FocusChina-India free trade pact may be a long way off - analysts

17 December 2010 06:52  [Source: ICIS news]

China Premier Wen Jiabao and India Prime Minister Manmohan SinghBy Judith Wang

SHANGHAI (ICIS)--China and India may not rush into a free trade agreement (FTA) soon even with the pledge between the two Asian giant economies to boost bilateral ties, analysts said on Friday.

The two governments, in a joint communiqué on Thursday, said they are targeting to double their annual trade to $100bn (€76bn) by 2015. China Premier Wen Jiabao is currently in India for a three-day official visit from 15-17 December.

Discussions on furthering bilateral ties between China and India could start in January, China's state-owned media organisation Xinhua News Agency had quoted China ambassador Zhang Yan as saying.

“The study on the FTA was already done, but negotiations have yet to start as India always worry that China’s low-cost goods exports will hurt India’s economy seriously,” said Chen Lijun, research head on south Asia at the Yunnan Academy of Social Sciences.

The primary purpose of Wen’s visit to India after five years was to promote the FTA talks, but there appeared to be a strong resistance from the south Asian country.

“I don’t think the final FTA could be achieved due to all kinds of concerns [raised by] India. [The] problems lie in India,” Chen said.

On the first day of the official state visit to India, $16bn worth of deal was struck between China’s 300-strong business delegation and their Indian counters, according to media reports.

But having an FTA would be good for both India and China, analysts said.

China’s main exports to India included consumer products such as toys and textiles. India, on the other hand, ships industrial raw materials such as ore, ash, iron pellets and steel into China, according to analysts.

“FTA will definitely boost the bilateral trade in the long run,” said Qiu Xiaofeng, an analyst from China Merchants Securities in Shanghai.

But the impact of such a deal on the petrochemical sectors of each country could not be ascertained at this point, analysts said.

($1 = 0.76)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections
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By: Judith Wang
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