further, in NICs, we find only India close to, or outperform CHinese industries......
en.wikipedia.org
as per reports, we find Western firms are more inclined to open branches in India as compared to CHina or other NICs... only India outperform CHina in NICs in this regard.....
here, we also have report that India has at least Outperformed
South Africa in NICs.
outside OECD economies, only China is ahead of India in terms of High-Tech Industries.
China-India Economic Ties: Trade, Investment, and Opportunities
October 11, 2024
- China and India established a robust trading partnership in 2023, with bilateral trade reaching a record US$136.2 billion, reflecting a 1.5 percent increase from the previous year. This growth was bolstered by a 6 percent rise in Indian exports to China, emphasizing positive momentum in bilateral ties amid geopolitical tensions.
- Indian companies have increasingly established operations in China across various sectors, including pharmaceuticals and manufacturing, while over 100 Chinese companies are active in India, particularly in infrastructure and electronics. This mutual investment trend highlights the growing interdependence between the two nations.
- Despite challenges in their economic relationship, including fluctuating foreign direct investment (FDI) flows and geopolitical tensions, both nations remain committed to stabilizing relations and fostering cooperation, paving the way for future trade and investment opportunities.
Since establishing diplomatic relations in 1950, China and India have navigated a complex relationship characterized by both cooperation and competition. While the two Asian giants have faced challenges, particularly over their disputed Himalayan border, they have also fostered growing economic and trade ties. Recent years have seen notable developments, as both countries recalibrate their approaches to bilateral engagement, focusing on stabilizing their border while enhancing commercial collaboration.
Economically, China is India’s largest trading partner, with bilateral trade crossing US$100 billion in the 2023-24 financial year. China remains a vital supplier of industrial goods to India, particularly in electronics, machinery, and chemicals. The growing demand for Chinese technology and investment, especially in sectors like electric vehicle (EVs) and telecommunications, highlights the deep economic ties between the two countries. At the same time, India is actively seeking to attract Chinese companies to set up local manufacturing through new joint ventures in key industries.
In this article, we explore the evolving trade and investment relations between China and Indian and the potential for future collaboration across various sectors.
China-India bilateral trade
In 2023, China-India bilateral trade reached a new record of US$136.2 billion, marking a slight growth of 1.5 percent from the previous year despite mid-year economic slowdowns and ongoing geopolitical tensions. This increase in trade, including a 6 percent rise in Indian exports to China, reflects a positive momentum in bilateral ties, as highlighted by the Chinese Chargé d’Affaires, Ma Jia, during a Chinese New Year event in Delhi.
The growth in trade occurred amidst continued high-level interactions between the two nations, including a sideline meeting between Indian Prime Minister Narendra Modi and Chinese President Xi Jinping. While direct flights and full diplomatic appointments remain unresolved, the two sides have shown a commitment to stabilizing relations, with hopes for further cooperation and investment in the coming year.
According to the United Nations COMTRADE database, in 2023, India’s main exports to China were valued at US$16.25 billion. These exports included key sectors, such as organic chemicals, mineral fuels, ores, cotton, and copper.
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Meanwhile, India’s total imports from China reached US$16.25 billion, reflecting in particular the critical role of Chinese goods in India’s industrial supply chain. On the import side, India’s imports from China in 2023 were dominated by electrical and electronic equipment, followed by machinery and nuclear reactors. Organic chemicals, plastics, and optical, photo, technical, and medical apparatus also featured prominently
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China-India bilateral investment
Investment flows between India and China have experienced notable fluctuations in recent years. According to Statista, foreign direct investment (FDI) from China to India reached approximately US$279.46 million in 2021, down from US$534.60 million in 2019 and US$205.19 million in 2020. The peak of Chinese FDI in India occurred in 2015, amounting to US$705.25 million.
This significant decline in FDI inflows is largely attributed to India’s revised FDI policy for countries sharing borders, implemented in response to the Sino-Indian border tensions in 2020. However, by mid-2022, the Indian government began to approve individual FDI proposals on a case-by-case basis, with reports indicating that as of June 29, 2022, 80 out of 382 proposals linked to China had received approval. Conversely, Indian investment in China has also seen a downturn, with FDI amounting to US$6.32 million in 2021, a decrease of 47.4 percent year-on-year.
By the end of 2021, cumulative Indian investment in China totaled US$943.96 million, according to data from the Chinese Ministry of Commerce.
These investment trends reflect the complexities and challenges faced by businesses in navigating the evolving economic relationship between India and China, emphasizing the impact of geopolitical tensions on cross-border investments.
Over the years, Indian companies have increasingly set up operations in China, spanning various sectors including pharmaceuticals, manufacturing, IT services, and trade. Many Indian firms in China focus on manufacturing industries, such as pharmaceuticals, auto components, and wind energy. Major Indian corporations like Dr. Reddy’s Laboratories, Infosys, TCS, Wipro, and Mahindra & Mahindra have established themselves in China through wholly owned foreign enterprises (WOFE), joint ventures, or representative offices.
Indian businesses are primarily located in major cities such as Shanghai and Beijing, with many also concentrated in important commercial centers like Guangzhou, Shenzhen, and Yiwu, a hub for wholesale markets. These companies aim to serve both the local Chinese market and their global clientele, leveraging China’s strategic position in global trade.
On the other hand, Chinese investment in India has also expanded, particularly in sectors like infrastructure, electronics, and mobile manufacturing. Over 100 Chinese companies have established operations in India, with state-owned enterprises like Sinosteel and Sino Hydro Corporation focusing on infrastructure and machinery. Chinese electronics giants, such as Huawei, ZTE, and Haier, have made inroads into India’s IT and hardware manufacturing sectors. Chinese mobile manufacturers like Xiaomi, Vivo, and Oppo have become dominant players in India’s mobile handset market, collectively accounting for a significant share of the market.
The mutual investments between the two nations highlight the growing economic interdependence and complement the substantial trade relationship between India and China.
Trade and investment treaties
China-India bilateral investment agreement
The
Agreement Between the Government of the Republic of India and the Government of the People’s Republic of China for the Promotion and Protection of Investments (BIT) outlines the framework to promote and protect investments between the two countries. It focuses on fostering favorable conditions for mutual investments, ensuring fair treatment, and safeguarding the rights of investors. Here are some key provisions from the agreement:
- Promotion and protection of investment (Article 3): Both countries commit to creating favorable conditions for investors from each other and guaranteeing that their investments receive fair and equitable treatment. This includes protection against arbitrary or discriminatory actions.
- National treatment and most-favored-nation treatment (Article 4): Investors from both countries will receive treatment no less favorable than that given to domestic investors or those from any third state. This ensures equality in terms of investment opportunities and protections, though certain exemptions, like taxation matters, are carved out.
- Expropriation (Article 5): Investments cannot be nationalized or expropriated unless it is for a public purpose, in accordance with the law, and involves fair compensation. Investors have the right to legal review of such cases, ensuring transparency and equitable treatment.
- Repatriation of investment and returns (Article 7): Investors are allowed to freely transfer their capital and returns from investments between the two countries without undue delay. This ensures liquidity and financial flexibility for cross-border investments.
- Settlement of disputes (Article 9): Any disputes between investors and the contracting parties are to be settled amicably through negotiations. If unresolved, disputes can be referred to arbitration, including international arbitration bodies like the ICSID, to ensure a neutral and fair resolution process.
These provisions help create a secure environment for investors from both China and India, encouraging economic cooperation and boosting mutual prosperity through protected and well-regulated investment channels.
China and India remain committed to deepening economic ties through mutual trade and investment cooperation.
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