India and China are two major players in International Trade with potential to grow. This presentation takes a look at the history between these two great nations, how trade has flourished and helped economies to grow in terms of Trade Balances, how it can contribute to GDP growth, barriers to trade and how each country can maximise their potential in this regard.

1. TRADE IS AN ENGINE OF GROWTH
COMPARATIVE ANALYSIS BETWEEN
INDIA & CHINA
Prof. K. L. Chawla
International Business Management
WMP17 | Group 2 | Section A
Abhishek Goel WMP10001
Aritra Ganguly WMP10010
Faraaz Khan WMP10014
Manish Malik WMP10019
Sonal Rawat WMP10038
Soumik Biswas WMP10040

2. INTERNATIONAL TRADE
 Across national borders
 Economic, Political and Social importance
 BENEFITS OF INTERNATIONAL TRADE
 Developing Countries offer cheaper labor:
 Produce the products at cheaper costs.
 Customers benefits low prices.
 Employment opportunities
 Potential of utilizing resources to the maximum
 Area of expertise, reduces the cost of production.
 Increased FDI in countries: greater FX and technical and managerial expertise
from all around the world to enter the country.
 Enhances the Domestic competitiveness
 Advantage of international trade technology
 Extend sales potential of the existing products
 Maintain cost competitiveness in your domestic market
 Gains a global market share
 Reduce dependence on existing markets
 Stabilize seasonal market fluctuations

3. CHINESE TRADE
AN OVERVIEW

4. CHINA IMPORTS AND EXPORTS
TRENDS FROM YEAR 1980 – 2012

5. CHINA TRADE BALANCE AND ITS TRENDS
FROM YEAR 1986 - 2012

6. HISTORICAL PERSPECTIVE
 Prior to reform ,from 1950 TO 1978 CHINA was a Centrally planned
economy.
 During the 1950s, all of China’s individual household farms were
collectivized into large communes.
 To support rapid industrialization, the central government undertook
large-scale investments in physical and human capital during the 1960s
and 1970s.
 As a result, by 1978 nearly three-fourths of industrial production was
produced by centrally controlled, state-owned enterprises .
 Private enterprises and foreign-invested firms were generally barred.
A central goal of the Chinese government was to make China’s
economy relatively self-sufficient.
 Foreign trade was generally limited to obtaining those
goods that could not be made or obtained in China.

7. HISTORICAL PERSPECTIVE
 According to Chinese government statistics, China’s real GDP grew at an
average annual rate of 6.7% from 1953 to 1978.
 Growth of Chinese per capita GDP 1950-78

8.  Comparison of Chinese GDP growth with Japan1950-78
HISTORICAL PERSPECTIVE

9. REFORMS
ENABLERS OF
GROWTH
AND TRADE
 There were no market mechanisms to efficiently allocate resources, and
thus there were few incentives for firms, workers, and farmers to
become more productive or be concerned with the quality of what they
produced .
 Beginning in 1979, China launched several economic reforms. The
central government initiated price and ownership incentives for
farmers, which enabled them to sell a portion of their crops on the free
market.
 In addition, the government established four special economic zones
along the coast for the purpose of attracting foreign investment,
boosting exports, and importing high technology products into China.
 Economic control of various enterprises was given to provincial and
local governments, which were generally allowed to operate and
compete on free market principles, rather than under the direction and
guidance of state planning.
 Citizens were encouraged to start their own businesses. Additional
coastal regions and cities were designated as open cities and
development zones, which allowed them to experiment with free
market reforms and to offer tax and trade incentives to attract foreign
investment.
 State price controls on a wide range of products were gradually
eliminated. Trade liberalization was also a major key to China’s
economic success.

10. ENABLERS
OF CHINESE
GROWTH
 The Role of Ports and Hong Kong
 Trade liberalization came swiftly in the form of
British gunboats. After defeat in the Opium War
(1840-42), China was forced to open its economy
to foreign trade at a large number of so called
treaty ports.
 Developing the Hinterland of Ports: Activating
Entrepreneurial Spirit
 Coastal provinces dominated China’s export
production during the 1990s and continue to
contribute almost 70% of the country’s total
exports
 Institutional Innovation: Systemic
Transformation
 Policy Innovation: Invite in Strategy and Trade
ownership strategy of the 1990
 Products could be imported duty-free if these
were used as inputs into export products.
 Innovation Import via IFDI, SEZ, and
International Competitiveness

11. • China and India differ significantly in trade
structure and it’s transformation over time. China’s
trade and trade expansion have been dominated by
export and import of commodities .
• In China the transformation is characterized by
continuous increase in the export of manufactured
goods from 74% in 1990 to 95% in 2007.
• In 1992 textile sector accounted for 29% 0f the total
export of china .
• In 2007 machinery and mechanical appliances,
electrical equipment etc. account for 43% of the
total export.
• From 1992 to 2007, the export share of labour
intensive goods like “textile and clothing, footwear
and other miscellaneous manufactured articles”
dropped from over 40% of total export to 22%.
CHINA
TRENDS

12. INDIAN TRADE
AN OVERVIEW

13. INDIAN TRADE : COMMODITY EXPORT

14. Product Groups 2005-6 2007-8 2009-10 2011-12 20012-13 2013-14
Petroleum and Crude Products 29.5 31.7 30.2 31.7 33.4 36.7
Gold 7.3 6.6 10.0 11.5 11.0 6.4
Machinery 14.4 18.0 12.6 10.5 10.6 10.0
Electronic Goods 8.9 8.2 7.3 6.7 6.4 6.9
Pearls Precious and Semi Precious
stones
6.1 3.2 5.7 5.8 4.6 5.3
Organic and inorganic Chemicals 4.7 3.9 4.1 3.9 3.9 3.5
Coal Coke and briquettes 2.6 2.6 3.1 3.6 3.5 3.7
Metaliferous ores and products 2.6 3.1 2.7 2.7 3.1 3.0
Edible oil 1.4 1.0 2.0 2.0 1.9 2.1
Iron and Steel 3.1 3.5 2.9 2.4 2.2 1.6
Fertiliser 1.4 2,2 2.4 2.3 1.9 1.4
INDIA’S IMPORT BASKET

15. Years Services Trade Balance Investment
income
Private Transfer (net)
2005-06 23.2 -5.3 24.5
2006-07 29.5 -6.8 29.8
2007-08 38.9 -4.4 41.7
2008-09 53.9 -6.6 44.6
2009-10 36.0 -7.2 51.8
2010-11 44.1 -17.1 53.1
2011-12 64.1 -16.5 63.5
2012-13 64.9 -22.4 64.3
INDIA’S
INVISIBLE
ACCOUNT
($ BILLION)

16. Year Travel Trans-
portation
Insurance Software
products
Business
Services
Financial
Services
Communication
Services
2005-06 13.6 11.0 1.8 40.9 16.1 2.1 2.7
2006-07 12.4 10.8 1.6 42.4 19.7 4.2 3.1
2007-08 12.6 11.1 1.8 44.6 18.6 3.6 2.7
2008-09 10.3 10.7 1.3 43.7 17.6 4.2 2.2
2009-10 12.3 11.6 1.7 51.8 11.8 3.8 1.3
20010-11 12.7 11.4 1.6 42.6 19.3 5.2 1.3
20011-12 13.0 12.8 1.8 43.7 18.2 4.2 1.1
20012-13 12.4 11.9 1.5 45.2 19.5 3.4 1.2
INDIA
SHARES OF MAJOR SERVICE SECTORS
IN EXPORT OF SERVICES (%)

17. TRADE AS AN ENGINE
FOR ECONOMIC GROWTH
International
trade
Poses new
challenges
Development
to meet them
Innovation
and creativity
increases
Specialization
and division
of labout
Enhancement
of
productivity
Income
Increases
Economic
growth

18. THE
BENEFITS
OF TRADE
 Increased Exports lead to greater GDP
 With the increase in economic trade, the goods
and services produced in your home country
can now be exported for sale in foreign land.
 Also the goods from foreign countries can be
imported in the domestic market.
 As exports increase, the utilization of
existing facilities increases which leads to
reduction in costs. This may lead to
further increase in exports.
 The employment opportunities increase
in the country.
 Makes latest technology and management
practices available developing countries.

19. INDIAN COMPANIES
IN CHINA
 Dr. Reddy’s Laboratories
 Aurobindo Pharma
 NIIT
 Bharat Forge
 Infosys
 TCS
 APTECH
 Wipro
 Mahindra & Mahindra
 TATA Sons
 Binani Cements
 State Bank of India (Shanghai)
 Bank of India (Shenzhen)
 Canara Bank (Shanghai)
 Bank of Baroda (Guangzhou)
 Axis Bank
 ICICI Bank
CHINESE COMPANIES
IN INDIA
 Sinosteel
 Shougang International
 Baoshan Iron & Steel Ltd
 Sany Heavy Industry Ltd
 Chongqing Lifan Industry Ltd
 China Dongfang International
 Sino Hydro Corporation
 Huawei Technologies
 ZTE
 TCL
 Haier
 Shanghai Electric
 Harbin Electric
 Dongfang Electric
 Shenyang Electric
 Beijing Automotive
Industry Corporation
(BAIC)

20. INDIA – CHINA TRADE FIGURES
Year Exports to China Imports from China Trade Deficit
2009 10.13 28.78 - 18.65
2010 14.58 42.26 - 26.67
2011 16.54 52.83 - 36.28
2012 14.87 51.88 - 37.01
2013 14.50 51.38 - 36.88
2014 11.98 58.27 -46.29

21. CHINESE INVESTMENT
IN INDIA
 2007- US$ 16 million
 2008- US$ 49.1 million
 2010- US$ 33 million (China’s non-
financial investment in India)
 2011- US$ 95.90 million (China’s
non-financial investment in India)
 2012- US$ 154 million (China’s non-
financial investment in India)
 Till Dec 2013-US$ 2.763 billion
(cumulative, China’s non-financial
investment in India))
 2014- US$ 243 million (China’s
non-financial investment in India)
INDIAN INVESTMENT
IN CHINA
 2006 – US$ 52 million
 2007- US$ 34 million in 78 Projects
 2008- US$ 257 million in 92 projects
 2010- India's FDI in China- 77
Projects; investment of US$ 55
million.
 2011- India's FDI in China- 130
Projects; investment of
US$ 42.17 million
 2012- India's FDI in China-
US$ 44 million
 2014_India’s FDI in China –
US$ 50.75 million
 Till 2014- Indian Investment
in China (cumulative):
US$ 0.564 billion

22. INDIA VS. CHINA GROWTH
9.8
3.89
8.48
10.26
6.64
4.74 5.02 5.63
14.2
9.64
9.21
10.41
9.3
7.65 7.7 7.38
0
3
6
9
12
15
18
21
24
27
2007 2008 2009 2010 2011 2012 2013 2014
GROWTH(%)
2007 2008 2009 2010 2011 2012 2013 2014
India 7.38 7.7 7.65 9.3 10.41 9.21 9.64 14.2
China 5.63 5.02 4.74 6.64 10.26 8.48 3.89 9.8
India vs. China GDP Growth

23. CHINA TODAY
 1. Good for smart cities: Copper is trading at a 6-year-low. China is the
world’s top copper consumer, using almost 40% of global consumption
 2. Good for deficit and inflation management: Oil prices were already on
the fall with global slowdown and a possible US-Iran deal. For India, low oil
prices helps in controlling its deficit and keeps inflation under check.
 3. Bad for automobile producers: Automobile exporters and manufacturers,
especially Tata Motors will feel the pinch as China was its fastest growing
market
 4. Gold might glitter: Chinese had overtaken India as the largest consumer of
gold. Prices of gold had slipped to a four-month low in expectation that the
present meltdown will spill over to the gold market.
 5. Mobiles and other Chinese goods can be cheaper:
World markets will be flooded with Chinese goods at low prices
affecting exports of other countries including India.

24. INDIA AND CHINA TRADE
WHAT LIES AHEAD
 Tariff Barriers in Foreign Trade
 China and other big players like
WTO and EU have imposed
various tariff and non-tariff
barriers on India’s export to the
international market which have
slowed down the presence of
Indian products globally
especially in China, the largest
trade partner.
 One of the items on Prime
Minister Narendra Modi’s agenda,
as part of recent visit to China, is
the easing of non-tariff barriers
for Indian exports, especially in
pharmaceuticals and textiles.

25. INDIA AND CHINA TRADE
WHAT LIES AHEAD
 Primary Goods vs. Finished Goods
 India has been largely sending primary goods to China.
 In comparison, the goods that China sends to India are dominated by
intermediate and finished goods.
 Since these are on the lower rungs of the production chain, their realizable
value is lower than, say, the finished goods made from them, and also
leaves India open to the risk of Chinese economic cycles.
 China’s MES status
 While government subsidies do remain an issue in some industries in
China, there is no evidence that this problem is endemic throughout
large sectors of the Chinese economy.
 China will automatically get the Market Economy Status
around 2019-20. Thus, for China, the symbolic value of
getting MES goes down with each passing year.

27.  Foul Cry of China’s
“Dumping” Habits
 A Reserve Bank of India
study, published a year
ago, broke sharply with
the conventional wisdom
that the Chinese have
made major inroads into
the Indian market because
their products are cheaper.
 The study says India has
actually “been importing a
large amount of
uncompetitive products
that can easily be supplied
by other competitors of
China at cheaper prices to
India

29. • Cheaper labor and factories in ASEAN countries are
causing migration of labor intensive manufacturing jobs
• Chinese businesses are using the lower cost
manufacturing bases of ASEAN countries to their
advantage more often than India.
• Similarly, Indian software & BPO industries are facing
tough competition from Asian and east European
countries.
• Export in Creative sector may hold a key for India’s
growth.
• The next driver of trade and growth for India?
• China’s recent economic crisis: its image of “economic
invincibility” is fading .
• Further devaluation and manipulation of Yuan and
its impact on the global economy
• India, however, is still not ready to wrestle the mantle
from China
• Greater transparency in India’s foreign exchange
policy
• Need to develop a pool of skilled labor to sustain this
growth
• Proper policy framework and strategic intent
CONCLUSION