POREG VIEW: Chinese Premier Wen Jiabao’s visit to India from Wednesday Dec 15 will be an important landmark in the relations between the two countries especially because of the emphasis Beijing is placing on increased bilateral trade. He will be accompanied by the biggest ever delegation of 400 businessmen. One of the deals that will be signed during the visit is an agreement agreed to in October for Shanghai Electric Group Co to sell power equipment and related services worth $8.3 billion to India’ private power major, Reliance Power.

This is the first visit to India by a Chinese premier in four years; it comes close on the heels of visits by President Barack Obama, President Nicolas Sarkozy and Prime Minister David Cameron. It is taking place at short notice at the invitation of Prime Minister Manmohan Singh.

Notwithstanding their increased interaction, relations between India and China are fragile, and suffer from trust deficit, as China’s ambassador to India Zhang Yan says. So much so, a free trade agreement which Chinese appear keen to push through may just remain an agenda item when Prime Minister Manmohan Singh and his visiting guest meet at the Hyderabad House for formal talks.

While China may be ‘positive’ on trade issues, as ambassador Zhang puts, it will have to erect welcome arches along the highway to Beijing for Indian traders by removing non-tariff barriers and by making trade a healthy experience.   Trading at the end of the day is a two-way process based on trust and confidence, not merely exchanging invoices and bank notes.

China should avoid the practice of dumping cheap goods, which now account for about two-thirds of its bilateral trade with India. Such exports hurt China’s image as a producer in the medium term while hurting India’s domestic small scale sector in the short run itself.  Also it should avoid practices like undermining India’s own exports to emerging markets in Latin America and Africa. Frankly this is not the in thing when China views India as a huge market for trinkets to turbines and idols to fire crackers and is keen to grab a larger  India pie  now that it has emerged as India’s biggest trading partner, with bilateral trade expected to touch $60 billion this year.  

Realistically speaking, Chinese economy is not the pink of health of late. Inflation has soared past forecasts to a 28-month high last month (November). Inflation is something akin to riding a tiger. Once it hits the high road, chaining it runs the risk of exacerbating social tensions.  Forex reserves, estimated at around three trillion dollars, are China’s biggest asset; it is the world’s second-largest economy, well on its way to No. 1. It is a major U.S. creditor, but all these pluses will be of no consolation when handling issues and concerns that have something to do with daily bread and butter issues.

“No issues are off the table (with India)”, Assistant Chinese Foreign Minister Hu Zhengyue told reporters in Beijing on the eve of Premier Wen’s departure for Delhi. And acknowledged the stapled visa issue ( for residents from Kashmir) as might Chinese dam building on the upper reaches of important rivers that flow across the border including the Brahmaputra, known in China as the Yarlung Zangbo.

So, will the Wen- Singh dialogue be a historic watershed in the India-China relations? Possibilities are there but high expectations are unwarranted.