China and India build business links

Zhu Rongji's visit is the first by a Chinese premier for a decade

By the BBC's Mark Gregory

The Chinese premier, Zhu Rongji, has visited Indian businesses in the financial hub of Bombay after the two countries said they were committed to forging closer economic ties.

China and India are both touted as economic superpowers of the future, and there is plenty of scope for co-operation between them.

For example China believes it can draw on India's vast reservoir of trained computer scientists to develop the software side of its information technology sector.

Indian exporters want better access to China's population - more than 1 billion consumers - for their goods.

Beijing has joined the World Trade Organisation, and Delhi sees it as a powerful potential counterweight to the power of America and the other rich nations in setting the terms for international commerce trade in a new global trade round.

This is the first such visit by a Chinese premier for a decade, and signals a thawing of the historically frosty political relationship between Beijing and Delhi.

One of the state-owned companies which Mr Zhu brought with him, China Mini Metal Group, has just signed deals worth more than $125m with five Indian firms.

Competing for investment

But there is also an undertone of rivalry between the two Asian giants.

Both are competing for foreign investment, and so far China has won hands down.

India attracts around $3bn of foreign capital to build up its economy each year - China gets more than $30bn.

Vast swathes of the world's basic manufacturing industries are moving to China.

Already a third of all computer components are made in the People's Republic.

Indian industrialists say they are struggling to compete with cheaper Chinese goods that have already penetrated their home market, which is why they are so keen on winning better access to Chinese consumers.

Cutting red tape

Both countries have scrapped many of the formal state controls that used to dominate economic management.

But Indian commentators worry that China has much more success in tackling the culture of red tape and bureaucratic obstruction that has slowed down economic development in the past.

India is likely to have one of the highest rates of economic growth of anywhere in the world in 2002 - it has escaped the worst of the global slowdown.

But that is for just one year. China has consistently topped the international growth league over the last quarter of a century.