China urged to deepen Asean ties as US becomes India's biggest trading partner

·4 min read

Fast growing trade between India and the United States has raised eyebrows in China, fuelling concern that the Biden administration is moving swiftly to use its new Indo-Pacific Economic Framework to contain the world's No 2 economy.

China lost its title as India's biggest trading partner to the US last year, according to new data from the Indian Ministry of Commerce and Industry.

The value of merchandise trade between the world's two most populous countries reached a high of US$115.4 billion in the 2021-22 financial year that ended in March, an increase of 33.6 per cent from a year earlier.

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But it was surpassed by trade with the US, which rose 48.3 per cent to US$119.4 billion.

Indian imports from China, mainly machines and electronics, rose 44.4 per cent to US$94.2 billion, but its China-bound shipments grew only 0.3 per cent to US$21.3 billion.

On the contrary, its exports to the US jumped 47.4 per cent from a year earlier to US$76.11 billion, while imports rose 50 per cent to US$43.31 billion.

India recorded a US$32.8 billion trade surplus from the US last year, compared with a deficit of US$72.9 billion with China.

India's top 10 trading partners were rounded out by the United Arab Emirates, Saudi Arabia, Iraq, Singapore, Hong Kong, Indonesia, South Korea and Australia.

"Trade between India and the US are complementary, as seen from the outsourced IT service from the Silicon Valley," said He Weiwen, a former commercial counsellor at Chinese Consulate General in San Francisco.

"It is a trend that their trade value will surpass China-India trade. However, it is far lower than China-US trade."

He, who is now a senior fellow with the Centre for China and Globalisation, a Beijing-based think tank, said China should concentrate on fixing domestic weak links and manage its relations with the Association of Southeast Asian Nations (Asean), its top trading partner with which it has complete supply chains.

"China should also remedy the negative impact of the recent pandemic on foreign funded firms," he said.

"Competition with India and Vietnam is not the most important because their size is too small. We should do a good job on our own things first."

China was India's top trading partner from 2013-18, before being replaced by the US, then topping the list again in 2020-21.

Lu Xiang, a researcher on US issues with the Chinese Academy of Social Sciences, said China's exports to India have been affected by trade and investment restrictions from New Delhi, which have coincided with heightened tensions between the neighbours.

"But the two markets are different and the US market cannot completely replace China for India," he said.

Closer US-India ties are among a number of risks facing China. Western powers are increasingly critical of the country's trade with Russia following its invasion of Ukraine, while Beijing's zero-Covid restrictions are slowing the economy and forcing investors to consider diversifying.

Zhong Zhengsheng, chief economist of Pingan Securities, said China should integrate more deeply with Asean to counter Washington's Indo-Pacific Economic Framework.

"[The framework] is a replacement for the Comprehensive and Progressive Agreement for Trans-Pacific Partnership as the Biden administration tries to re-establish its influence in Indo-Pacific regions and lure members of the Regional Comprehensive Economic Partnership ," he wrote in a note on Monday.

India is not a member of the China-led RCEP, but signed up for the Indo-Pacific Economic Framework launched by Biden during his Asia trip last week.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2022 South China Morning Post Publishers Ltd. All rights reserved.

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