Rising trade and rising tensions point to China’s conundrum in India

Conflicting trends even as New Delhi hails ‘breakthrough for pharmaceutical industry in China’

India’s trade with China reaching record highs in 2021 and set to cross the $ 100 billion mark for the first time has underscored the challenge New Delhi faces as it seeks to recalibrate relations in the midst of ‘a border crisis lasting more than a year while remaining locked in a deep commercial embrace.

The two seemingly conflicting trends in the relationship became very clear this month when, three days after the 13th round of talks between military commanders ended in deadlock with trade accusations on both sides, New Delhi hailed “A breakthrough for the Indian pharmaceutical industry in China” with Hyderabad-based Dr. Reddy’s Laboratories ready for a potential windfall, becoming the first Indian pharmaceutical company authorized to launch an anti-cancer drug in China’s lucrative market.

Huge potential still to be realized

Foreign Minister Harsh Shringla and Ambassador to China Vikram Misri this week highlighted the potential of the trade relationship. Mr. Misri underlined that pharmaceutical products in particular had “enormous potential to be exploited”. He said, in an interview with World time in Beijing, discussions “were underway on the border crisis” and “we hope that the two sides can resolve this problem. [border] problem, because it casts a shadow on bilateral relations ”.

Mr Shringla also linked the border standoff to global relations, noting at a seminar this week that “it was in the context” of the two sides developing “a broad relationship” which was “clearly based on ensuring may peace and tranquility not be disturbed. ”that ties, especially commercial ties, have taken off since relations were normalized in 1988.

Trade relations have reached record levels over the past year – a period that New Delhi officials say marked the lowest point since 1988, following the crisis along the Line of Control reality that erupted last summer with the unprecedented mobilization of Chinese troops. .

Figures released this month by Chinese Customs showed that bilateral trade after nine months reached $ 90.37 billion, up 49.3 percent year-on-year. Indian imports from China reached $ 68.4 billion, up 51.7%, recalling the continued dependence on goods that India has imported in large quantities over the past two decades, such as electrical machinery and active pharmaceutical ingredients (APIs), as well as the emergence of new imports such as medical supplies, which India bought more from China than any other country during the pandemic, from ventilators to EAR.

China’s global exports of drugs and medical supplies have grown 108% this year, and medical supplies appear to have become the latest trade dependency. India also imports up to 70% of APIs from China, over 90% of solar components and a large part of automotive components.

If the trade relationship seemed to remain largely insulated from the border crisis, where relations have radically changed, it is on the investment front, with restrictions on Chinese companies, and in the telecommunications sector where companies Chinese companies have been kept away from 5G trials. The massive influx of Chinese funds into the tech sector has also been halted. Chinese private equity and venture capital investments fell below $ 1 billion for the first time since 2017, according to industrial research firm Venture Intelligence.

Barriers to Market Access

Mr Shringla said that the size of the trade deficit, which is also set at a record this year, and “a number of barriers to market access, including a host of non-tariff barriers, for the most part of our agricultural products and the sectors in which we are competitive, such as pharmaceuticals, IT / ITES, etc. ”, remained two important concerns.

He also noted that India is seeking to reduce these imbalances through initiatives such as the Production Linked Incentive Program (PLI) aimed at “improving the resilience of the Indian manufacturing sector”.

India’s message to China is that business cannot be normal as long as border peace is disrupted. Business has exploded, however, with no sign of slowing down even as the border crisis shows no sign of abating.

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