A steep decline in Indian exports to China in October has widened the trade imbalance between both countries to USD 23 billion, according to trade figures released last week, with bilateral trade in 2012 set to fall below last year’s record figure.October’s trade figures have underscored the recent troubles in the trade relationship, which has, in recent years, emerged as the biggest positive in bilateral ties.
While officials say Indian demand for sourcing in China is still strong, a sharp fall in iron ore exports and continuing uncertainties in the power and telecom sectors where the imports of Chinese equipment have emerged as a key driver of trade have left an uncertain future for the trade relationship, and cast doubts on whether a USD 100 billion target set for 2015 will be met.
Officials attributed the decline to a close to 50% fall in Chinese purchases of iron ore, the biggest Indian export to China. The trade figures, officials said, underscored the need for both countries to find a replacement for ores as a new driver of trade.
One reason for the fall in exports is an oversupply of stock in China and a slowdown in the steel sector here. But with mining bans in India and increasing domestic demand, exports are unlikely to recover fully.
India’s exports to China after 10 months of this year amounted to USD 16.34 billion, a 13.3% decline from the same period last year, according to the figures released by the Chinese General Administration of Customs (GAC). Overall bilateral trade reached USD 55.68 billion as of October, down 8.1% from last year.
Chinese exports to India have also fallen this year, down 5.7% after 10 months. Indian purchases of power and telecom equipment have been the biggest component of Chinese exports, but troubles in both sectors have seen a slump in trade. Officials said the falling rupee, which discouraged Indian companies from entering into debt arrangements to fund purchases, was another reason behind the slump.
“Signs of stabilization in the economy were getting more obvious in October,” Mr. Zhang Ping, the Head of the National Development and Reform Commission (NDRC), the top planning body, told reporters in a briefing.
Commerce Minister Chen Deming struck a more cautious note, telling reporters that China was unlikely to meet its annual target of 10% growth in foreign trade. Foreign trade volume had grown 6.3% in the first 10 months. “The trade situation will be relatively grim in the next few months,” Mr. Chen said, “and there will be many difficulties next year.”
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