China and India reach out

India has concerns about cheap Chinese goods

By Vir Singh in Delhi

One of China's most powerful politicians tried to paint a picture of a friendly neighbour eager to do business as he met India's top political and business leaders this week.

Li Peng: Raised hopes over border issue

The visit by former premier Li Peng was aimed at easing decades of mistrust, even outright hostility, that peaked in 1962 when the world's two most populous nations went to war over a border dispute that has still not been settled.

But China's missile sales to Pakistan have infuriated India's defence establishment.

And Beijing's links with another of India's neighbours, Burma, have fuelled fears about Chinese ambitions in the rest of Asia.

Goods dumping

In recent years, Indian politicians have also protested against a Chinese invasion of a different kind.

Reports in the Indian media say a whole host of Chinese-made goods, from umbrellas, toys and locks to bicycles and electronic items, is flooding the market.

Indian manufacturers say the lower-priced imports are driving them out of business and they have demanded protection.

But in this downward spiral, there are signs that both Beijing and New Delhi have started reaching out to each other in an attempt to improve ties.

Nuclear tests

Sino-Indian relations nose-dived after India conducted underground nuclear tests in May 1998.

Tibetan protest in Delhi: Dalai Lama's presence treated as minor irritant

At about the same time, Indian Defence Minister George Fernandes set off a firestorm of protest in Beijing when he said China was India's "potential number one threat."

Since then, both countries have managed to steer clear of contentious issues.

China did not highlight its objections to India's nuclear tests during President Narayanan's visit to Beijing last year.

And although China has long criticised India for sheltering Tibet's exiled leader, the Dalai Lama, this is treated as a minor irritant, a side-show in the larger scheme of things.

Contentious issues

Indian political leaders and defence officials are keeping a close eye on efforts to resolve the border issue.

During his meeting with Indian Prime Minister Atal Behari Vajpayee, Mr Li pledged China's firm commitment to move this process forward.

This statement - from a leader who has the full support of the People's Liberation Army - may help to build the "mutual trust" both leaders say is needed for China and India to move ahead.

But despite talk of progress, India still appears ready to assert its own defence interests - hence the test firing of the Agni-II missile as Li Peng was ending his visit.

Commercial opportunities

Mr Li began his nine-day visit in India's commercial capital, Bombay, and ended with a visit to the high-tech cities of Bangalore and Hyderabad.

India's software industry has attracted Chinese interest

Although China is way ahead of India in attracting foreign investment and enjoys cheaper manufacturing costs, it lacks well trained managers.

The Chinese often travel abroad to learn managerial skills.

India's professional training institutes are filled with students from developing countries who cannot afford a Western education.

But very few come from China.

This could change if relations improve.

Another area that has attracted Chinese interest is the entrepreneurial culture that has fuelled India's computer software industry.

WTO membership

However, all this is not going to change the fate of small-scale Indian manufacturers who will be wiped out if cheap consumer goods continue to enter the country.

This is as it should be, say leading industry groups who met with Mr Li.

India's industry leaders are instead applauding China's plans to join the World Trade Organisation (WTO).

They say this will make the Chinese economy more transparent and eventually reduce the huge cost advantage that allows China to undersell other exporting countries.