India and Vietnam’s Trade Relationship with China

The Economist ran two separate pieces on Vietnam's and India's trade with China. Both posts suggest that Vietnam and India should export more to China. Banyan writes on China and Vietnam's growing trade relationship in Fellow travellers, fellow traders:

China is Vietnam’s largest trading partner. Last year their two-way trade stood at $36 billion, while trade between America and Vietnam was $22 billion. Their two-way trade however is a bit more one-way than the Vietnamese would like. Their trade deficit already stands at $1.85 billion for the first two months of 2012, according to Vietnam’s General Statistics Office.

This doesn’t even take into account for the huge black-market border trade at places like Mong Cai, in the north of the country, or Lang Son, which is known, among other things, for its large sex-toy market (dildos being technically illegal in Vietnam).

The more serious piece on India, Friend, enemy, rival, investor, also ran in the magazine:

Rising trade with China has been good for India. It mainly imports Chinese capital goods, with firms benefiting from cheap and decent gear. The giant Reliance Group has bought kit for power stations and telecoms networks—partly paid for with competitive Chinese loans. Chinese firms have often strived to win such business. Pan Song of Shanghai Electric, which makes power equipment for Reliance, among others, recounts years of hard slog in India.

But for India the China connection is also disconcerting. For every dollar’s worth of exports to China, India imports three, leading to a trade deficit of up to $40 billion in the year to March 2012, or about 2% of GDP (see chart). China accounts for a fifth of India’s overall trade deficit with the world, over half if oil is excluded. Given India’s balance-of-payments woes—the rupee has fallen by a fifth in the past year—even Chinese businessmen worry that the discrepancy in bilateral trade is unhealthy.

And it may grow larger. For a start, the little manufacturing India has tends to be quite high-end. As Chinese firms shift to more complex forms of production, they will make life harder for Indian firms. Saif Qureishi of Kryfs, which makes the metal cores of transformers used in, for example, power grids, says China has won a third of the Indian transformer market and is giving locals “a bloody nose”.


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