India and China: Building trade and trust

China’s Premier Li Keqiang has arrived in India for his first foreign trip since taking office. It is a sign of improving relations after decades of disagreements between the two countries.

Together, India and China account for more than a third of the world’s population, and the two are now looking at ways to work together to boost economic ties and trust.

But amid the talks on trade, there are still lingering disputes over ill-defined boundaries.

The two countries fought a brief but bloody war over disputed territory in 1962 and, just last month, the decades-long dispute over the Ladakh region of eastern Kashmir led to a tense stand-off.
 
China is a long-time ally and weapons supplier to India’s arch-rival Pakistan, while India has irritated China by protecting the Dalai Lama and the self-declared Tibetan government-in-exile.
 
On a grander scale, China sees itself as Asia’s great superpower, while India hopes its growing economic and military might will eventually put it in the same league.

China is India’s largest trading partner, but exports remain heavily skewed in China’s favour.

A little over 10 years ago, two-way trade was worth just $5bn. Last year it amounted to more than $66bn, but while India exported goods worth $18.8bn to China, China’s sales to India were just short of $50bn.

China is the big brother in this relationship, whichever way you look at it.

There is not much to choose between them when it comes to population. China has a little over 1.3bn people to India’s 1.2bn.

But China is three times as big geographically, with 9.6 million square kilometres, and the major difference between them: gross domestic product.
 
Latest figures for China put the value of all goods and services at more than $7tn, versus just under $2tn for India. New Delhi and Beijing have agreed to a bilateral trade target of $100bn for 2015. 

So, can the world’s two most populous nations resolve their differences and work together?

To discuss this, Inside Story, with presenter Jane Dutton, is joined by guests: Mohan Guruswamy, the chairman and founder of the Centre for Policy Alternatives, and a former adviser to India’s finance minister; Andrew Leung, a specialist on China affairs, and former Hong Kong representative to the UN; and Roderic Wye, an associate fellow for Chatham House’s Asia programme.

“The substantial exports began only two years ago … and China is financing those exports with a lot of softs loans, almost interest-free loans, so it is a good thing for India. But on the other hand, this trade imbalance is going out of control … And we have lots of Indian companies that have been complaining of restrictions, of difficulties, in doing business with China … They are subject to all kind of entry barriers in China … Only of late has the Chinese government began to respond to this. I must say that China has the similar kind of complaints about India … but I think we have resolved them, and we now require the Chinese to resolve some of our complaints.” – Mohan Guruswamy,  a former adviser to India’s finance minister