delhi’s bid for a greater role in the United Nations and agreeing on an ambitious target of $100 billion in trade between the rising Asian powers by 2015” is a BIG step between the two countries with cold relations, proves that nowadays there are no permanent enemies or friends in the international arena.Recommend

  • M Bilal
    Dec 16, 2010 - 7:05PM

    Well well well. lets what Chinese premier gets out of his bag when he reaches Islamabad. multi billion trade agreements with India were expected.. lets hope our dumb leaders make out most of Chinese pm visit to Islamabad and boost trade and Chinese investment even further. most important of all would be finalization of civil nuclear deal of china with Pakistan. we really need that,Recommend

  • Ben
    Dec 16, 2010 - 8:13PM

    There is a lesson to learn. Economic ties are the only way to ease tension between India and Pakistan. link textRecommend

  • Anoop
    Dec 16, 2010 - 8:42PM

    The only thing left for Premier Wen to do is ask Pakistan to dismantle Terror Infrastructure and say Terrorism from Pakistani soil is unacceptable like other great leaders have done.Recommend

  • Cautious
    Dec 16, 2010 - 10:20PM

    MMM – anyone really think that Pakistan is going to come out ahead of India in relations with China? Once China abandons Pakistan your stuck with the USA who is already in the process of reevaluating its position on Pakistan.

    Pakistan will end up with no friends – no money – and a pariah known for nothing other than religious extremist and exporting terror. Recommend

  • J.Oberoi
    Dec 17, 2010 - 6:34AM

    China will make all the right diplomatic noises when it comes to India but will continue to use Pakistan as its proxy. It irritates the Chinese no end that India is able to almost keep up with a growth rate of 9% year after year. There is no way India will catch up with the Chinese economically but it will ensure that the gap does not grow. But they do realize that there can never be a war between the two nations. With the stakes in bilateral trade assuming gargantuan proportions, there is a grudging truce between them. The military-industrial complex in the US will ensure that this region keeps simmering so that the defense industry can keep exporting 10s of billions of dollars worth of weapons to the region. The supply of F16s to Pakistan is a case in point – you don’t fight the Taliban and Al-Qaeda with F16s – albeit crippled. The US, after all, is pitching their most modern jet fighters to the Indian Air Force and that will be worth a lot of money. With the US economy tottering under debt the engines of economic growth are India and China. If Pakistan also joins in this economic arms-race, the region will be back to the era when it constituted more than 70% of world trade. Recommend

  • Sanjay
    Dec 17, 2010 - 7:50AM

    India and China both have rich cultural base and ancient civilsation. Both are populous countries in the world and are also neighbours. With so many similiarities there are many differences..China has robust economy and among top 5 nations of the world, it can dictate the bilateral and multilateral tarde discussions..and also posses bigger military power compared to India. India is still developing country , though on a different growth trajectory, growing at pace which is fuelled by Indian enterpreneurs and not by state funds. India is plural and open society..and having long running democracy since more than 60 years. India has to deal with China with respect and look for win-win agreements so that India’s economy can be fuelled by comptetively available quality goods and services from Chinese companies. China becomes a good market for India , provided China doesnt intervene in “fixing” yuan rate. Border disputes and issues related to China’s tacit support to Pakistan inspite of its failure to curb terrorists growing in its backyard etc needs to handled diplomatically and firmly. But these issue should not become hindrance for growth. India surely understands the China’s aspiration to squeese through world power by building naval infrastrure in Indian ocean..and India has all wherewithal to neutralise such designs if required.Recommend

  • Dec 17, 2010 - 2:37PM

    In the ideal world, Pakistan will recognise China for what it is and maintain distance. Not agreeing to staying away from the Nobel Peace prize ceremony would have been a good start. Did Pakistan want to be in the same league as Sudan and Saudi Arabia in this regard? And surprisingly I dont see any columns condemning the government for this stand. (now I suppose there will be a barrage of comments on India vis-a-vis Myanmar)Recommend

  • G. Din
    Dec 18, 2010 - 4:55AM

    @J.Oberoi
    “…With the US economy tottering under debt…”
    Is it really? Can an “economy tottering under debt” pursue trillion dollar wars? True, China owns much of that debt. What recourse does China have if US says “can’t repay”? China is no better than a sweat shop of the world. Remind yourself that Japan was in a similar position in the later half of the last century. Where is Japan today? Its economy is really, really tottering!

    “…the engines of economic growth are India and China…”
    They might look that way but neither has stamina to persevere. In this India is much better placed as, wisely enough, it did not pursue exports to the same extent as did China. Besides, China is literally aging because of their one-child policy. Although, China is admittedly an ancient civilization like India, it has displayed a shallow temperament in the international arena. The result: all nations around it do not feel very kindly about it. Yesterday’s news: Japan has decided to arm itself against China. All others feel threatened, too. It has massive territorial disputes with practically all of them. India’s disputes are nothing in comparison.

    “… If Pakistan also joins in this economic arms-race, the region will be back to the era when it constituted more than 70% of world trade…”
    How can a nation that cannot pay its salaries without some agency or the other, some bank or the other, some government or the other extending a loan in time. Those loans are also becoming scarce because Pakistan has already expressed its inability to repay those loans and has asked for forgiveness of the same. Economic arms race?Don’t count on it. At least Pakistanis should not count on it!
    Moral: “Bhai-Bhai”ism never worked. It is not likely to work ever. Look at the European Union, if ever there was a case of “Bhai-Bhai”. They heralded the industrial revolution and have been at it for the last 300 years. India’s economy is projected to surpass their economy in the next two decades.Recommend

  • J.Oberoi
    Dec 19, 2010 - 8:48AM

    @G.Din,
    “Can an economy tottering under debt pursue trillion dollar wars?”
    You bet it can when all the Fed has to do is issue more Treasury Bills that is lapped up by petrodollars and the Chinese. There is a reason why the Fed is never subjected to an external audit nor is its statement of accounts made public. If the true picture of its condition is made public, the dollar will be worthless. But then, the Chinese having pegged their currency to the dollar will ensure the dollar stays afloat – not to mention their trillion dollar investment in t-bills It is a pact of the devil. But it will unravel one day and the vortex will take everyone down with it.
    The Chinese use their massive investment in t-bills as leverage against protectionist tendencies in the US. The Chinese economy hinges on huge consumption by the US. Their local market, relatively speaking, is not so robust. Overall, in the present equation, it is in everybody’s interest that the US economy stays viable and indeed thriving. Recommend

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