INDIA and China are recognised as two significant powers of the "Asian Century." China is India's largest trade partner, but the trade deficit between the two is highly in favour of China.
While the two-way trade was at $73.9 billion last year, it reportedly dipped to $55.6 billion during the past 10 months. Both the countries have expressed an interest to take the figure up to $100 billion by 2015.
The trade deficit between the two countries in 2011-12 is pegged at $23 billion. India has been concerned over widening trade imbalance in favour of China. Chinese companies have taken significant share of Indian market in electronic hardware, white goods, consumer items including mundane puja products, construction machinery and power transmission.
Prime Minister Manmohan Singh pressed for greater investments from China during his meeting with Premier Wen Jiabao in the Cambodian capital Phnom Penh on November 20. A Dialogue was established in 2010 during Prime Minister Wen Jiabao's visit to India and the first round was held in Beijing in September last year. The second such Dialogue was aimed at discussing ways to enhance investments and business engagement between the two of the fastest growing economies, significantly at a time when the Western world is in deep debt crisis.
At the beginning of the second dialogue on November 26, it is reported that Zhang Ping, Chairman of the National Development and Reform Commission of China and the leader of the delegation, said that the two countries should expand communication and coordination of their macro-economic policies, learn from each other's 12th five-year plans of economic development, seek cooperation in basic economic structure, encourage investment in each other's countries, and look for green economic cooperation.
Montek Singh Ahluwalia, India's vice chairman of the economic planning commission and leader of the Indian delegation, said that India-China economic cooperation was still a new initiative with huge potential. He said the two countries should overcome information deficit in economic fields and seek cooperation in sectors such as water-recycling, digital science and micro-irrigation.
The two countries set up five working groups for cooperation in areas like railways, energy, environment protection (energy efficiency and water), Hi-Tech (Information and Communication Technology) and policy coordination.
The following Memorandums of Understanding were signed by the two sides in the presence of the delegation leaders:
• Memorandum of Understanding between the Planning Commission of the Government of the Republic of India and National Development and Reform Commission of the Government of the People's Republic of China on undertaking joint studies;
• Memorandum of Understanding between the Bureau of Energy Efficiency, Ministry of Power, Government of the Republic of India and National Development and Reform Commission of the Government of the People's Republic of China on enhancing cooperation in the field of energy efficiency;
• Memorandum of Understanding between the Ministry of Railways of the Government of the Republic of India and Ministry of Railways of the Government of the People's Republic of China on enhancing technical cooperation in the railway sector; and
• Memorandum of Understanding between the National Association of Software and Services Companies (NASSCOM), India and the China Software Industry Association (CSIA) on enhancing cooperation in the IT/ITES sector.
The two sides agreed that the third India-China Strategic Economic Dialogue will be convened in China in 2013. They also agreed that prior to the 3rd Dialogue, the working groups would meet to implement the consensus and decisions agreed to by the two sides at the second Strategic Economic Dialogue.
Despite the rapprochement and robust economic engagement undertaken, the relationship has a constant undercurrent of tension because of the memories of the brief war between them in 1962 when China defeated India, and is often described as uneasy.
India says China controls 41,440 square kilometers (16,000 square miles) of its territory in Aksai Chin in Kashmir, while Beijing claims that the Indian state of Arunachal Pradesh, which shares a 1,050-kilometer (650-mile) border with the Chinese-run region of Tibet, is rightfully Chinese territory.
Border talks between India and China, although continuing, have not made much progress. On the contrary, the Chinese have hardened their position on Arunanchal Pradesh. They have objected to the visit of the Indian prime minister to the state. They have refused to issue visas to the residents of Arunanchal Pradesh and have openly declared the state to be a part of "Southern Tibet."
External Affairs Minister Salman Khurshid says the Chinese recently issued passport map showing India's Arunachal Pradesh state and the Himalayan region of Aksai Chin as part of China, which is "unacceptable." India retaliated by starting to issue visas to Chinese citizens with a map of India that includes all territories claimed by New Delhi.
On a larger canvas, China is viewed with suspicion as a long-time ally of, and weapons supplier to, Pakistan. For Beijing, the presence in India of the Tibetan spiritual leader, the Dalai Lama, and 120,000 other exiles from Tibet remains a source of tension.
India is keen to engage the new Chinese leaderships. On December 3 India's National Security Adviser Shivshankar Menon visited Beijing for two days and held discussions with senior Chinese officials on bilateral issues.
Notwithstanding conflicting interests and divergence on geopolitical realities, economic cooperation between China and India is not only desirable but also achievable, as globalisation has created growing interdependence leading to a shared stake in maintaining peace and stability in an increasingly integrated world.
The writer is a former Bangladesh Ambassador to the UN, Geneva.