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All unions based on mutual needs

Will China heed the call?


eace is a natural effect of trade, said Charles de Montesquieu, 16th century French judge and political philosopher. “The natural effect of commerce is to bring peace. Two nations that negotiate between themselves become reciprocally dependent, if one has an interest in buying and the other in selling. And all unions are based on mutual needs.” Montesquieu’s wisdom on trade continues to hold good. And if the natural effect of commerce be to bring peace, India and China are on the right track. The Frenchman’s words are remarkably accurate on the IndiaChina equation. Both have interest in buying, and also in selling. While India continues to stare at a huge trade deficit vis-à-vis China, the buying and selling roles keep changing in the India-China equation. Salvatore Babones, associate professor in the Faculty of Arts and Social Sciences at the University of Sydney, told China Daily, the English-language Chinese daily owned by the government, “China needs the customers. India needs the technology.” The arrangement is not unilateral. Where India scores high is expertise in information technology backed by a huge English-speaking population, software and medicines. For China, India is a crucial infrastructure and investment market. Wuhan, admittedly, was more about optics than outcomes. But these enhanced atmospherics were much

10 ICC May-June 2018_Press

needed at this juncture after Doklam and other needling factors in the bilateral relationship. Wuhan was a great confidence building measure for the businesses in both countries. Till now, the huge potential for investment opportunities in India (worth a trillion) has largely been unexplored by Chinese investors due to uncertainty

about relations. Out of $36.32 billion worth of FDI India received in 2016-2017, merely $ 198 million of FDI was from China. The poor statistics in India’s favour remained despite the fact that globally, China was the second largest source of outward FDI, at $183 billion. Hopefully, Wuhan will change the mindset of Chinese businessmen, and they may start looking for long term Greenfield investment in India rather than short term, and mergers and acquisitions. With increased prosperity, China is looking at rising per capita income, and a simultaneous increase in labour costs. India can be a natural destination for Chinese industries looking at controlling

▪ May-June 2018


Profile for India China Chronicle

India China Chronicle May - June 2018