Trade and economic cooperation between China and India, the world's two largest developing countries, are expected to blossom in 2004 as the process of market liberalization in both countries is gathering steam, according to an Indian industrial leader.

"The bilateral economic prospects for China and India will surely bring a rosy future," said Atul Dalakoti, executive director of the China Office of the Federation of Indian Chambers of Commerce and Industry (FICCI China).

The neighbors, whose citizens account for one-third of the world's population, have outperformed other countries in terms of economic growth rates. China underwent an average of 7.8 percent gross domestic product (GDP) increases over the last 10 years, followed by India with an average of 5 percent-plus growth rates. In contrast, the average global growth was about 3 percent.

With enormous market potential and abundant human resources, the two fast-growing countries have now also become the world's manufacturing powerhouses. Despite competition in exports and market shares, they are seeking to forge closer economic ties on the basis of their "complementary competencies."

Bilateral trade is expected to reach US$10 billion by the end of 2004, exceeding all earlier estimates, said Dalakoti, who is also president of August International Ltd. Early last year, Chinese Minister of Commerce Lu Fuyuan gave a much more conservative estimate by predicting that two-way trade between China and India will not reach the US$10 billion mark until 2005.

Official figures have shown that two-way trade between China and India for the 11 months to the end of November 2003 amounted to US$6.7 billion, up 54 percent from the same period a year earlier.

Dalakoti, who has been in China for the past 27 years since he was 13-years-old, said that China is meeting its commitments to the World Trade Organization (WTO).

"We will see a further opening of the Chinese economy, which will indeed lead to the further development of bilateral trade," he said.

The director also attributed the high rate of growth in bilateral trade to the improving relations between the two countries.

"We feel that frequent trips and meetings between various Indian and Chinese leaders are of great importance to fostering closer understanding and economy co-operation," Dalakoti notes.

Chinese Premier Wen Jiabao met Indian Prime Minister Atal Behari Vajpayee in Beijing last June. The two countries signed a declaration, which is expected to accelerate bilateral relations and comprehensive co-operation.

The two leaders met again four months later on the sidelines of the meetings of the Association of Southeast Asian Nations. They expressed satisfaction over the positive progress of the bilateral relations.

The closer economic ties have also led to an increased flow of investment between the two countries.

Currently there are about 50 Indian companies operating in China, which, according to Dalakoti, is "an exciting and big market that no one can ignore."

Total investment by Indian companies in China has amounted to about US$300 million.

East China alone - namely, Shanghai, Jiangsu and Zhejiang provinces - is now home to nearly 30 Indian companies.

Several Indian IT firms, such as Satyam, TCS, Infosys and NIIT, have established ventures in Shanghai and are tapping the huge potential of the Chinese market.

Meanwhile, a growing number of Chinese firms have stepped up their efforts to explore the potential of the vast Indian market.

FICCI statistics have showed that China's investment in India totaled US$148.5 million at the end of 2002. A large portion of those investments focused on telecommunications, transportation, the metallurgical industry, office and household equipment and electrical appliances production.

"I suggest that Chinese enterprises should adopt a longer-term strategy by establishing their own brand names in the Indian market instead of taking what is widely seen as a 'hit-and-run' approach to doing business," Dalakoti said.

So far, only a few Chinese companies have succeeded in establishing their brand names in India. Most notable among these companies include electrical appliance maker Haier and telecommunications equipment manufacturer TCL.

Further, Dalakoti wanted Chinese companies to conduct thorough studies on Indian markets and culture before they decide to elbow their way in.

"We have the best engineers, doctors, software programmers," Dalakoti said. "They know more about India's markets and culture."

Dalakoti said that competition does exist in the two countries' exports to the developing world, and some products are competing for the same international markets. But he called the rivalry "healthy."

"Competition is everywhere, it also appears in other countries," he said.

The two countries can achieve a win-win situation by taking advantage of their "complementary competencies."

For instance, he suggested that China's prowess in hardware manufacturing and India's expertise in software development could combine to seek a larger influence on the international information technology market.

India's software industry enjoyed a 43 percent increase year-on-year from 1991 to 2002. And the country is among the world's top five software exporters.

"We feel that there should be more and more exchanges between the two countries' business communities, and FICCI China is well-positioned to contribute in this regard," he said.

FICCI China plans to hold an India-China Business Summit in New Deli next March, which is expected to attract more than 100 chief executive officers and presidents of Chinese companies.

The director, who speaks fluent Mandarin, says he and his families had long-time ties with China.

"My father worked as a foreign expert in China for nearly 15 years, who translated many Chinese masterpieces into Hindi," Dalakoti said. "He is a big promoter of India-China relations."

"(And) I am very glad to fill my father's shoes and work as a bridge between Chinese and Indian businessmen by using my knowledge and relations in these two countries."

(China Daily February 9, 2004)