Since initiating market reforms in 1978, China has shifted from a centrally-planned to a more market-based economy and has experienced rapid economic and social development. GDP growth has averaged nearly 10% a year—the fastest sustained expansion by a major economy in history—and more than 850 million people have lifted themselves out of poverty. China reached all the Millennium Development Goals (MDGs) by 2015 and made a major contribution to the achievement of the MDGs globally. Although China’s GDP growth has gradually slowed since 2012, as needed for a transition to more balanced and sustainable growth, it is still relatively high by current global standards.

With a population of 1.3 billion, China is the world’s second largest economy and the largest if measured in purchasing price parity terms. China has been the largest single contributor to world growth since the global financial crisis of 2008.

Although China has made impressive economic and social development gains, its market reforms are incomplete, and its per capita income remains that of a developing country and less than one quarter of the average of OECD countries. The country is on track to eliminate absolute poverty by 2020 according to China’s current poverty standard (per capita rural net income of RMB 2,300 per year in 2010 constant prices). However, there are still an estimated 373.1 million people below the “upper middle income” international poverty line of $5.50 a day.      

Rapid economic ascendance has brought on many challenges as well, including high inequality (especially between rural and urban areas), challenges to environmental sustainability, and external imbalances. China also faces demographic pressures related to an aging population and the internal labor migration.

China’s rapid economic growth exceeded the pace of institutional development, and there are important institutional and reform gaps that it needs to address to ensure a sustainable growth path. Significant policy adjustments are required for China’s growth to be sustainable. Managing structural reforms and related risks will not be straightforward given the complexity, size, and global importance of China’s economy.

China’s 13^th Five-Year Plan (2016-2020) addresses these issues. It highlights the development of services and measures to address environmental and social imbalances, setting targets to reduce pollution, to increase energy efficiency, to improve access to education and healthcare, and to expand social protection. The 13^th Five-Year Plan’s annual growth target is 6.5%, reflecting the rebalancing of the economy and the focus on the quality of growth while maintaining the objective of achieving a “moderately prosperous society” by 2020 (doubling GDP for 2010-2020). 

Source: World Bank

China has the world’s largest outbound tourism industry. In 2017, more than 130 million outbound tourists traveled to different parts of the world and spent more than US$ 115 billion. Tourism to India, however is still below potential. In 2017, India received around 250,000 Chinese tourists. To enhance people to people cooperation, the year 2015 was celebrated as “Visit India Year in China” and year 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. In 2018, Mr KJ Alphons, Minister of State for Tourism (IC) visited China in August 2018 and held roadshows in Beijing, Wuhan, Guangzhou and Shanghai. The roadshows were highly attended and generated a lot of interest from Chinese Tour operators.

India-China MoU on Audio-visual co-production 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. “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. In 2017, “Kung fu Yoga”,  featuring Jackie Chan and “Buddies in India” were released. In recent years, Indian movies such as Dangal, Secret Superstar, Hindi Medium, Toilet etc. registered great success at Chinese box office.

Double Taxation Avoidance Agreement (DTAA):  India and China signed the DTAA on 18 July 1994 and the Agreement came into force on 21 November 1994.  Both the countries have agreed to revise the DTAA in its entirety. The revised DTAA has been signed in May 2018.

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 (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

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. In recent years, Chinese mobile companies have achieved remarkable growth in India. Xiaomi, became largest mobile handset selling company in the 3rd quarter of 2017. Today, Chinese mobile handset companies Xiaomi, Vivo and Oppo occupies nearly 40% of Indian mobile handset market.

Bilateral trade

The rapid expansion of India-China bilateral trade since the beginning of this century propelled China to emerge as India’s largest goods trading partner by 2008, a position which China continues to hold today. Since the beginning of the current decade, bilateral trade between the two countries recorded exponential growth. For last two years, the bilateral trade has registered robust two digit growth. For the year 2017, bilateral trade increased by 20.3% year-on-year to reach US$ 84.41 billion, with India’s exports rebounding to US$ 16.34 billion registering positive growth of 38.9% year-on-year after 3 years’ continuous decline. India’s imports from China grew by 16.5% to US$ 68.03 billion.

Trade Deficit:

While India-China trade grew exponentially, it has also led to the biggest single trade deficit we are running with any country. In 2017, the widening trade deficit reached to US $51.72 billion. The growth of trade deficit with China could be attributed to two factors: narrow basket of commodities, mostly primary, that we export to China and market access impediments for most of our agricultural products and the sectors where we are competitive in, such as pharmaceuticals, IT/IteS, etc. Our pre-dominant exports have consisted of cotton, copper and diamonds/ natural gems. Over time, these raw material-based commodities have been over-shadowed by Chinese exports of machinery, power-related equipment, telecom, organic chemicals, and fertilizers.

The Five Year Development Program for Economic and Trade Cooperation between the People’s Republic of China and the Republic of India was adopted during the visit of China’s President to India during September 2014 to address the serious issue of trade imbalance and facilitation of market access for more Indian products in China. In 2018, market access was achieved for export of Indian Non-Basmati rice, rapeseed meal, fishmeal and fish-oil. The Embassy also took proactive steps and organized various Buyer Seller meets to bring Indian exporters and Chinese importers on same platform. In last six months we hosted events such as oil meals, rice, pharmaceuticals, tea, sugar and tourism and one RBSM on grapes in Mumbai/Nashik.

Bilateral Investment

Growth in bilateral investment has not kept pace with the expansion in trading volumes between the two countries. While both countries have emerged as top investment destinations for the rest of the world, mutual investment flows are yet to catch up. According to Ministry of Commerce of China, Chinese investments in India between January-December 2017 were to the tune of US$289.98 million and Cumulative Chinese investment in India till the end of December 2017 amount to US$4.747 billion. Cumulative Indian investment in China till September 2017 is US$ 851.91 million.  However these figures might be misleading as the data do not capture investment routed through third country like Singapore, Hong Kong etc. especially in sectors such as start-ups etc. which has seen significant increase in Chinese investment.

Source: ITC Trade Map

Untapped Trade Potential:

According to the ITC Trade Map, the products with greatest export potential from India to China are copper cathodes, diamonds, worked, and motor vehicles for the transport of persons, nes.

Embassy of India, Beijing,
No.5, Liang Ma Qiao Bei Jie, Chaoyang
District, Beijing 100600 China

Tel: +86-10-8531 2500/2501/2502/2503
Fax: +86-10-8531 2515
Website – www.eoibeijing.gov.in

Counsellor (Economic & Commerce)
ceco.beijing@mea.gov.in; 85312537

First Secretary (Economic & Commerce)
com.beijing@mea.gov.in; 85312522