The Chinese government's decision to step in to rescue two Indian businessmen from an ugly situation in Yiwu city of Zheijiang province was timely. The two were first held by local traders demanding to be repaid $1.58 million owed them by the Indians' absconding Yemeni employer. Later, after they were freed by a court, the traders surrounded their hotel, preventing them from leaving. The reluctance of Yiwu authorities to give the two Indians adequate protection and an incident involving an Indian diplomat giving consular assistance to them forced New Delhi to put out a strongly worded advisory “not to do business with Yiwu.” The annual bilateral trade between India and China is worth over $60 billion; nearly one-third of this comprises business deals in eastern China, where the Yiwu Market — one of the world's largest wholesale commodity markets — is located. Rightly, Beijing has taken Indian concerns seriously, promising action against five Yiwu traders in connection with the incident. But the two Indians will have to stay back and face court proceedings against them by the creditors, and the Indian advisory remains. The incident holds lessons for both sides. It underscores the urgent need for a non-government mechanism to mediate in such incidents. With the number of such disputes on the rise, intervention by Beijing or New Delhi each time cannot become the template for resolving them. It is surprising that despite the booming trade between the two countries, no joint trade body, such as a chamber of commerce exists, to which businessmen can take their problems, that could give advice on finding reliable business partners, run credit checks or provide legal assistance. A recently opened economic wing at the Indian Embassy in Beijing does not have a mandate to handle disputes, while the CII and FICCI have one representative each for all of China.

The Yiwu spat has also underlined that the high level of trade has done precious little to remove the mistrust that pervades the relationship between India and China at the popular level. This runs counter to the view — often quoted in the context of India-Pakistan relations — that healthy trade between two countries and the people-to-people interactions it generates builds goodwill and lobbies on both sides for improving bilateral relations. In truth, mistrust between the people of two countries is often a product of mistrust between the states involved. Trade by itself is no magic wand. If New Delhi and Beijing are serious about creating positive attitudes at a popular level, they must actively promote people-to-people interactions, and take steps on the ground, such as encouraging educational and cultural exchanges, and travel for tourism. They must also desist from propaganda against each other.

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