“INTERNATIONAL TRADE BETWEEN INDIA AND CHINA”

SUBMITTED FOR THE PARTIAL FULFILMENT FOR THE

DEGREE OF
MBA IN INTERNATIONAL BUSINESS
[SESSION 2021-23]

SUPERVISED BY: - SUBMITTED BY:-

DR. ANUKRATI SHARMA AFROZ ZABI
ASSOCIATE PROFESSOR & MBA IB II SEM
HEAD OF DEPARTMENT

DEPARTMENT OF COMMERCE AND MANAGEMENT

UNIVERSITY OF KOTA, KOTA RAJASTHAN

1
 CERTIFICATE

This is to certify that AFROZ ZANI of course MBA IN

INTERNATIONAL BUSINESS completed the Seminar course entitled
“INTERNATIONAL TRADE BETWEEN INDIA AND CHINA” It is
further certified that this seminar course has completed under my
guidance and supervision.

Dr. Anukrati Sharma

Associate professor & head of department
UNIVERSITY OF KOTA KOTA RAJ.

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 CANDIDATE’S DECLARATION

I AFROZ ZABI hereby declares that the Seminar course

“INTERNATIONAL TRADE BETWEEN INDIA AND CHINA”
submitted in the partial fulfilment of the requirements for the award of the
degree of MBA IN INTERNATIONAL BUSINESS is my original design/
research work and that the information taken from secondary sources is given
due citations and references.

AFROZ ZABI
MBA IB II SEM

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 ACKNOWLEDGMENT

My profound gratitude to Almighty Allah for the knowledge, wisdom and

understanding that he bestowed on me to carry out this project. I appreciate
my supervisor for the supervision and support that gave, which helped the
progression and smoothness of the project. The co-operation is much indeed
appreciated. My grateful thanks also go to the Entire Commerce and
management department of the University of Kota, the H.O.D Dr.Anukrati
Sharma and all lecturers who prepared me from the base. I will also like to
Special thanks also to my parents May the Almighty Allah bless you all and
keep you all to enjoy the fruit of your labour
In shaa Allah.

Date:-
Place:- AFROZ

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 INDEX
Introduction 1
History 3
Socio-Cultural Relations 4
Legal Relations 5
Political Relations 7
Indo-China 10
Introduction
History of Indo-China 11
Sino-India War 12
Country Comparison of 14
Indo-China
Socio-Cultural Relations 16
of Indo-China
Legal-Relations of Indo- 19
China
Political Relations of 21
Indo-China
Defence Relations of 23
Indo- China
Economic Relations of 26
Indo-China
Bilateral Trade 27
Relations of Indo-China
Investment Of Indo- 32
China
Free Trade Zones of 34
Indo-China
Special Economic Zones 35
Of India and China
Future of Indo-China 38
Relations
Conclusion 41

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 INTERNATIONAL TRADE
BETWEEN INDIA AND CHINA

Introduction :

The term international relations has been interpreted and defined in narrow and broad sense.
In the narrow and ordinary sense, ―International relations are official relations conducted by
authorised leaders of the states only.‖ In the broader sense, in the words of Hartmann
―International are all intercourse amongst states and all movements of people, goods, ideas
across national frontiers.

International Relation (IR) is also termed as ‗foreign relation‘ which is basically an

interaction between individuals belonging to various nations. It is study of foreign affairs and
global issues among states within the international system, including the roles of states,
intergovernmental organisations (IGOs), non-governmental organisations (NGOs),
international non-governmental organisations (INGOs), and multinational corporations
(MNCs).

Apart from political science, IR comprises of various fields such as economics, history,
international law, philosophy, geography, social work, sociology, anthropology, psychology,
and cultural studies/culturology. It involves a diverse range of issues including but not limited
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to globalisation, state sovereignty, ecological sustainability, nuclear proliferation,
nationalism, economic development, global finance, terrorism, organised crime, human
security, foreign interventionism and human rights.
The relationship between states can be of two types- cooperative and oppositional (Involving
conflict). The cooperative relations are mainly of non-political character such as economic,
cultural etc. and do not involve any use of power. The oppositional relations, on the other
hand, imply conflict or struggle among groups and demand use of power. Therefore,
International Relations is a study of both cooperative and oppositional relations among the
states.

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History :

Historically, International Relations dealt with the establishment of treaties and agreement
between various nations. The emergence of International Relations took place after the 15th
century when governments of various nations interacted with each other and exchanged their
cultural values. The purpose of IR was to avoid conflicts and to ensure peace. Initially,
international relations as a distinct field of study was almost entirely British-centred.

Flags of the member states of the United Nations

Internationalisation:

The field of International Relations is concerned with social, economic, cultural, political and
legal interactions among various nations. According to the Princeton University WordNet,
Internationalisation simply means ―to bring something under international control‖.

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Socio/- Cultural Relations :

 Language : A language usually defines the parameters of a particular culture. If

several languages are spoken within the borders of the country, that country is seen to
have as many cultures. Within each cultural group, the use of words reflects the
lifestyle, attitudes and many of the customs of that group. Language is not only a key
to understanding the group, it is the principal way of communicating within it.

 Aesthetics : Aesthetics sense is the every individuals point of view to express beauty.
It is how beauty can be defined through dance, drama, music, color. Aesthetics is the
sense of expression.

 Material Culture : Material Culture relates to the way in which a society organises
and views its economic activities. It includes the technique and know-how huge in the
creation of goods and services, the manner in which the people of the society use their
capabilities and the resulting benefits. The Material Culture of a particular market will
affect the nature and extent of demand of a product.

 Time : Time has a different meaning in each country. Western cultures tend to persue
time in terms of past, present and future. They are oriented towards the future and in
the process of preparing for it, they save, they waste, makeup or spend time.

 Space/ Proximity : The concept of space is different wherever one goes. In western
corporate culture, the size and location of an executive‘s office is usually determined
by his level of seniority in the company.

 Religious Beliefs : A religious system refers to the spiritual side of a culture or its
approach to the super natural. A society‘s religious belief system is often dependent on
its stage on human or economic development.

 Attitude : Attitudes are psychological states that predispose people to behave in

certain ways. Attitudes may relate, to work, wealth, achievement, change the role of
women in the economy.

 Values : Values are judgements regarding what is valuable or important in life, and
they vary greatly from one culture to another. People who are operating at a survival
level will value food, shelter and clothing. Those with high security needs, on the other
hand, may value job security, status, money. From its value system, a culture sets
norms, acceptable standard of behaviour.

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Legal Relations :

The legal systems of a country refers to the rules, or laws, that regulate behaviour along with
the processes by which the laws are enforced and through which redress for grievances is
obtained. The legal environment of countries differ in significant ways.

The legal relations of countries is bided by these global legal institutes, they are:

WTO : The original vision of a global trade organisation such as the ITO has been at least
partially realised in the agreement to replace GATT with a World Trade Organisation
(WTO). The WTO incorporates GATT rules, but as considerably more power to set and
enforce standards than the previous GATT secretariat in Geneva.
The WTO agreements contain special provisions which gives developing countries special
rights and to developed countries the possibility to treat developing countries favourably than
other WTO members. The WTO system combines reciprocal market access negotiation of
market access with rules on non-discrimination in trade- the Most Favoured Nation (MFN)
principle. That is market liberalisation agreed between any two WTO members is spread to
all members of WTO.

World Bank : After World War II, when the United Nation was organised, it was envisioned
that a World bank and International Trade Organisation(ITO) would also be established. The
World Bank came into as an international lending and development agency to which
industrialised nations make contributions for the ostensible purpose of promoting the
development globally.

ICJ( International Court Justice) : An organisation within the United Nations that has
fostered the growth of international law. The ICJ hears and rules on disputes between nation-
states but usually does so only where the respective nations agree that the ICJ has
jurisdiction. The ICJ relies on customary international law, treaties and conventions in
making its decisions.

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The following laws are generally practiced internationally :

 Common Law : It is based on tradition which means punishments are passed on from
generations to generations. Common law is one that is on tradition. These principals are
used by courts to interpret and apply the law as it evolves overtime.

 Civil Law : It is codified form of law where court follow statues( written rules).

 Religious Law/ Theocratic Law : It is religious law based on sacred techs, religious
tenants and interpretation of these by the religious hierarchy of the nation.

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Political relations:

Political relations include :

The political systems of a country shapes its economic and legal systems. By political sytems
we mean of government in a nation.
 Regulations governing how businesses can interact with overseas companies.
 Regulations and laws limiting or restricting importing.
 Regulations limiting the operations of foreign companies.
 How the national government is influenced by larger governments or special interests
outside the country.
 Laws and rules reflecting social/cultural changes in the demographic make-up of the
citizens.

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Economic relations:

International economic relations looks at the differences in production capacities and

economic institutions across nations, and how these affect worldwide economic activity. The
international economic relations between two countries depend on a number of factors like
the import export relations, investment between two countries and so on.
Trade is an important factor in this context, normally there are two types of trades:
 Bilateral trade
 Multilateral trade

Bilateral trade is the trade between two countries and multilateral trade is trade between more
than two countries.

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The importance of good International Economic Relations may be
understood by taking a look at INDIA and CHINA. Apart from
being in terms with other countries, these two nations also have
cordial economic relationships and they share symbiotic
relationship from economic point of view. They have continued to
make economic progress by helping each other out and have set
the trend as far as International Economic Relations are
concerned.

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 INDO - CHINA

Introduction :

China–India relations, also called Sino-Indian relations or Indo-China relations, refers to the
bilateral relationship between the People's Republic of China (PRC) and the Republic of
India.
Both India and China are large economies. Their domestic markets provide vast scope for
diversified industrialization and trade. Both economies are classified by international
agencies as emerging markets with potential for rapid economic growth. Both economies
possess the capacity to become the ‗power houses‘ of global economy. There are many
similarities between the two economies such as vast pool of employable labour and
abundance of natural resource endowments. Also both countries suffer from paucity of
capital and a large part of population is still dependent on farm activities. Poverty and
relatively poor standard of living continue to affect a large number of people in both the
countries. Eradication of poverty and improvement in living standard, therefore, are seen as
the basic objectives of development and acceleration in the rate of economic growth as the
means to achieve them. In June 2012, China stated its position that "Sino-Indian ties" could
be the most "important bilateral partnership of the century".

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History :

Historically, India and China have had relations for more than 2,000 years but modern
relationship began in 1950 when India was among the first countries to end formal ties with
the Republic of China (Taiwan) and recognize the PRC as the legitimate government of
Mainland China. China and India are two most populous countries and fastest growing major
economies in the world. The resultant growth in China and India's international diplomatic
and economic influence has also increased the significance of their bilateral relationship.

China and India are two of the world‘s oldest civilisations and have co-existed in peace for
millennia. Cultural and economic relations between China and India date back to ancient
times. The Silk Road not only served as a major trade route between India and China, but is
also credited for facilitating the spread of Buddhism from India to East Asia. During the 19th
century, China's growing opium trade with the British Raj triggered the Opium Wars. During
World War II, India and China played a crucial role in halting the progress of Imperial Japan.

Despite the fact that India was one of the first few countries, which recognized the
People‘s Republic of China, the bilateral relationship saw a number of downs than ups. The
history of initial years of India-China relations more particularly during 1949 – 1958 depicts
an era of friendliness. Both India and China were able to reach to a consensus and signed the
Panchsheel Agreement, which basically dealt with Trade and Intercourse between India and
Tibet region of China in Beijing. Panchsheel became the guiding principles of India-China
bilateral relationship. Zhou Enlai‘s trip to India in June 1954 was a symbolic messaging
about China‘s intent and philosophy. It was historic in the sense that a communist head of
government was making a peacetime visit to a non-communist state.

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Sino-Indian War

The Sino-Indian War , also known as the Sino-Indian Border Conflict , was a war between
China and India that occurred in 1962. A disputed Himalayan border was the main pretext for
war, but other issues played a role. There had been a series of violent border incidents after
the 1959 Tibetan uprising, when India had granted asylum to the Dalai Lama. India initiated a
Forward Policy in which it placed outposts along the border, including several north of the
McMahon Line, the eastern portion of a Line of Actual Control proclaimed by Chinese
Premier Zhou Enlai in 1959.

Unable to reach political accommodation on disputed territory along the 3,225-kilometer-

long Himalayan border, the Chinese launched simultaneous offensives in Ladakh and across
the McMahon Line on 20 October 1962. Chinese troops advanced over Indian forces in both
theatres, capturing Rezang la in Chushul in the western theatre, as well as Tawang in the
eastern theatre. The war ended when the Chinese declared a ceasefire on 20 November 1962,
and simultaneously announced its withdrawal from the disputed area.

The Sino-Indian War is notable for the harsh mountain conditions under which much of the
fighting took place, entailing large-scale combat at altitudes of over 4,000 metres (14,000
feet). The Sino-Indian War was also noted for the non-deployment of the navy or air force by
either the Chinese or Indian side.

The border row brought significant changes in China‘s approach towards India.
China‘s nuclear test on 1964 added additional fear among Indian minds and key policy
makers. Both the nations had lost mutual trust and confidence and since then it has been a
great challenge to leave misunderstandings behind and forge a new relationship. Such process
of forging friendly ties requires a strong determination and greater initiative to promote their
friendship.

It is obvious that the India – China border conflict in 1962 brought about serious
damage to the friendship between the Chinese and Indian Peoples and that led to a long term
conflict has still not been vanished. Hence, it had really been one of the greatest challenges
to change the mindset and look for zenith in India – China relations, which had reached to
nadir in the aftermath of 1962 conflict.

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The cause of the war was a dispute over the sovereignty of the widely separated Aksai Chin
and Arunachal Pradesh border regions. Aksai Chin, claimed by India to belong to Kashmir
and by China to be part of Xinjiang, contains an important road link that connects the
Chinese regions of Tibet and Xinjiang. China's construction of this road was one of the
triggers of the conflict.

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 Country comparison

People's Republic of
Republic of India
China

140.21 crores (2020)

Population 138 crores
(2020)

9,640,821 km² (3,704,427

Area 3,287,240 km² (1,269,210 sq mi)
sq mi)

Population density 382/km² (922/sq mi) 139.6/km² (363.3/sq mi)

Capital New Delhi Beijing

Largest city Mumbai Shanghai

Federal republic, Parliamentary

Government Socialist, Single-party state
Democracy
First Leader Jawaharlal Nehru Mao Zedong

Current Leader Droupati Murmu Xi Jinping

Hindi, English, Assamese or " Assamiya ",

Bengali, Gujarati, Kannada, Kashmiri, Standard Chinese
Official languages Konkani, Malayalam, Marathi, Manipuri, (Mandarin), Mongolian,
Nepali, Oriya, Punjabi, Sanskrit, Sindhi, Tibetan, Uyghur, Zhuang
Tamil, Telugu and Urdu

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 >10% each: non-religious,
folk religions and Taoism,
Hindu (80.5%), Muslim (13.4%), Christian
Buddhism. <10% each:
Main religions (2.3%), Sikh (1.9%) Buddhist (0.8%), Jain
ethnic minority religions,
(0.4%) other religions (0.6%)
Christianity, Hinduism,
Islam.

GDP (nominal)(2020) 2.62 lakhs crore US$ 14.72 lakh crores US$

GDP (nominal) per

US$1,900.71 US$10,500.40
capita(2020)

GDP (PPP)(2021) US$ 1961.42 US$ 11188.30

GDP (PPP) per

US$ 6675.35 US$17602.70
capita(2021)

Human Development
0.645 (medium) 0.759 (medium)
Index

Foreign exchange 564,053US$ 3,275,490US$

reserves

US$ 293 billion (2021)

Military expenditures US$ 76.6 billion (2021)

Active Troops:
Active Troops: 1,325,000 (1,155,000 approximately 2,200,000
Manpower
Reserve personnel) (1,170,000
Reserve
Personnel)

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Socio-Cultural Relations :

History of Cultural Exchanges

Both India and China are not mere societies; they are civilizations. We do not know exactly
when and how they started exchanging their cultural elements, but what we do know is that
they grew in parallel and shared their cultural traits since the beginning of human history and
this tradition of sharing has been continuing ever since.

Both civilizations also shared scientific knowledge. In eighth century, Indian astronomer
Aryabhata's astronomical signs were translated into Chinese in the book "Kaiyuan Zhanjing"
compiled by Gautama Siddha, an astronomer in Chang'an of Indian descent. It is also
believed that he translated the Nabagraha calendar into Chinese. During the Ming Dynasty,
navigator General Zheng His arrival at Calicut in early 15th century is also a testimony of
China‘s ancient maritime linkage with India.

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Modern Phase of Cultural Exchanges

Our exchanges continued during the days of our struggle for self governance. In early 20th
century, Nobel laureate Rabindranath Tagore visited China twice, in 1924 and in 1929. Since
1911, Chinese scholars and intellectuals have been visiting and revisiting Tagore‘s life, works
and philosophy. During this year, which marks his 150th birth anniversary, there are efforts
by Chinese publishing houses to bring out collected volumes of these writings on Tagore in
the last one hundred years. Institutions are preparing to stage Tagore‘s plays in Chinese
language for easy comprehension of Chinese audience. As part of Gurudev‘s 150th Birth
Anniversary celebrations, Mission collaborated with Chinese institutions like Peking
University, Chinese Association for Friendship with Foreign Countries (CPAFFC), Yunnan
University and many others to hold seminars, exhibitions and movie screenings in his honour.
A fully Chinese production of Gurudev‘s famous play- Chitrangna, is slated to be opened in
Lanzhou University in March 2012.

Both India and China have vibrant cultures and vibrant people. Buddhism, Xuan Zhang,
Tagore, Dr, Kotnis, Nalanda, Yoga and Cinema are only symbols of our long tradition of
exchanges. They are testimonies of our shared heritage. The momentum has been set and the
pace can only increase in the 21st century.

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List of Cultural Events-

1. 62nd Republic Day Celebration, January 26, 2011

Embassy of India organized a function to celebrate 62nd Republic Day Celebration on 26th
January, 2011. The function started with the lighting of the ceremonial lamp Ambassador Dr.
S. Jaishankar and H.E. Mr. Hu Zhenyue. A 10 member cultural troupe led by noted Kathak
dancer, Namrata Pamnani gave a scintillating performance on the occasion.

2. Independence Day Celebrations at Indian Embassy, August 15, 2011

Embassy of India celebrated Independence Day on 15th August. Ambassador hoisted the
national flag at the Chancery premises. He also read out the President of India‘s message to
the nation. Embassy staff and members of the Indian community in Beijing participated.

3. “The future of India-China Cultural exchanges”, an Interactive Session with a

prestigious panel of Indian artists and literary personalities held at Indian Cultural
Center on November 9, 2011
Indian Culture Center organized ―The Future of India-China Cultural Exchanges‖, an
Interactive Session with the prestigious panel of Indian artists and literary personalities led by
Sh. Ashok Vajpayi, Chairman, Lalit Kala Akademi.

4. Indian Movie Festival- from 29th November to 4th December, 2011

Embassy of India, Beijing with the collaboration of Magic Lantern Foundation organized
Indian Movie Festival in 798 Arts district in Beijing. The movie festival held from 29th
November to 4th December, 2011. The movie festival attracted hundreds of people.

5. Buddhist Photography Exhibition held at Sanya, 19-20 December, 2011

Embassy of India organized a Buddhist Photography Exhibition of the famous artist Mr.
Binoy Behl on 19-20 December, 2011 at Nanshan Buddha Temple, Sanya

6. Enhance Mutual Learning between Yoga, Work Together to Strengthen People-

to-People Bond
The 2022 International yoga day & China-India Cultural Exchange Event was held on
june 21 in Kunming, southwestern China’s Yunnan Province. The event was attended
by more than 100 Chinese and foreign guests both online and offline.

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Legal Relations :

China joined the WTO in December 2001. Its commitments to the WTO are massive. It has
made commitments to open and liberalize its economic regime. It would offer predictable
environment for trade and foreign investment. China has agreed to provide non-
discriminatory treatment to all WTO members, elimination of duel pricing between domestic
and export products, price controls, elimination of export subsidies on farm products,
reduction in tariff duties and removal of non-tariff barriers to name but a few. The largest
gainers are the advanced countries and newly industrializing countries of East Asia.
Developing countries are the minor gainers. China herself is major gainer because of
improved market access worldwide.

China‘s joining of the WTO has coincided with rapid rise of Indo- China bilateral trade. The
two-way trade grew over 25 per cent per annum. Indian exports to China increased by 26 per
cent and imports from China increased by 24 per cent during 2000─2004 periods. However,
on the one hand, the share of India in China‘s global imports is around 1 per cent. On the
other hand, import from China in Indian global imports is over 5 per cent. For 237 India,
China is an important export destination but it cannot be said for China. Primary and
resourced based products dominate the Indian export basket but now there are some signs of
diversification. Chinese exports to India are more diversified and include resource based
manufactures and low and medium technology based products. Major change in product
composition of China‘s exports to India occurred in 2003 with the entry of large number of
electric and electronic products. However, the product concentration remained stable during
1996─2003. This is evident from Hirschman Index. The Chinese exports to India are more
diversified than India‘s exports to China. More of medium and high technology products
dominate Chinese exports to India. Therefore, it appears that Chinese exports are more
sustainable than India‘s exports to China.

Liberalisation

As India and China are almost at similar levels of tariff regimes, further tariff liberalisation
may not be a critical negotiating point for India in order to secure better market access in
China. If preferential reduction of tariff takes place between the two countries, it may be
more advantageous to China in the agricultural sector than to India. Considering the small
export basket of India to China, peak tariff and preferential tariffs could be detrimental to the
export interest of India. China is gradually following regionalism, and extension of tariff
preferences to more regional partners could prevent Indian access to the Chinese market and
realisation of its export potential. If China continues to maintain peak tariff on certain
products which are of export interest to India, and continues to provide tariff preferences to
many competing suppliers from emerging countries, India may have to look for an alternative
strategy to join more Southern-based Regional Trading Arrangements to compensate the loss
of trade in China.

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In general, tariffs in China are lower than those in India particularly, for India‘s major export
items such as ores, pharmaceutical products, plastics, manmade staple fibers, and iron and
steel. The non-tariff barriers and informal restrictions are of greater concern. Such restrictions
in China on imports of goods and services apply to imports from India as well Indian industry
and business organisations have identified similar constraints in promoting their exports to
China, for example: customs procedures, standards, certification and regulatory practices, and
quantitative restrictions.

India‘s trade policy regime with China‘s yields useful policy lessons. The reduction in
average tariffs is a general phenomenon in both India and China.

Indian Embassy in Beijing, China

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Political Relations :

Leaders of the two countries have maintained regular contacts and have met frequently
during international gatherings.
The People's Republic of China (PRC) was established on October 1, 1949, and India was the
first non-communist country to establish an Embassy in PRC. On April 1, 1950, India and
China established diplomatic relations. The two countries also jointly expounded the
Panchsheel (Five Principles of Peaceful Co-existence) in 1954. Chinese Premier Zhou Enlai
visited India in June 1954 and Prime Minister Nehru visited China in October 1954.
India and China have stepped up functional cooperation in all areas. The two foreign
ministries have instituted dialogue mechanisms on issues relating to counter-terrorism, policy
planning and security, besides strategic dialogue and regular consultations. There are also
close cooperation in areas as diverse as water resources, judiciary, science & technology,
audit, personnel, finance, labour etc.
Exchanges at the government levels, Parliamentary and Party exchanges have also expanded.

India-China political relations are enhanced and strengthened by various mechanisms. There
is a close and regular interaction between strategic and foreign policy think-tanks. These
exchanges continued to be strengthened during 2011. CICIR has regular interactions with
IDSA and ICS. The third Track-II dialogue between China Reform Forum and Aspen India
was held in March 2011. USI has exchanges with China Institute for International Strategic
Studies and ICWA has interactions with CPIFA. Dialogues are now being initiated between
pairs of India-China academic organizations.

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 Prime Minister of India and China, Manmohan Singh and Li Keqiang,

Trade policy

Assessment of trade policy developments indicates that both the countries have benefited
from import liberalization to a large extent. This is evidenced by growth in exports and
imports. China cut trade restrictions on imports and exports in a gradual manner. By the time
China entered the WTO in 2001, the import regime had been entirely transformed. The share
of imports subject to licensing requirements had fallen to less than 4 per cent of all
commodities. Besides, sweeping changes in trading rights and reduction in the scope of state
controlled trading organizations had been undertaken. India too abolished quantitative
restrictions on most of the commodities. Import tariffs were drastically reduced and non-tariff
barriers dismantled in both the countries. However, tariff duties remained relatively higher in
India than in China. The Chinese commitment to the WTO compelled China to cut tariffs
but it was not the case with India. The import liberalization policy of India was more
calibrated. At the outset, it appears that China is more open as compared to India on the trade
policy front. These facts enable us to analyze the reasons for the rising trade between the two
countries.

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Defence Relations :

Background

A warming trend in relations between India and China was facilitated after Prime Minister
Rajiv Gandhi visit China in Dec 1988, wherein it was decided to set up a Joint Working
Group (JWG) on the boundary issue. Between Dec 1988 and Jun 1993, progress was made in
reducing tensions on the border via Confidential Building Measures (CBMs), including
mutual troop reductions, regular meetings of local military commanders and advance
notifications of military exercises. Seven rounds of JWG talks were held during this period.
During Shri Sharad Pawar's visit to Beijing in July 1992, the first ever by an Indian Defence
Minister, it was agreed to develop academic, military, scientific and technological exchanges.
A senior level Chinese military delegation aimed at fostering CBMs between the defence
forces of the two countries made a six day goodwill visit to India in Dec 1993. The visit was
reciprocated by Indian Army Chief Gen BC Joshi's visit to China in July 1994. Since then
regular exchanges have been taking place at various levels. Bilateral defence interaction has
been growing. Peace and tranquility along the Line of Actual Control (LAC) in the border
areas is being largely maintained by both sides in accordance with the agreements of 1993
and 1996. Recent highlights in defence relations are the visit by the then Defence Minister,
Mr George Fernandes, to China in Apr 2003. The visit came after a gap of more than one
decade and also helped ease the post Pokhran tensions. This was followed by a return visit by
Chinese Defence Minister Gen Cao Gangchuan in Mar 2004. In Dec 2004, Gen NC Vij, the
then COAS visited China, the first by an Indian COAS in a decade, and both the countries
agreed to deepen defence cooperation. In May 2005, the Chinese CGS visited India, a further
sign of warming relations between the two countries. The Indian Defence Minister visited
India in May 2006 and signed the first ever MoU on Defence Exchanges between the Armed
Forces of India and China. In May 2007 Gen JJ Singh, Chairman COSC and COAS visited
China. This was the first time that Chairman COSC visited China and was hosted by the CGS
of the PLA. In Nov 2008, the Chief of Air Staff of the IAF paid an official visit to China from
02 – 06 Nov 2008. Simultaneously, the Commander PLA Navy paid a visit to India from 02
to 05 Nov 2008. Chairman COSC and CNS, Admiral Sureesh Mehta, PVSM, AVSM, ADC
visited China and participated in the International Fleet Review to mark the 60th Anniversary
Celebrations of PLA Navy from 19 - 25 Apr 2009.

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Review of Defence Exchanges

General: Bilateral defence interaction has been growing. Peace and tranquility along the
Line of Actual Control (LAC) in the border areas is being largely maintained by both sides.
Presently our approach has been based on interaction at a higher level with the heads of
departments/institution making visits to PLA Institutions. Lower level interaction is carried
out through training institutions like NDC and Army War College (AWC). With
thenformalisation of MoU on Exchanges in the Field of Defence Cooperation between India
and China, the effort to deepen and institutionalise defence cooperation between the armed
forces of India and China is being reinforced.

Bilateral Exchanges: Details of bilateral exchanges (Service Chiefs & Ministerial)

conducted between the two countries from 2000 to 2011 is attached as at Annexure. The
bilateral exchanges between India and China have been steadily increasing with greater
exchanges of defence delegations.

Ministerial Level Delegations: From India, the Indian Defence Ministers have visited China
thrice in Jul 1992, Apr 2003 and May 2006. The Chinese Defence Ministers have visited
India twice in Sep 1994 and Mar 2004.

29
India China Line Of Actual Control (LAC)

30
Economic Relations :

Both the countries posses advantages in labor India-China economic relations constitute an
important element of the strategic and cooperative partnership between the two countries.
Several institutional mechanisms have been established for enhancing and strengthening
economic cooperation between the two countries.

India and China compete in the global market place in many product lines. This competition
got intensified after China joined the WTO. This is because China received the MFN
treatment from the WTO member countries.-intensive product lines, particularly
manufacturing products such as textiles, apparel, chemicals, leather products and host of light
manufacturing products to name but a few.
Sizeable exports of both the countries are directed towards the developed countries markets,
namely the US and the EU. In addition, both the countries 181 have substantial trade with the
Asian economies such as ASEAN and Japan.
China‘s global exports was $438 billion or 6 per cent in world exports as compared to India‘s
$55 billion or 0.76 per cent share in world exports in 2003.
China‘s exports grew on an average 21 per cent between 2001 and 2003, during the same
period when India‘s exports grew by 9 per cent.18 India‘s share is too small as compared to
China in the total imports of the US, the EU, Japan and ASEAN.

31
Bilateral Trade Relation :

During 1990s, Indo-China bilateral trade began to expand rapidly,

particularly after mid-1990s.

Changing Trends of Bilateral Trade Engagement

Bilateral trade between India-China has grown rapidly in the past few years and picked
up significantly after Chinese accession to WTO. During the period 2001-2009, bilateral
trade turnover jumped by nearly twelve and a half times from US$ 3.6 billion to nearly US$
45.1 billion as presented in the table. With a conservative estimate, the India-China trade
turnover is expected to cross US$ 60 billion in 2010 and further to 125 billion in 2012. China
has now emerged as the largest trade partner of India30 since 2008-09.
During the last nine years, exports of India to China have grown at annual rate of 29.8
per cent and by 2009, they formed 7.7 per cent of the total exports. In 2001, China was
lagging behind several countries including Belgium and Singapore so far as its share in the
total trade of India is concerned. In the same year, China shared 3.5 per cent of India‘s total
trade whereas the US shared 14.4 per cent, the UK 5.1 per cent and Belgium 4.1 per cent of
total India‘s trade. The trade scenario changed significantly in 2009 with a sizable increase in
India‘s bilateral imports. China not only jumped up in its ranking among India‘s lead bilateral
trade partners but also splashed the Indian market with its exports, causing serious bilateral
trade imbalances. It is now sharing nearly 9 per cent of 48.

32
Bilateral trade figures for the period Jan-Oct, 2011

The overall bilateral trade figures for Jan-Oct, 2011 released by the China Customs are
as follows:

(All figures in US$ billions)

Highlights:

 India-China trade for Jan-Oct, 2011 stood at US$ 60.58 billion, recording an increase of
almost 22%.
 India‘s exports to China for Jan-Oct, 2011 reached US$ 18.89 billion, a growth of more
than 11% when compared to the same period in 2010.
 China‘s exports to India for Jan-Oct, 2011 reached US$ 41.68 billion, recording an
increase of almost 27% compared to Jan-Oct, 2010.
 The trade deficit for India for Jan-Oct, 2011 stood at US$ 22.79 billion.
 China’s export to India last year(2021) went by 46.2 per cent to USD 97.52 billion
 India’s export to China grew by 34.2 per cent to USD 28.14 billion
 The trade deficit for India grew by USD 69.38 billion
 2021- bilateral trade volume between India and China is USD 125.66 billion
 The India China bilateral trade increase by 15.3 per cent to over USD 31 billion in the first
quarter of this year

33
India’s total trade with China for the period Jan-Oct, 2011

34
 India’s Exports to China for the period Jan-Oct, 2011

India’s Export to
china for period 2021-
22
India Exports by Category Last Previous

Non Basmati Rice 120945.66 73953.76 INR Million Jun/22

Non Basmati Rice 46996.64 37207.76 INR Million Jun/22

35
India’s Export to
china for period 2021-
22
India Exports by Category Last Previous

gems & Jewellery-total 25295.69 25365.35 INR TML Jun/22

gems & Jewellery-cut & Polished Diamo 15737.26 16156.03 INR TML Jun/22

gems & Jewellery-gold Jewellery 2746.39 2104.19 INR TML Jun/22

Manufactured Goods 2029.08 1924.02 INR Billion Jun/22

gems & Jewellery-silver Jewellery 1999.29 1830.54 INR TML Jun/22

Engineered Goods 744.00 747.66 INR Billion Jul/22

Gems & Jewellery- Rough Diamonds 429.08 290.25 INR TML Jun/22

Chemical & Products 419.88 378.73 INR Billion Jun/22

Agricultural Products 379.06 366.35 INR Billion Jun/22

gems & Jewellery-coloured Gemstones 181.75 337.92 INR TML Jun/22

Electronic Goods 144.69 130.87 INR Billion Jul/22

Textile Excl. Ready-made Garments 126.99 129.58 INR Billion Jun/22

Leather & Products 36.97 35.17 INR Billion Jul/22

Ores & Minerals 24.30 33.57 INR Billion Jun/22

Handicrafts Excl. Hand-made Carpets 9.65 9.06 INR Billion Jul/22

36
India’s Export to
china for period 2021-
22
India Exports by Category Last Previous

gems & Jewellery-synthetic Stones 7.41 3.73 INR TML Jun/22

gems & Jewellery-pearls 1.61 1.02 INR TML Jun/22

gems & Jewellery-gold Medallions & Co 0.67 0.22 INR TML Jun/22

Highlights:

 Iron Ores, cotton & yarn, fabric, copper, precious stones, organic chemicals, plastic,
salt, sulphur, earth & stone, machinery, reactors, boilers continued to dominate the
Indian export basket.
 Among the products exported from India to China, iron ores, slag and ash (HS 26)
constituted a dominant share of 49% though the export declined by 10% y-o-y. The
share of cotton, yarn and fabrics in the total exports from India to China stood at
10% for the period Jan-Oct, 2011.
 Spectacular rise was seen in the exports of copper and articles thereof (HS 74),
plastic (HS 39), food waste (HS 23) and miscellaneous chemical products (HS 38)
recording increases of 164%, 71%, 64% and 63% y-o-y respectively.

37
 India’s Imports from China

India Imports by Category Last Previous

Non Pol Items 13572564.00 9804133.00 INR Million Jul/22

Non Pol Items 3592420.21 3344613.05 INR Million Jul/22

38
India Imports by Category Last Previous

Petroleum Crude & Products 1681.98 1619.22 INR Billion Jul/22

Non Oil 243.98 203.03 USD Million Oct/21

Oil 87.42 72.99 USD Million Oct/21

Non Oil 40.94 38.95 USD Million Oct/21

Project Goods 15.81 7.34 INR Billion Jul/22

Cotton Raw & Waste 15.43 9.81 INR Billion Jul/22

Oil 14.43 17.44 USD Million Oct/21

Highlights:

 In Jan-Oct, 2011, imports from China touched a total of USD 41.68 billion, increasing by
more than 27% over the figure for Jan-Oct, 2010.
 In Jan-Oct, 2011, India was the 7th largest export destination for China.

39
Investments :

Chinese Investment in India

 2007- USD 16 million

 2008- USD 49.1 million (Cumulative investment till Dec 2008 was at USD 91.1 million)
 2010- USD 33 million (China‘s non-financial investment in India)
 Jan-Oct, 2011- USD 50.77 million (China‘s non-financial investment in India)
 Oct, 2011- USD 298.75 million
 2019- USD 6.68 billion (venture capital, private equity, accelerators and incubators)
 2020- USD 3.95 billion (venture capital, private equity, accelerators and incubators)
 2021- USD 14.13 billion (venture capital, private equity, accelerators and incubators)

Indian Investment in China

 2006 – USD 52 million

 2007- USD 34 million in 78 Projects
 2008- USD 257 million in 92 projects ( turnover realized was USD 88.1 million and the
cumulative committed FDI from India into China in the projects till 2008 was USD 898
million in 426 projects)
 2010- India's FDI in China- 77 Projects; investment of USD 55 million.
 Jan-Oct, 2011- India's FDI in China- 83 Projects; investment of USD 33.45 million
 Oct, 2011- India's FDI in China- 676 Projects; investment of USD 432.98 million

40
Indian Companies in China

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 or Joint Ventures with Chinese companies are into
manufacturing (pharmaceuticals, refractory, 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. Most of the Indian companies have a presence in Shanghai,
which is China‘s financial centre; 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. In the field of banking, ten Indian banks have set up operations in China. State Bank of
India (Shanghai), Bank of India (Shenzhen), Canara Bank (Shanghai) and Bank of Baroda
(Guangzhou), have branch offices, while others (Punjab National Banks, UCO Bank,
Allahabad Bank, Indian Overseas Bank, Union Bank of India etc.) have representative
offices. Apart from PSU banks, private banks such as Axis, ICICI also have representative
offices in China.

Chinese Companies in India

According to information available with the Embassy of India, close to 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 also have 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. Chinese automobile major Beijing Automotive
Industry Corporation (BAIC) has recently announced plans to invest US$ 250 million in an
auto plant in Pune. TBEA a Xinjiang-based transformer manufacturer has firmed up plans to
invest in a manufacturing facility in Gujarat. During the visit of Premier Wen to India,
Huawei announced plans to invest in a telecom equipment manufacturing facility in Chennai.

41
Free Trade Zones :

China (Shanghai) Pilot Free-Trade Zone is a free-trade zone launched in Shanghai, China
on September 29, 2013. Backed by Chinese Premier Li Keqiang, it is the first free-trade zone
launched by the Chinese government. The zone covers an area of 29 km2, integrating four
existing bonded zones — Waigaoqiao Free Trade Zone, Waigaoqiao Free Trade Logistics
Park, Yangshan Free Trade Port Area and Pudong Airport Comprehensive Free Trade Zone.
It is seen as a testing ground for a number of economic reforms. It has been reported that the
sale of video game consoles, banned in China since 2000, will be allowed within the zone.

The Free Trade Zone will permit yuan convertibility and unrestricted foreign currency
exchange, and a tax-free period of 10 years for the businesses in the area. Although it was
initially reported that the Free Trade Zone will also have unrestricted access to the internet
(with bans on sites such as Facebook lifted), the official Xinhua News Agency has stated that
Internet restrictions would not be lifted.

India‘s Free Trade Zone (FTZ) at Tamil Nadu, is a one-stop facility for all logistics and
trading requirements. The customized special zone from DHL brings profitable
infrastructural support without any tax and duty burdens. Add to that special value added
services that include packing, labelling, re-invoicing along with our export – import clearance
expertise. Getting business connected successfully to the globe.

Free Trade Zone in China

42
Special Economic Zones :

A flourishing group of SEZs, otherwise known a Special Economic Zone, seems to be a

golden goal for every developing nation that aspires to be one of the giants in international
trade. Both India and China had realized the same, possibly three decades back. What differs
is the way these two countries have approached this issue. The reason why China is reaping
the success now is because of appropriate policy measures that she adopted from time to
time. But all is not well with the Chinese model either. India, on the other hand, had been a
bit late in implementing the SEZ model. Initially it started emulating China but thing just
didn‘t work the way they were expected to. Till date she has not been successful in providing
a flexible economic environment similar to that of the SEZs in China. An overview of the
land laws, labour laws, and government policies clearly indicates why this is so. It is time to
revisit our past and learn from our mistakes. There are a number of provisions of law that
needs to be amended, reformulated and debated upon so that we can have a definite vision of
our SEZs in future and meet our aspirations efficiently.

SEZs have existed in Asia for many years now. The reason why SEZs have become so
popular in Asia is because this particular model of trade has resulted in a rapid growth in the
industries and the economy augmented by the process of globalization and emergence of
international organizations like the World Bank and the IMF. We have particularly chosen to
study India and China in this regard because both these nations have made remarkable
transformations, West Bengal National University of Juridical Sciences within their
economies. It is believed that the success of SEZs in China, which introduced this model way
back in the 1970s, prompted India to introduce the same policy in 2000. India has therefore
closely emulated China‘s policies aspiring to achieve similar results. However one needs to
be cautious about wholesale importation of China‘s methods. India must acknowledge and
take into account the vast differences between the two countries when crafting its own
policies.

The main purpose of SEZs in India is to serve the promotion of exports.

The Commerce Ministry of India has shown great confidence regarding its growth.
The Commerce and Industries Minister, Mr. Kamal Nath claims that exports will
ultimately grow by five times, GDP will rise 2%, and will generate around 30 lakh
jobs across India.1 The government also claims that these SEZs will attract Foreign
Direct Investments (FDI), enable transfer of modern technology and will create
incentives for infrastructure. India has also received a good response from these
SEZs, so far. Fifteen of the SEZs that are presently operational have been able to
maintain an amount close to US$ 780 million and have created over 100,000 jobs.2
But this humble success has been grossly overshadowed by the phenomenal
prosperity of China‘s limited SEZs. Shenzhen, one of the first and the biggest SEZs
in China, has transformed itself from a fishing village to one of the world‘s most
rapidly growing cities.3 Today, it is home to China‘s state of the art technology
leaders like Huawei and ZTE. According to official estimates, its economy grew at an annual
rate of 16.3% from 2001-2005. India, on the contrary, has decided to encourage a number of
small enclaves instead of allotting huge areas of land.

43
Several newspaper reports are indicative of the fact that as many as 267 projects have already
been cleared ‗in principle‘ by the government. Out of these 150 proposals have won final
approval. India has also come up with a central legislation governing the SEZs in 2005 and
subsequent rules in 2006. But there is a down side to this as well. Land has been a serious
constraining factor for India‘s development process. This process of land acquisition has
already deprived thousands of peasants and has brought the poor landless labourers at the
brink of grave poverty and unemployment. Apart from forceful land acquisition and
displacement of peasant population, improper and inadequate compensation has also been a
major problem for the Indian Government.

The Chinese Model

The Chinese economy, in 1979, had just emerged from a hazardously closed economic policy
prescribed by Mao Zedong, and was still reeling from its after-effects. In 1979, Deng
Xiaoping committed the Chinese economy to reform, believing, as a true Communist would,
that the economy is the base of all society, and in it lays the answer to the majority of
society‘s woes.

The Indian Model

India was one of the first countries in Asia to recognize the effectiveness of the Export
Processing Zone (EPZ) model in promoting exports, with Asia's first EPZ set up in Kandla in
1965. In order to overcome the shortcomings experienced on account of the multiplicity of
controls and clearances; absence of world-class infrastructure, and an unstable fiscal regime
and with a view to attract larger foreign investments in India, the Special Economic Zones
(SEZs) Policy was announced in April 2000.

Objective :

The objectives of SEZs can be clearly explained as the following:-

(a) Generation of additional economic activity;

(b) Promotion of exports of goods and services;
(c) Promotion of investment from domestic and foreign sources;
(d) Creation of employment opportunities;
(e) Development of infrastructure facilities.

44
The major incentives and facilities available to SEZ developers include:-

 Exemption from customs/excise duties for development of SEZs for authorized

operations approved by the BOA.
 Income Tax exemption on income derived from the business of development of the SEZ
in a block of 10 years in 15 years under Section 80-IAB of the Income Tax Act.
 Exemption from minimum alternate tax under Section 115 JB of the Income Tax Act.
 Exemption from dividend distribution tax under Section 115O of the Income Tax Act.
 Exemption from Central Sales Tax (CST).
 Exemption from Service Tax (Section 7, 26 and Second Schedule of the SEZ Act)

SEZ in Noida, India

45
Future :

In terms of the future prospects, China can assist India in her globalization efforts, by cheaper
imports from India and using them to produce low cost products in India itself, through the
joint-venture strategy. By trading with China, India can be a little more competitive in global
markets. A strategy of engagement with China and facing up to competition can be India‘s
policy for the future.

India must emulate China by taking advantage of its cheap hardworking and skilled workers
to leverage better in world markets. To compete effectively India needs to expand its primary
and secondary education, and give more emphasis to vocational education and training.
At the geo-political level, Sino-Indian relations should rise above the present border disputes,
and past tilts. Relation should be non-hyphenated and stand alone, not guided by any third
country. India occupies a special place, as the land of Buddha in China. There is also
admiration in India for China‘s economic achievements. India has an edge over China in
terms of intellectual capital for the future knowledge of economy.

46
47
48
CONCLUSION :

There is no doubt in saying that the levels of engagement between India and China have
increased certainly to a greater extent. India, at the same time, requires to adopt sophisticated
approach to deal with the emerging Strategic challenges being emanating from China.
Despite the fact that China has become increasingly assertive not only at the regional level
but also at the global level, India has not shown any displeasure so far in strongest terms. The
border dispute with China will not be resolved in near future.

In the current circumstances, it is obvious that trade has come to be viewed as an increasingly
important driver of relations by both sides; especially in the light of lingering political
mistrust on a number of wide ranges of issues spanning from the long running border dispute
to China‘s all weather relationship with Pakistan. The regular reports of incursions by
Chinese troops and more aggressive patrolling in disputed areas have certainly created strain
on India-China relations.

It is high time that both India and China should start emphasizing on resolving the real border
issues so that the relationship gets a boost and which ultimately would forge a greater and
friendly cooperation. India also requires taking pro-active measures in countering China
across its borders. A new pragmatism with a combination of both realism and neo-realism
would shape their view of each other. The neo-realist perspective of international relations,
where maximization of interests becomes the key factor would guide India – China relations
in the future. The emergence of China as India‘s biggest trading partner in the year 2008
signals that both the countries have been ushering into a new phase of relationship mostly
guided by economics and commerce factor.

The signing of an Agreement on ―Political Parameters and Guiding Principles for the
Settlement of the Border Dispute‖, by both India and China has shown that both the
countries, India and China are moving ahead in terms of reaching to a consensus on this
major irritant. It has been also agreed that both sides would maintain peace and tranquillity on
the border. But, at the same, it requires careful assessment especially on the intent and
declarations. China has also been following the tenets of the ‗Monroe Doctrine‘. The attempt
has always been to deny access to other powers in the region that it perceives as exclusively
within its sphere of influence. Such Chinese actions have been damaging the interests of
other regions especially to the countries in the East and South East Asia. Many of China‘s
actions in this part of the world would require very careful handling by India. It may be
important for India in the current context to understand China‘s intentions and fundamental
goals. India will always promote constructive engagement with China and avoid any direct
confrontation. It would also be in China‘s interest if it forges greater and robust partnership.

49
 BIBLIOGRAPHY

www.dgft.gov.in
www.mca.gov.in
www.business .mapsofindia.com
www.brookings.edu.com
www.thehindu.com
www.sricity.in/freetrade.com
www.ecb.europa.com
www.indianembassy.org
www.ajadhind.wordpress.com
International Business by Hill and Jain
International Economic Relations by Gautam Murthy
International Relation and Organisation by Dr. S. R. Myneni
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