India and China quibble over trade figures

Cargo containers stacked at a port in Lianyungang in China's eastern Jiangsu province on May 9, 2022. PHOTO: AFP

NEW DELHI - Asian rivals India and China have differences on many issues, the latest being a disagreement over which country is India's largest trading partner.

India claims that it is the United States, while China maintains that it is the South Asian country's largest trading partner.

According to Indian Commerce Ministry figures, trade between India and the US was worth US$119.4 billion (S$165.5 billion), while trade with China was worth US$115.4 billion in the financial year to March 31, 2022.

But China has maintained that trade was actually US$125 billion - putting it ahead of the US - saying the discrepancy was due to "different statistical measurement scales".

While import duties may account for some discrepancies in trade data between countries, the massive US$9.6 billion difference is mystifying, said experts.

"In the case of China, the discrepancy is in both imports and exports. China is reporting larger numbers of both exports and imports.

"This could be a case of over-invoicing and under-invoicing in exports and imports," said Professor Biswajit Dhar, a trade expert and professor at Jawaharlal Nehru University.

"These numbers need to be verified and there has to be a greater extent of customs cooperation between the countries."

He noted that India could have potentially lost out on import duties, should the Chinese data be correct.

India has been trying to reduce dependence on China, particularly after a 2020 border blowout combined with disruptions caused by the Covid-19 pandemic.

The 2020 border clashes in which Indian and Chinese soldiers lost their lives inalienably altered the dynamics of the relationship between the two countries.

India put curbs on investment from China and banned Chinese apps. It also made efforts to diversify from China following disruptions to the supply chain due to the pandemic.

Border talks are still ongoing.

Experts noted that India is still reliant on China for finished products, as well as intermediate goods for manufacturing such as air-conditioner parts, and active pharmaceutical ingredients like penicillin.

Major imports were electrical products like unassembled solar cells and electric inverters, mechanical products such as air compressors for air-conditioners, and chemicals.

India's exports mainly raw materials like steel to China.

In financial year 2020, two-way trade between both nations was US$86.4 billion. It was US$81.9 billion in the preceding year.

"I don't think Indian demand for Chinese products has decreased within one year," said Mr Santosh Pai, an international corporate lawyer and honorary fellow at Institute of Chinese Studies, a New Delhi-based think-tank."

He noted that a lot of Chinese companies operating in India have been impacted due to Covid-19 and the curbs imposed on Chinese foreign direct investment following the border row.

Meanwhile, India's trade with the US last year shot up substantially from the preceding year, when it was US$80.5 billion.

While India has a trade deficit, meaning imports exceed exports, with China, the US is among few countries with which India has a trade surplus.

"India's exports to the US have gone up right across the board. Every sector has experienced significant expansion. We are also moving away from conventional items like apparel to other items like petroleum products in the trade basket, aided by the demand rebound in the US which generally led to expansion in the market," said Prof Dhar.

Indian export of diamonds to the US, for instance, went up 57.9 per cent in financial year 2021 to US$9.8 billion.

Other top exports included jewellery, motor vehicle parts and accessories, linen and apparel.

Trade between the two nations is expected to deepen, with India recently signing on to the US-led Indo-Pacific Economic Framework for Prosperity, a 13-country economic initiative to further push trade while reducing dependence on China.

Still, Prof Dhar said it is too early to tell if India-US trade would stay elevated.

"This phenomenon could be because of the Biden administration's cash to citizens," he said, referring to US President Biden's US$1.9 trillion coronavirus relief package that included sending direct payments to Americans.

"Whether this increase is due to just pent-up demand unleashed in 2021 and a one-off thing or whether India has genuinely expanded its presence in the US market remains to be seen."

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