Even as Indian and Chinese officials were engaged in intense consultations to secure the release of Danish Qureshi, a Mumbai trader kidnapped by Chinese suppliers in Yiwu earlier this week, 120 Chinese businessmen gathered several hundred kilometres away at a business event on Friday with a common objective: finding out how to invest in India.

At the event, Indian officials courted investment from executives from some of China's biggest corporations, including telecom giants Huawei and ZTE and large infrastructure companies such as the China Road and Bridge Corporation (CRBC).

The event was part of a renewed push by officials to boost mutual investments and deepen a trade relationship that is still being driven by Chinese appetite for raw materials such as iron ore. The initiative was also aimed at addressing mistrust that persists between trading communities of both countries, which has been reflected in recent incidents that have seen Indian businessmen being detained over commercial disputes in the trading hub of Yiwu in southern Zhejiang province.

Bilateral trade reached $ 73.9 billion last year, with China once again becoming India's biggest trade partner. While trade between both countries has grown rapidly up from a few billion dollars a decade ago, India's trade deficit with China has also ballooned, reaching a record $ 27.1 billion.

The rising imbalance has prompted an increasing number of anti-dumping investigations filed by India, and has also, according to officials, strained the one aspect of the bilateral relationship that has been a strong driver of ties amid persisting political mistrust on many issues. To bring the relationship back on track, both countries have decided that boosting mutual investments can play a key role in deepening ties.

“Buying and selling raw materials is an impersonal exercise, and has done little to bridge the gap between the two countries both in terms of misperceptions and mistrust,” said one Indian executive who has been based in China for several years.

Indian officials say Chinese companies are showing increasing interest in the Indian market with the economic troubles in the West.

Last year, Chinese investments in India increased by more than $ 100 million, driven by plans of energy company TBEA to invest in a major plant in Gujarat and other investments in new energy projects.

At the end of 2011, Chinese companies had directly invested $ 555 million in India, while Indian companies had invested $ 447 million in China, according to figures available with the Indian Embassy. While the number is still low, many investments are routed either through Hong Kong or other third party countries, and the actual invested figure is estimated to be far higher.

But whether or not the moves to boost two-way investments will pay dividends still remains unclear, particularly against the backdrop of new strains that trade ties have been grappling with in 2012.

Chinese imports of iron ore, which have largely driven trade, have fallen on account of last year's bans in Karnataka and a slowing down in the Chinese economy. India's moves to restrict exports of cotton and a proposal to impose 19 per cent import duty on power equipment, which has not yet been approved, have angered both Chinese officials and executives.

The disputes in Yiwu have also not helped. A string of cases of Indian traders vanishing while owing hundreds of thousands of yuan even prompted authorities in Yiwu to issue an advisory warning locals of the risks of doing business with Indians. Indian anxieties, on the other hand, have risen after two Indian traders were held in captivity for two weeks and ill-treated after the Yemeni and Indian owners of their trade company fled last year allegedly leaving more than $ 10 million RMB ($ 1.58 million) in dues. The traders, Deepak Raheja and Shyamsunder Agarwal, say they were only employees, and are now fighting a legal battle to clear their names.

The Indian Embassy has since issued two advisories warning of the dangers of trading in Yiwu, while India also postponed the visit of a delegation from the Zhejiang province, where Yiwu is located, to voice its displeasure at the authorities' handling of the case.

Both countries did, however, move quickly to resolve the kidnapping of Mr. Qureshi from Mumbai earlier this week, attempting to draw a line over the issue and minimise disruptions to the larger trade relationship.

The State-run Xinhua news agency said late on Friday a Chinese woman had been taken into custody for illegally detaining Mr. Qureshi following a debt dispute. The Yiwu local government said the Indian trader was in good health and left after being questioned by police, and said there was “no physical confrontation during the illegal detention.” The government said the Chinese woman, named Wang (30), had along with her boyfriend detained Mr. Qureshi at her home on Monday after demanding debts owed by another trader named Faisal.

While Indian officials said Mr. Qureshi's abduction was a case of mistaken identity, the Xinhua report suggested that Ms. Wang believed that Mr. Qureshi was connected to the absconding trader, who had defaulted on service fees of 50,000 yuan (Rs. 4.35 lakh) as well as payments for goods valued at 400,000 yuan (Rs. 34.8 lakh), which Ms. Wang and a classmate had paid for with their own savings.

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