India, China agree to tackle trade deficit at Modi-Xi summit

Chinese President Xi Jinping having a discussion with Indian Prime Minister Narendra Modi at the "Five Chariots" monument in Mamallapuram, India, on Oct 11, 2019.
Chinese President Xi Jinping having a discussion with Indian Prime Minister Narendra Modi at the "Five Chariots" monument in Mamallapuram, India, on Oct 11, 2019.PHOTO: EPA-EFE/PRESS INFORMATION BUREAU

MAMALLAPURAM (REUTERS, BLOOMBERG) - India and China will set up a mechanism to tackle India’s galloping trade deficit with the world’s second-biggest economy, a top Indian diplomat said on Saturday (Oct 12), following summit talks between Prime Minister Narendra Modi and President Xi Jinping.

Mr Xi, who is visiting India, and Mr Modi held several hours of one-on-one talks in a southern seaside Indian town, during which they discussed a range of economic issues, including India’s US$53 billion (S$73 billion) trade deficit with China in 2018/19, and ways to tackle it.

Indian Foreign Secretary Vijay Gokhale said at a press briefing that the deficit was a concern for India and the Chinese side was willing to address it.

Mr Xi welcomed Indian investment in pharmaceuticals and textiles, he added.

India also raised its concerns about the China-led Regional Comprehensive Economic Partnership (RCEP), Mr Gokhale said. The contentious issues of China’s Huawei 5G network and India’s decision to revoke the special autonomous status of Kashmir were not discussed, he added.

The talks between the leaders of the world’s two most populous countries came amid border disputes and trade tensions.

China is India’s second-largest trading partner with current two-way trade of US$87 billion (S$119 billion), and the two sides have targeted US$100 billion in trade by 2020.

Mr Modi told Mr Xi that "it is important that RCEP is balanced – that a balance is maintained in trade in goods, trade in services and investments," Mr Gokhale said.

Mr Xi said China "is ready to take sincere action" on trade and “to discuss in a very concrete way how to reduce the trade deficit," Mr Gokhale said.

Chinese vice-premier Hu Chunhua and Indian finance minister Nirmala Sitharaman will lead the new mechanism which seeks to smooth concerns in the trade relationship that’s currently skewed in China’s favour.

The countries agreed on a partnership to create more jobs in manufacturing and will deepen defence communication, Mr Gokhale said.

Mr Xi had said earlier he had a free and frank discussion with Mr Modi and would pursue proposals the two leaders discussed to improve bilateral ties.

The discussions at their second annual summit, designed to break through decades of distrust between their countries over border disputes, also included China's close military ties with India's arch rival, Pakistan.

"Yesterday and today we have engaged in candid discussions and as friends," Mr Xi said in opening remarks as the two leaders sat down for formal talks with their delegations.

"I look forward to further discussions, I may follow up on proposals discussed yesterday," he said, without elaborating.

Ties were ruffled when India revoked the special status of the Himalayan territory of Kashmir in August, angering both Pakistan, which claims the region, and its all-weather ally China.

Mr Modi noted in his opening remarks that he and Xi had agreed to manage their differences prudently and not let them snowball into disputes.