Indo-China trade meagre but growing

Trade between the world's two most populous countries is a meagre $5 billion a year, but that is growing fast as China and India find they can complement each other in everything from software to auto parts.

Whereas a decade ago, the Asian neighbours exchanged goods and services worth just $300 million a year, now a single deal can be worth that much.

Witness a $230 million deal between China's Shandong Power and India's third-biggest aluminium maker, Bharat Aluminium Co, in April.

The contract, said by Chinese officials to be the largest construction project involving the countries, calls for Shandong to build a four-turbine power plant for energy-thirsty Balco.

"India's electric power market is attractive to Chinese construction firms because of the country's low power consumption level, which has great potential to improve," said Shandong Power's project manager for the deal, who only gave his surname as Yin.

Also improving are oft-chilly political ties.

Indian Prime Minister Atal Bihari Vajpayee heads to China next week for a visit that will be watched for signs of warming between the two countries that have been deeply suspicious of each other, even fighting skirmishes over their border.

Political ups and downs

Mutual mistrust has sometimes been a more formidable barrier to trade than the Himalayan mountain range that divides them.

"Politically there have been some ups and downs over the years," said Tai Hui, an economist with Standard Chartered in Hong Kong. "It's not just about costs and process, it's also about culture."

Vajpayee will bring about 50 business leaders with him to Beijing and China's economic stronghold of Shanghai, although so far there have been no details of any pending deals.

Confederation of Indian Industry has identified a host of sectors offering business opportunites to Indian business and CII president Anand Mahindra will be leading a CEOs delegation, coinciding with the visit of the Prime Minister.

Telecommunication equipment, energy, medical equipment, automotive parts, agricultural chemicals, plastics and packaging equipment are the sectors offering immense opportunities for Indian business.

Sino-Indian trade is tiny: the $5 billion last year was less than one per cent of China's total trade volume.

But trade rose 38 per cent last year from 2001 and has picked up the pace this year too.

Chinese data shows exports to India shot up 42 per cent year-on-year in the first four months to nearly $1 billion, while imports from India doubled to $1.3 billion.

Exports of machinery and vehicles soared nearly 60 per cent to about $300 million. China also shipped some $247 million in chemical products to India, up 22 per cent, and textile exports rose 31 per cent to $247 million.

For its part, India's steel sales to China have rocketed, hitting $425 million in the first four months, up an astounding 2,250 per cent.

Budding tech sector

Trade is not limited to metals and machinery.

Both countries have legions of savvy computer engineers and software programmers highly sought after by multinational firms like IBM and Microsoft. NIIT Ltd, India's biggest computer training firm, entered China in 1998 and operates more than 100 centres.

"China offers a big opportunity for us," P Rajendran, NIIT's chief operating officer, told Reuters. Infosys Technologies Ltd, India's number two software services exporter, said China's talent pool offered the chance to tap developed markets in Japan and South Korea.

"China is very exciting from a long-term perspective for opportunities in the IT services space," an Infosys spokesman said in an e-mailed statement.