Beijing, Delhi urged to overcome suspicion and boost trade

PUBLISHED : Monday, 23 April, 2007, 12:00am
UPDATED : Monday, 23 April, 2007, 12:00am

China and India need to work much harder to boost investment and trade between the two countries, leading businessmen and economists warned yesterday.

Panelists at a Boao Forum session exploring the relationship between the region's two powerhouses noted the presence of lingering suspicions and the need for governments to free up internal markets.

'The economic relationship is far from what it should be,' said Alan Rosling, the executive director of Tata Sons, India's largest conglomerate. 'The numbers are ridiculously small ... there is no serious relationship yet.'

Two-way trade, though rapidly increasing, was just US$25 billion while investment was only a fraction of that figure.

Peking University economist Lin Yifu urged closer co-operation, saying he expected the two giant economies to dominate regional growth patterns for the next decade.

He said he expected the mainland to post annual growth figures around 9 to 10 per cent for the next decade, with India's figures in the range of 7 to 8 per cent.

'The challenge for both economies will be to make sure that growth is inclusive,' he said, adding that the wider region could only gain by the continued rise of the pair.

Unless close attention was paid to the relationship, some analysts warned, the two could move further apart given their very different economies.

While small and medium-sized private mainland enterprises lacked access to funding through a state-dominated banking system, small Indian entrepreneurs struggled with poor infrastructure.

The mainland's system promoted rapid infrastructure development, but India's reforms were promoting an expanding private entrepreneurial class.

The rise of successful multinationals from both countries would prove one of the key trends of the next decade - something western competitors would have to adjust to, analysts noted.

The session came amid a Pakistani push at Boao to promote its broadening and deepening relationship with its old ally, China.

India has longed eyed with suspicion Pakistan's traditionally close military and political relationship with Beijing.

India fought a brief border war with China in the early 1960s and has fought Pakistan four times.

While some senior regional trade officials trumpeted growing trade within the region, Hong Kong tycoon Victor Fung Kwok-king warned that it was far from enough.

'Those products are being exported elsewhere once they are completed ... this shows that the demand is still outside the region,' said the chairman of Li & Fung Group.

'The demand will come but it is not there yet.'