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India’s trade ties with Beijing taking time to ripen
December 07, 2018
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China and India may be talking about improving their trade relationship but there is little action to go with the words.

According to Indian government officials and representatives of various Indian trade bodies, progress is very slow - and may even be getting slower after last weekend’s truce between the United States and China in their trade war.

Both India and China have sought to rebuild trust after a armed standoff over a stretch of the Himalayan border last year.

Indian Prime Minister Narendra Modi and Chinese President Xi Jinping have met a number of times this year to give impetus to the trade discussions. The latest was last week, when they met on the sidelines of the G20 meeting in Argentina.

Indian and Chinese officials said after that meeting there was talk of Beijing increasing its soymeal, rapeseed meal, rice and sugar imports from India, while China would push for more Chinese exports of dairy products, apples and pears to India.

India is also keen to increase its exports of drugs to China.

In reality, though, getting such exchanges turned into deals is going to be a laborious process.

“When we say the Chinese are receptive, it means the talks are happening, but it’s going slow,” said one senior Indian government official with direct knowledge of the discussions. “It can be termed as progress because just a few months ago, we weren’t even talking,” said the official, who did not wish to be named because he is not authorised to talk to media.

The Chinese commerce ministry did not respond to a faxed request for comment for this article.

Bilateral trade between China and India touched $89.71 billion in the year ending March 2018, with the trade deficit widening to $63.05 billion in China’s favour, more than a nine-fold increase over the past decade.

The Indian government is very keen to reduce that gap. A recent study commissioned by India’s trade ministry and reviewed by Reuters, said: “There is no bilateral trade relationship of greater economic and political significance for India than with China.” The reduction in trade tensions between Washington and Beijing, which has led to a delay in the imposition of larger punitive tariffs by the United States pending further trade talks over a 90-day period, means that the Chinese government may not feel the need to speed up its discussions with New Delhi, Indian officials said.

The government has received calls from jittery exporters who want to know whether the improvement in the relationship between China and the United States would make India’s position weaker, said the senior Indian government official.

ROADBLOCK FOR INDIA
Ajay Sahai, director general of the Federation of Indian Export Organisations, also said China’s truce with the United States may be a roadblock to improved trade with Beijing.

“As it is, the China-US tariff tension was a temporary opportunity and it is not correct for companies to base their long-term strategies on it,” said Sahai.

One longer term impediment to improved trade is product quality, and trade, industry and government officials in India said both Beijing and New Delhi could take time to iron out their differences.

Last week, India and China signed an agreement allowing Beijing to inspect imports of Indian fish meal and fish oil.

A Chinese trade delegation is coming to India on Dec. 10 to inspect soymeal plants, said D.N. Pathak, executive director of the Soybean Processors Association of India.

India wants China to drop a years-long ban on soymeal imports from the South Asian nation. China was a leading buyer of Indian soymeal, a key ingredient in animal feed, until Beijing banned the purchases in late 2011 over quality concerns.

In November, India’s trade ministry said the country could export up to 2 million tonnes of sugar, but trade officials said the target was too steep because China has already exhausted its import quota for this year.

Although India has contracted to sell some tiny shipments of rice to China, officials said New Delhi would find it difficult to boost volumes as Beijing has traditionally been importing the staple from Vietnam and Thailand and the Chinese would take time to develop a taste for Indian rice.

Meanwhile, it’s not shaping up as a merry Christmas for coal exporters to Asia as the region’s top buyers, China and India, pull back from the recent trend of strong imports.

The Chinese authorities appear to be making good on a commitment to try and limit the country’s imports of the polluting fuel to levels the same as 2017.

The restrictions have led to a sharp drop in the daily import of coal so far in December, according to vessel-tracking and port data compiled by Refinitiv.

Seaborne imports in the first five days of the month stood at 1.5 million tonnes, or a daily rate of just 300,000 tonnes.

This compares to total seaborne imports of 226.2 million tonnes in the first 11 months of 2018, a daily rate of about 677,000 tonnes.

The authorities in Beijing have told coal traders and utilities they want imports for the whole year to be similar to the 279 million tonnes in 2017.

This is likely going to be a challenge since customs data showed imports for the first 10 months of the year were 252 million tonnes, up 11 percent from the same period in 2017.

With vessel-tracking data pointing to November seaborne imports of about 18.3 million tonnes, this would in theory leave only about 9 million tonnes available for December.

At the rate of imports for the first five days of December, this may just be possible, as it suggests about 9.3 million tonnes for the month as a whole.

However, the ship-tracking data doesn’t cover overland imports, mainly from neighbouring Mongolia, meaning it’s likely that 2018 imports will probably exceed those of 2017.

But the sharp reduction in imports so far in December shows Beijing’s message to the industry is being heeded.

Reuters

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