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China’s Trade Surplus with India - Coggle Diagram
China’s Trade Surplus with India
Context
Upcoming 70th anniversary of the India-China Panchsheel Agreement
Bilateral trade between India and China soared to a record $136.2 billion in 2023, marking a 1.5% year-on-year increase.
A quick backgrounder
This was driven largely by India’s imports of Chinese machinery and other equipment.
It rose up from $3 billion in the year 2000 to $42 billion in 2008, the year China became India’s largest trading partner.
Trade ties began to boom since the early 2000s.
India's import from China
Automotive parts and fertilizers constitute more than 25%
0 per cent of certain mobile phone parts
One-third of machinery and almost two-fifths of organic chemicals
India’s export to China
China is the third-largest destination for Indian shipments.
India only accounts for a little over two percent of China’s total exports, according to the Federation of Indian Export Organisation (FIEO).
Even as an export market, China is a major partner for India.
Should we worry about this?
Pharmaceuticals that India exports to the world require ingredients that are imported from China.
Chinese imports of Indian seafood are one area that has recently shown robust growth
Many American production units are shifting to India
Having a trade deficit against a country doesn’t make the domestic economy weaker or worse off.
Can we ban trade with China?
Pharma sector could be worst hit
Ban will barely hurt China
It will punish Indian producers and exporters
Chinese money funds Indian unicorns
It will hurt the Indian poor the most
India will lose credibility at global level
Conclusion
India must develop its domestic capabilities
No country is completely self-sufficient
Trade war will hurt India far more than China.
A more effective strategy needs to be built to provide an ecosystem
Turning a border dispute into a trade war is unlikely to solve the border dispute.