China and India sign trade pact -- Not “Chindia” yet

November 28, 2006

Chindia is the term used to describe a tight partnership between China and India -- two of the world’s largest countries and fastest growing economies. With one-third of the world’s people, Chindia could be a tremendous economic powerhouse in the global economy.

Chinese President Hu Jintao met with Indian Prime Minister Manmohan Singh, and other high ranking Indian officials including Sonia Gandhi, during his visit from November 20-24. This is the first visit to India by a Chinese head-of-state in ten years.

China and India signed a trade agreement that will strengthen cooperation in the areas of information technology, energy, and agriculture. They also set a target of doubling their total bilateral trade to $40 billion by 2010.

In addition, they reopened border trade across the Nathu La pass, which links China's Tibet and India's Sikkim areas, and had been closed for 44 years.

What the China and India Agreement Means:

China and India have complementary economies:

• India has raw materials, China has manufacturing;
• India has high tech, China has the businesses and consumers to use them.

However, they also have long-standing trade disputes stemming from their common borders, China’s friendliness with India’s enemy, Pakistan, and even few airline routes and visa delay. These disputes will not be solved by one friendly trade agreement. Fortunately, both realize the potential advantages of a partnership, and the trade agreement is a good first step towards a “Chindia” of some sort.

Action Steps:
These are small steps taken between two economic giants. The best approach, therefore, is to wait and see how this new partnership progresses.

Source:  China People’s Daily Online: “China-India relations: best yet to come”, 11.20.06. “Backgrounder: Brief Introduction to India”, 11.21.06.