Economic ties to propel relations with China: PM

BEIJING, JANUARY 14: Exhorting business leaders on both sides to redouble efforts at expanding the agenda for economic cooperation between India and China, Prime Minister Manmohan Singh today made it clear that bilateral economic cooperation has become the “principal driver of our strategic and cooperative partnership”.

It was on this note that one of the largest business summits between the two countries, comprising representatives from over 300 Indian and Chinese companies, took off today. While Indian side sought to identify new areas of cooperation, Chinese efforts were focused on increasing investment into India.

China is also said to have made an offer to transfer some of the Olympic Games infrastructure, once the event is over, to India, so that it can be used for the Commonwealth Games in Delhi.

Singh suggested a “three-pronged strategy” to the business leaders, which involved developing a joint strategic plan for the future, come out with “profitable business models that factor in complementarities” and find a way to gain “insights into each others markets, business customs and management styles”.

The last aspect is what is proving a difficult barrier to cross, even as both countries are expected to demonstrate the political will to move forward on a regional trade agreement. Indian business, however, is still reluctant largely because of the ownership structures of Chinese enterprises that allow transfer pricing on a much larger scale. This, in turn, makes Chinese enterprises more competitive in comparison to some of the small and medium enterprises from India.

According to CII head Sunil Mittal, this is a real problem and it is important for China to “further clarify” by listing companies and providing additional details. In fact, industry sources indicate that granting China market economy status is one of the big hurdles for India. Surprisingly, this is one issue where the Government appears to be keener than the industry.

Among other economic issues, commerce minister Kamal Nath raised several issues of market access to Indian companies. To list a few:

• India expressed concern on China putting a “huge cess” on coking coal

•While India has permission for export of 17 types of fruits and vegetables, China has allowed only 3 types so far. The Commerce Minister said he took this up with his counterparts.

• India raised the issue of Jet Airways being allowed to transit Shanghai and pick up passengers from there for San Francisco. This issue now stands resolved with India setting aside its security concerns over the Great Wall Airlines.

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