WRAPUP 2-China, India meet to focus on trade, despite mistrust

* Wen arrives in Delhi with more than 400 business leaders

* Talks on free-trade agreement possible

* Relations are still fragile – China envoy to India

(Adds Tibet protests, deals)

By Sui-Lee Wee

NEW DELHI, Dec 15 (BestGrowthStock) – Chinese Premier Wen Jiabao,
accompanied by more than 400 business leaders, will seek to
boost trade with India and soothe tensions between the world’s
fastest-growing major economies when he visits on Wednesday.

Wen’s visit is the first by a Chinese premier in five
years. He is accompanied by China’s top tycoons, underscoring
the growing commercial ties of countries which, between them,
house more than a third of the world’s population.

“Impressive business delegations have accompanied Barack
Obama and David Cameron, but when the Wen circus rolls into
town with 100 of China’s top tycoons, the red carpet needs to
be a bit longer,” said a commentary in the Hindustan Times on
Wednesday.

“Let trade do the talking, other issues that add to the
trust deficit will hopefully get addressed on the way.”

The two countries, one-time rivals who went to war in
1962, are now entwined by their booming trade relationship and
rising global clout.

Both have stood together to resist Western demands in
world trade and climate change talks, but they have also
clashed over China’s close relationship with Pakistan, fears
of Chinese spying and a longstanding border dispute.

Wen is expected to announce more Chinese investments in
India or lower trade barriers to assuage the worries of Indian
politicians, peeved that the Sino-Indian trade balance is
heavily in China’s favour.

India’s deficit with China could reach $24-25 billion this
year, analysts said. The deficit rose to $16 billion in
2007-08, from $1 billion in 2001-02, according to Indian
customs data.

India has sought to diversify its trade basket, but raw
materials and other low-end commodities such as iron ore still
make up about 60 percent of its exports to China.

In contrast, manufactured goods — from trinkets to
turbines — form the bulk of Chinese exports.

China is now India’s largest trade partner and two-way
trade reached $60 billion this year, up from $13.6 billion in
2004.

“Economic ties constitute literally the bedrock of our
relations … Both sides are keen to further enhance mutually
beneficial trade and are looking at new initiatives,” said an
Indian foreign ministry spokesman on Monday.

Still, total investment by China in India is small,
amounting to only $221 million in 2009, representing only
about 0.1 percent of China’s total outward foreign direct
investment stock in that year.

That figure is seven times less than what China has
invested in Pakistan, according to data from China’s Ministry
of Commerce.

TIBETAN PROTESTS

The Sino-Indian trade relationship is overlaid with
political and strategic rifts.

Beijing’s longest running grudge against India is over its
granting of asylum to Tibetan leader Dalai Lama, who fled to
India in the 1950s following a failed uprising, setting off a
chain of events that led to the war between them.

Hundreds of demonstrators wearing orange T-shirts with
slogans such as “Free Tibet Now” took to the streets of
central Delhi, shouting “Wen Jiabao go back!” and “Tibet’s
independence is India’s security.”

The Tibetan protests, which usually accompany visits by
Chinese leaders to India, were peaceful, watched over by a
heavy police presence. Security was also stepped up outside
the Chinese embassy in Delhi.

The Dalai Lama is due to visit Sikkim, an Indian state on
the Chinese border, during Wen’s visit to Delhi, something
that could inflame tensions.

FRAGILE RELATIONS

The two nations have pursued divergent paths in their
development: for India, a democracy, economic reforms began
only in 1991; for China, a one-party state that implemented
market reforms in 1979, catapulting the country’s economy.

Although both India and China have said they are exploring
a possible free-trade agreement, no real progress is expected
on that front as there is some scepticism in New Delhi that
Beijing may only want to dump cheap manufactured goods on
India’s booming $1.3 trillion economy. [ID:nSGE6BC04V].

While the two are often lumped together as emerging world
powers, China’s GDP is four times bigger than India’s and its
infrastructure outshines India’s dilapidated roads and ports,
a factor that makes New Delhi wary of Beijing’s growing might.

“Relations are very fragile, very easy to be damaged and
very difficult to repair. Therefore they need special care in
the information age,” China’s envoy to India, Zhang Yan, told
reporters in New Delhi.

India fears China wants to restrict its global reach by
possibly opposing its bid for a permanent U.N. Security
Council seat or encircling the Indian Ocean region with
projects from Pakistan to Myanmar.

Long wary of Washington’s influence in South Asia,
Beijing’s overtures toward New Delhi also come just a little
over a month after U.S. President Barack Obama’s trip to
India, during which he endorsed India’s long-held demand for a
permanent seat on the U.N. Security Council and announced $10
billion worth of business deals. [ID:nSGE6A707T].

French President Nicolas Sarkozy and British Prime
Minister David Cameron also visited India this year.

After Wen’s Dec. 15-17 visit he travels straight to
Pakistan, India’s nuclear armed rival, for another two nights.

In the days leading up to Wen’s trip, China and India have
agreed on a series of business deals.

Chinese telecoms gear maker Huawei , whose imports
were banned by India only in May over spying fears, said on
Tuesday it aims to invest more than $2 billion in India over
the next five years. India is the world’s fastest growing
mobile phone market and second only to China in subscribers.

India’s Anil Dhirubhai Ambani Group (ADAG) will sew up
about $3 billion in loans from Chinese banks, while Reliance
Communications will sign an accord with China
Development Bank for a $1.93 billion, 10-year loan.
[ID:nSGE6BE00I].

The loans are yet another example of the growing challenge
the BRIC group consisting of the frontier markets of Brazil,
Russia, India and China are giving Western banks, which have
traditionally been the destination for companies like ADAG.
(Additional reporting by Henry Foy and Abhishek Madhukar,
Editing by Paul de Bendern and Miral Fahmy)

WRAPUP 2-China, India meet to focus on trade, despite mistrust