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Brief on India-China Trade & Commercial Relations

In the recent years the momentum generated by the visit of Chinese President Xi Jinping to India in September 2014 and the return visit of Prime Minister Modi to China in May 2015, has been kept high. Hon’ble President of India paid a successful state visit to China (Guangzhou and Beijing) from 24-27 May 2016. In the year 2016, Prime Minister Narendra Modi and President Xi Jinping met thrice including for the G20 Summit in Hangzhou, the BRICS Summit in Goa, and the SCO Summit in Tashkent. In 2017, Prime Minister Narendra Modi and President Xi Jinping met during the SCO Summit in Astana, G20 Summit in Hamburg and during the BRICS Summit in Xiamen.

2. The other high level visits include the Finance Minister Arun Jaitley’s visit to China in June 2016, Defence Minister Manohar Parrikar’s visit in April 2016, Secretary, DEA Mr. Shaktikanta Das’s visit to Beijing in August 2016, Chairman of China’s National Development and Reform Commission Minister Mr. Xu Shaoshi visit to India in October 2016. The Chief Ministers of Madhya Pradesh and Andhra Pradesh also visited in June 2016. The Chinese Finance Minister Xiao Jie travelled to Delhi on 31 st March-1 st April to attend the NDB board of Governance meeting and also held a bilateral talk with our Finance Minister. Indian side participated in all the BRICS related events. The Commerce Minister, Health Minister, Culture Minister, HRD Minister,Labor Minister, MOS (AYUSH) and MOS (Telecom) participated in respective BRICS Ministerial meetings.

INSTITUTIONAL FRAMEWORK OF BILATERAL COOPERATION

India-China Strategic Economic Dialogue (SED)

3. During Chinese Prime Minister Wen Jiabao’s visit to India in December 2010, India and China agreed to set up the Strategic Economic Dialogue (SED) mechanism. The initiative for setting up the SED came from India. The SED mechanism looks beyond the immediate bilateral issues faced by the two countries and is a forum for both sides to discuss strategic macro- economic issues impacting both nations as a result of the changing international economic and financial landscape, to share their individual best practices and in handling challenging domestic economic issues and to identify specific fields for enhancing cooperation, learning and experience sharing. The first India-China SED took place in Beijing from September 26-27, 2011. The fourth meeting of the India-China SED took place in New Delhi on 7 th October , 2016.

Joint Economic Group Meeting

4. India-China Joint Economic Group on Economic Relations and Trade, Science and Technology (JEG) is a ministerial-level dialogue mechanism established in 1988 during the visit of former Prime Minister Rajiv Gandhi to China. JEG has so far met ten times. The scheduling of the previous JEG’s is as under:

First Session New Delhi Sep 18-20, 1989
Second Session Beijing Feb 06, 1991
Third Session New Delhi Dec 09, 1991
Fourth Session Beijing Jan 04, 1993
Fifth Session New Delhi Jun 13, 1994
Sixth Session Beijing Feb 19-20, 2000
Seventh Session New Delhi Mar 16, 2006
Eighth Session Beijing Jan 19, 2010
Ninth Session New Delhi Aug 27, 2012
Tenth Session Beijing Sep 2, 2014

5. During the 9 th JEG, the two sides also set up three working groups on Economic and Trade Planning Cooperation, Trade Statistical Analysis and Service Trade Promotion. The Work Programme of the three working groups was signed by CITM and Chinese Commerce Minister during the visit of Premier Li Keqiang to India from May 19-22, 2013.

India-China Financial Dialogue: 

6. India-China Financial Dialogues are held in accordance with the MoU signed during Chinese Premier Wen Jiabao’s visit to India in April 2005. Since then the two sides have successfully held 8 Financial Dialogues in April 2006, December 2007, January 2009, September 2010, November 2011, September 2013, December 2014 and August 2016. The eighth India-China Financial Dialogue was held in Beijing on 19 August 2016 which was co-chaired by Secretary DEA. The Ninth India-China Financial Dialogue is proposed to be held in New Delhi.

NITI Aayog-DRC Dialogue

7. A Memorandum of Understanding between NITI Aayog of the Government of India and the Development Research Centre (DRC), State Council of the People’s Republic of China was signed during the visit of Hon’ble Prime Minister of India to China in May 2015. The First NITI Aayog-DRC Dialogue was held in Beijing on 24 th November 2015, co-chaired by Mr Arvind Panagariya, Vice Chairman NITI Aayog and Mr Li Wei, President (Minister), DRC. The second NITI Aayog-DRC Dialogue was held in New Delhi 16-17 November , 2017 and was once again co-chaired by Mr Arvind Panagariya, Vice Chairman NITI Aayog and Mr Li Wei, President (Minister), DRC.

Other Dialogue Mechanisms

8. Some of the other institutionalized dialogue mechanisms between the two countries include the Joint Working Group (JWG) on Trade, JWG on Collaboration in Skill Development and Vocational Education, Joint Study Group and Joint Task Force on Regional Trading Agreement (RTA), India-China Joint Working Group on Agriculture, India-China Joint Working Group on Cooperation in Energy and the Joint Study Group on BCIM Economic Corridor.

BILATERAL TRADE BETWEEN INDIA AND CHINA

9. India and China officially resumed trade in 1978. In 1984, the two sides signed the Most Favoured Nation Agreement. Trade volume between the two countries in the beginning of the century, year 2000, stood at US$ 3 billion. In 2008, bilateral trade reached US$ 51.8 billion with China replacing the United States as India’s largest “Goods trading partner.” In 2011 bilateral trade reached an all-time high of US$ 73.9 billion.

Current State of Play

10. According to recently released data by Chinese Customs, India-China trade in 2016 decreased by 0.67% year-on- year to US$ 71.18 billion. India’s exports to China decreased by 12.29% year-on- year to US$ 11.748 billion while India’s imports from China saw a year-on- year growth of 2.01% to US$ 59.428 billion. The Indian trade deficit with China further increased by 6.28% year-on- year to US$ 47.68 billion. In 2016, India was the 7th largest export destination for Chinese products, and the 27th largest exporter to China.

11. India-China trade in the first eight months of 2017 increased by 18.34% year-on- year to US$ 55.11 billion. India’s exports to China increased by 40.69% year-on- year to US$ 10.60 billion while India’s imports from China saw a year-on- year growth of 14.02 % to US$ 44.50 billion. The Indian trade deficit with China further increased by 7.64% year-on- year to US$ 33.90 billion.

Composition of Bilateral Trade

12. In 2016, India’s top exports to China included diamonds, cotton yarn, iron ore, copper and organic chemicals. Indian exports of diamonds grew 28.48% and amounted to US$ 2.47 billion. India was the second largest exporter of diamonds (worked/not worked) to China (with a share of 31.81%). India’s cotton (including yarn and woven fabric) exports to China showed a decline of 44.1% to reach US$ 1.27 billion, although India was the second largest exporter of cotton to China with 16.43% market share. In 2016, Indian exports of iron ore registered an increase of over 700% to reach US$ 844 million.

13. In 2016, China exports of electrical machinery and equipment saw an increase of 26.83% to US$ 16.98 billion. India was the largest export destination of Fertilizers exports from China. China exported 23.48% of its total Fertilizers (worth US$ 1.54 billion) to India. India was the largest export destination for Chinese Antibiotics worth US$ 711 million in 2016, with a share of 23.55%. India was the second largest export destination for Chinese organic chemicals, worth US$ 5.68 billion in 2016.

Border trade

14. There are three border trade points between India and China viz. Nathu La Pass (Sikkim), Shipki La Pass (Himachal Pradesh) and Lipulekh Pass (Uttarakhand).

» Trade across Lipulekh (Qiang La) Pass is governed by the Protocol on entry and exit procedures for border trade, signed between the two countries on July 1, 1992 at New Delhi. The period of trade is June 1- Sep 30 and the designated market sites are Gunji (India) and Pulan (TAR) with 39 items allowed for export from India and 18 items for import from China.

» Trade across Shipki La Pass is governed by the Protocol for extension of border trade across Shipki La Pass, signed between the two countries in Beijing on Sep 7, 1993. Border trade markets are Namgya (Kinnaur District, Himachal Pradesh) and Jiuba in Zada County of TAR.

» Border trade between India and China across Nathu La resumed in July 2006. This border trade across Nathu La is governed by the MoU on expanding border trade, signed between the two countries in Beijing on June 23, 2003. The border trade markets for trade across Nathu La are Changgu (Sikkim) and Renqinggang (Tibet Autonomous Region- TAR). The period of the trade through Nathu La is from May 1-Nov 30. 15 items are allowed to be imported from China and 29 items allowed to be exported from India.

» Joint Statement during the visit of Hon’ble Prime Minister to China in May 2015 stated that two sides recognized that enhancing border areas cooperation through border trade, pilgrimage by people of the two countries and other exchanges can effectively promote mutual trust, and agreed to further broaden this cooperation so as to transform the border into a bridge of cooperation and exchanges. The two sides agreed to hold negotiation on augmenting the list of traded commodities, and expand border trade at Nathu La, Qiangla/Lipu-Lekh Pass and Shipki La. 

INVESTMENTS

15. Industrial Parks: An MoU between the Ministry of Commerce of PRC and Ministry of Commerce and Industry of India on ‘Cooperation on Industrial Parks in India’ was signed on June 30, 2014 in Beijing during the visit of Vice President of India to China so as to provide a platform for cluster type development of the enterprises of both countries. In pursuance to the MoU, DIPP constituted a Joint Working Group (JWG) of the Indian side on 16 th July 2014 under the Chairmanship of Joint Secretary, Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, who will be the nodal officer from the Indian side, to identify and agree upon the detailed modalities for implementing cooperation under the said agreement, and to periodically review progress. The First Meeting of the JWG on Industrial Parks was held in Beijing from 3-4 August 2015. The 3rd meeting of the Joint Working Group on Industrial Parks was held in Beijing from 2-3 November, 2016.

Indian Companies in China

16. With the growth in bilateral trade between India and China in the last few years, many Indian companies have started setting up Chinese operations to service both their Indian and MNC clientele in China. Indian enterprises operating in China either as representative offices, Wholly Owned Foreign Enterprises (WOFE) or Joint Ventures with Chinese companies are into manufacturing (pharmaceuticals, refractories, laminated tubes, auto-components, wind energy etc.), IT and IT-enabled services (including IT education, software solutions, and specific software products), trading, banking and allied activities. While the Indian trading community is primarily confined to major port cities such as Guangzhou and Shenzhen, they are also present in large numbers in places where the Chinese have set up warehouses and wholesale markets such as Yiwu in Zhejiang. Most of the Indian companies have a presence in Shanghai, which is China’s financial center; while a few Indian companies have set up offices in the capital city of Beijing. Some of the prominent Indian companies in China include Dr. Reddy’s Laboratories, Aurobindo Pharma, Matrix Pharma, NIIT, Bharat Forge, Infosys, TCS, APTECH, Wipro, Mahindra Satyam, Dr. Reddy’s, Essel Packaging, Suzlon Energy, Reliance Industries, SUNDARAM Fasteners, Mahindra & Mahindra, TATA Sons, Binani Cements, etc.

Chinese Companies in India

17. According to information available with the Embassy of India, more than 100 Chinese companies have established offices/operations in India. Many large Chinese state-owned companies in the field of machinery and infrastructure construction have won projects in India and have opened project offices in India. These include Sinosteel, Shougang International, Baoshan Iron & Steel Ltd, Sany Heavy Industry Ltd, Chongqing Lifan Industry Ltd, China Dongfang International, Sino Hydro Corporation, etc. Many Chinese electronic, IT and hardware manufacturing companies are also having operations in India. These include Huawei Technologies, ZTE, TCL, Haier etc. A large number of Chinese companies are involved in EPC projects in the Power Sector. These include Shanghai Electric, Harbin Electric, Dongfang Electric, Shenyang Electric etc.

BANKING SECTOR COOPERATION

18. Many Indian banks have established their presence in mainland China in the last few years.

The following Indian Banks have either branch or representative offices in China:

» State Bank of India (Shanghai and Tianjin),
» Canara Bank (Shanghai),
» Axis Bank (Shanghai),
» Bank of Baroda (Guangzhou),
» ICICI (Shanghai)
» Bank of India (Shenzhen)
» Union Bank (Beijing, Shanghai)

19. In early 2011, Industrial and Commercial Bank of China (ICBC) secured a license to start banking operations in India. ICBC inaugurated their Mumbai branch on September 15, 2011. This marked the opening of the first branch of a mainland Chinese bank in India. Recently ICBC has applied for its second branch in New Delhi.

TOURISM / FILMS

20. The number of outbound tourists from China in 2016 was about 122 million whose expenditure abroad amounted to about US$ 100 billion. However only 0.2 million Chinese visited India during 2016. The electronic visa was recommended for Chinese nationals as part of proposals for tourism promotion in December 2014 and was announced by Hon’ble PM in Beijing in May 2015. This has been implemented on 31 st July 2015. Since then the demand for e-visa has been exponential. 71325 E-Visas have been issued in 2016, accounting for about 36% of all visas issued on mainland China. More recently, in April 2017, e-business visa has been introduced to encourage more number of people travelling to India. New categories of visa like intern visa and film visa have also been introduced this year.

21. India-China MoU on Audio-visual coproduction was signed during Chinese President Xi Jinping’s visit to India in September 2014 and two Indian movies (PK and Dhoom3) were released in 2015. As agreed between India and China in the 2014 Joint Statement, the year 2015 was celebrated as “Visit India Year in China”. It was launched jointly by Vice Premier Wang Yang, External Affairs Minister Smt. Sushma Swaraj and Chairman CNTA, Mr. Li Jinzao on 2 February 2015. India also participated as the ‘Country of Honour’ at the 3rd China-South Asia Expo in Kunming in June 2015. An India-China Business and Tourism Forum was held on the side lines of the Expo to deepen cooperation between the two countries in the tourism sector. 2016 was celebrated as ‘Visit China Year in India’. The renewal of the bilateral MoU on Cooperation in Tourism Sector was completed in May 2015.

22. As part of promotion of people to people contacts and enhancing the public image of India, co-production films were encouraged in last few years. “Xuan Zang” was the first co-production film between India and China, featuring popular Chinese Huang Xiaoming. This film released in 2016 was submitted as a contender to represent the mainland China for Best Foreign Language Film at the 89th Academy Awards in 2017. “Kungfu Yoga” featuring Jackie Chan was released in 2017. “Buddies in India” was released in 2017