India’s bilateral trade with China has fallen by 12 per cent to $ 66 billion in 2012, driven by a record slump in exports, which has expanded the trade deficit to $29 billion — despite the decline in overall trade — and cast doubt on the sustainability of an increasingly strained trade relationship.
Figures released by China’s General Administration of Customs (GAC), on Thursday, showed that Indian exports to China had fallen by as much as 19.6 per cent year-on-year in December, reflecting the challenge faced by both countries to find a new driver of trade after iron ore exports have slumped following bans.
India’s exports in 2012, comprised largely of ores, cotton, chemicals and raw materials, reached $18.8 billion, while imports from China — driven by growing demand for power and telecom equipment and machinery — reached $47.7 billion. Bilateral trade last year reached $66.47 billion, down from $73.9 billion in 2011 when China became India’s biggest trade partner.
The gloomy outlook for India’s future trade ties with China came even as overall exports out of the world’s second-largest economy rebounded last month, recording a higher than expected 14.1 per cent growth, suggesting a revival — whether temporary or permanent — in the Chinese economy following the downturn last year.
China’s exports last year rose by 7.9 per cent despite “a deepening debt crisis in the Eurozone, a sharply slowing world economic recovery, continuously sluggish demand on the global market and big downward pressure on the domestic economy,’’ said Zheng Yuesheng, a spokesman at the GAC.
He forecast that trade in 2013 would be ‘slightly better’ than last year, pointing to the 14.1 per cent surge in exports in December that followed a 2.9 per cent rise the previous month.
On the India-China trade front, however, the coming year is expected to be a difficult one. With bans on iron ore exports, import duties on power equipment, and likely restrictions in the telecom sector, the outlook for bilateral trade — and the likelihood of meeting the $100 billion target for 2015 — remains uncertain.
Silver lining
A silver lining in recent months, according to E.B. Rajesh, the chief representative of the Confederation of Indian Industry (CII) in China, was increasing interest among Chinese firms to invest in India. A new trend, he said, was of more small and medium Chinese enterprises and newer firms joining the bigger and more established companies in investing in Indian facilities. Mr. Rajesh pointed to the example of Yapp, an automotive company based in the town of Yangzhou, which has opened facilities in Chennai and Pune and made inroads into the plastic fuel tank market.
“With new duties, there is some thinking among Chinese companies about setting up component manufacturing facilities in India,” he said.
