Indo China Bilateral Trade Relations Project Report (Subject Code –606 ) A project by

Deccan Education Society‘s

Brihan Maharashtra College of Commerce. Pune - 411004.

Indo China Bilateral Trade Relations Project Report (Subject Code –606 ) Submitted for the requirement of fulfilment of Third Year of

Bachelor of Business Management in International Business (BBM-IB) A Degree Course under

University of Pune. A project by:

Utkarsha Shinde and Manasi Shinde

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Declaration

We, Manasi Shinde and Utkarsha Shinde students of TY BBM(IB) hereby declare that the project report submitted on ―Indo China Bilateral Trade Relations‖ made under the subject of Project Report (Subject Code-606 ) represents our own collection of information, original research and work, which was carried out by us at the Brihan Maharashtra College of Commerce, Pune. We have completed this mandatory Project Work as prescribed by the University of Pune. We further declare that the foregoing statements made by us in regard to our project report are correct and complete.

Manasi Shinde Shinde TY BBM-IB, BMCC, Pune – 411004 411004

Utkarsha TY BBM-IB, BMCC, Pune -

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Acknowledgement Project report required co-operation of many people. We would like to take this opportunity to thank all those who have helped us in this project work. We are very thankful to,

Mrs. Bharati Upadhye, Coordinator, (BBA and BBM-IB), BMCC.

Prof. Sonal Apte For their help and valuable Guidance in choosing the subject, collecting the information & arranging the same in proper manner.

We would also like to thank my family, friends and classmates who helped and supported me in preparing this project report.

Date: February 28, 2014. Place: BMCC, Pune.

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INDEX 1 3 4 5 7 10

Introduction History Socio-Cultural Relations Legal Relations Political Relations Indo-China Introduction History of Indo-China Sino-India War Country Comparison of Indo-China Socio-Cultural Relations of Indo-China Legal-Relations of IndoChina Political Relations of Indo-China Defence Relations of Indo- China Economic Relations of Indo-China Bilateral Trade Relations of Indo-China Investment Of IndoChina Free Trade Zones of Indo-China Special Economic Zones Of India and China Future of Indo-China Relations Conclusion

11 12 14 16 19 21 23 26 27 32 34 35 38 41

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INDO-CHINA BILATERAL TRADE RELATION

Introduction : The term international relations has been interpreted and defined in narrow and broad sense. In the narrow and ordinary sense, ―International relations are official relations conducted by authorised leaders of the states only.‖ In the broader sense, in the words of Hartmann ―International are all intercourse amongst states and all movements of people, goods, ideas across national frontiers.

International Relation (IR) is also termed as ‗foreign relation‘ which is basically an interaction between individuals belonging to various nations. It is study of foreign affairs and global issues among states within the international system, including the roles of states, intergovernmental organisations (IGOs), non-governmental organisations (NGOs), international non-governmental organisations (INGOs), and multinational corporations (MNCs).

Apart from political science, IR comprises of various fields such as economics, history, international law, philosophy, geography, social work, sociology, anthropology, psychology, and cultural studies/culturology. It involves a diverse range of issues including but not limited 5

to globalisation, state sovereignty, ecological sustainability, nuclear proliferation, nationalism, economic development, global finance, terrorism, organised crime, human security, foreign interventionism and human rights. The relationship between states can be of two types- cooperative and oppositional (Involving conflict). The cooperative relations are mainly of non-political character such as economic, cultural etc. and do not involve any use of power. The oppositional relations, on the other hand, imply conflict or struggle among groups and demand use of power. Therefore, International Relations is a study of both cooperative and oppositional relations among the states.

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History : Historically, International Relations dealt with the establishment of treaties and agreement between various nations. The emergence of International Relations took place after the 15th century when governments of various nations interacted with each other and exchanged their cultural values. The purpose of IR was to avoid conflicts and to ensure peace. Initially, international relations as a distinct field of study was almost entirely British-centred.

Flags of the member states of the United Nations

Internationalisation: The field of International Relations is concerned with social, economic, cultural, political and legal interactions among various nations. According to the Princeton University WordNet, Internationalisation simply means ―to bring something under international control‖.

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Socio/- Cultural Relations : 

Language : A language usually defines the parameters of a particular culture. If several languages are spoken within the borders of the country, that country is seen to have as many cultures. Within each cultural group, the use of words reflects the lifestyle, attitudes and many of the customs of that group. Language is not only a key to understanding the group, it is the principal way of communicating within it.

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Aesthetics : Aesthetics sense is the every individuals point of view to express beauty. It is how beauty can be defined through dance, drama, music, color. Aesthetics is the sense of expression.

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Material Culture : Material Culture relates to the way in which a society organises and views its economic activities. It includes the technique and know-how huge in the creation of goods and services, the manner in which the people of the society use their capabilities and the resulting benefits. The Material Culture of a particular market will affect the nature and extent of demand of a product.

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Time : Time has a different meaning in each country. Western cultures tend to persue time in terms of past, present and future. They are oriented towards the future and in the process of preparing for it, they save, they waste, makeup or spend time.

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Space/ Proximity : The concept of space is different wherever one goes. In western corporate culture, the size and location of an executive‘s office is usually determined by his level of seniority in the company.

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Religious Beliefs : A religious system refers to the spiritual side of a culture or its approach to the super natural. A society‘s religious belief system is often dependent on its stage on human or economic development.

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Attitude : Attitudes are psychological states that predispose people to behave in certain ways. Attitudes may relate, to work, wealth, achievement, change the role of women in the economy.

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Values : Values are judgements regarding what is valuable or important in life, and they vary greatly from one culture to another. People who are operating at a survival level will value food, shelter and clothing. Those with high security needs, on the other hand, may value job security, status, money. From its value system, a culture sets norms, acceptable standard of behaviour.

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Legal Relations : The legal systems of a country refers to the rules, or laws, that regulate behaviour along with the processes by which the laws are enforced and through which redress for grievances is obtained. The legal environment of countries differ in significant ways. The legal relations of countries is bided by these global legal institutes, they are:

WTO : The original vision of a global trade organisation such as the ITO has been at least partially realised in the agreement to replace GATT with a World Trade Organisation (WTO). The WTO incorporates GATT rules, but as considerably more power to set and enforce standards than the previous GATT secretariat in Geneva. The WTO agreements contain special provisions which gives developing countries special rights and to developed countries the possibility to treat developing countries favourably than other WTO members. The WTO system combines reciprocal market access negotiation of market access with rules on non-discrimination in trade- the Most Favoured Nation (MFN) principle. That is market liberalisation agreed between any two WTO members is spread to all members of WTO.

World Bank : After World War II, when the United Nation was organised, it was envisioned that a World bank and International Trade Organisation(ITO) would also be established. The World Bank came into as an international lending and development agency to which industrialised nations make contributions for the ostensible purpose of promoting the development globally.

ICJ( International Court Justice) : An organisation within the United Nations that has fostered the growth of international law. The ICJ hears and rules on disputes between nationstates but usually does so only where the respective nations agree that the ICJ has jurisdiction. The ICJ relies on customary international law, treaties and conventions in making its decisions.

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The following laws are generally practiced internationally : 

Common Law : It is based on tradition which means punishments are passed on from generations to generations. Common law is one that is on tradition. These principals are used by courts to interpret and apply the law as it evolves overtime.

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Civil Law : It is codified form of law where court follow statues( written rules).

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Religious Law/ Theocratic Law : It is religious law based on sacred techs, religious tenants and interpretation of these by the religious hierarchy of the nation.

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Political relations: Political relations include : The political systems of a country shapes its economic and legal systems. By political sytems we mean of government in a nation.  Regulations governing how businesses can interact with overseas companies.  Regulations and laws limiting or restricting importing.  Regulations limiting the operations of foreign companies.  How the national government is influenced by larger governments or special interests outside the country.  Laws and rules reflecting social/cultural changes in the demographic make-up of the citizens.

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Economic relations: International economic relations looks at the differences in production capacities and economic institutions across nations, and how these affect worldwide economic activity. The international economic relations between two countries depend on a number of factors like the import export relations, investment between two countries and so on. Trade is an important factor in this context, normally there are two types of trades:  Bilateral trade  Multilateral trade Bilateral trade is the trade between two countries and multilateral trade is trade between more than two countries.

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The importance of good International Economic Relations may be understood by taking a look at INDIA and CHINA. Apart from being in terms with other countries, these two nations also have cordial economic relationships and they share symbiotic relationship from economic point of view. They have continued to make economic progress by helping each other out and have set the trend as far as International Economic Relations are concerned.

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INDO - CHINA

Introduction : China–India relations, also called Sino-Indian relations or Indo-China relations, refers to the bilateral relationship between the People's Republic of China (PRC) and the Republic of India. Both India and China are large economies. Their domestic markets provide vast scope for diversified industrialization and trade. Both economies are classified by international agencies as emerging markets with potential for rapid economic growth. Both economies possess the capacity to become the ‗power houses‘ of global economy. There are many similarities between the two economies such as vast pool of employable labour and abundance of natural resource endowments. Also both countries suffer from paucity of capital and a large part of population is still dependent on farm activities. Poverty and relatively poor standard of living continue to affect a large number of people in both the countries. Eradication of poverty and improvement in living standard, therefore, are seen as the basic objectives of development and acceleration in the rate of economic growth as the means to achieve them. In June 2012, China stated its position that "Sino-Indian ties" could be the most "important bilateral partnership of the century". 14

History : Historically, India and China have had relations for more than 2,000 years but modern relationship began in 1950 when India was among the first countries to end formal ties with the Republic of China (Taiwan) and recognize the PRC as the legitimate government of Mainland China. China and India are two most populous countries and fastest growing major economies in the world. The resultant growth in China and India's international diplomatic and economic influence has also increased the significance of their bilateral relationship. China and India are two of the world‘s oldest civilisations and have co-existed in peace for millennia. Cultural and economic relations between China and India date back to ancient times. The Silk Road not only served as a major trade route between India and China, but is also credited for facilitating the spread of Buddhism from India to East Asia. During the 19th century, China's growing opium trade with the British Raj triggered the Opium Wars. During World War II, India and China played a crucial role in halting the progress of Imperial Japan. Despite the fact that India was one of the first few countries, which recognized the People‘s Republic of China, the bilateral relationship saw a number of downs than ups. The history of initial years of India-China relations more particularly during 1949 – 1958 depicts an era of friendliness. Both India and China were able to reach to a consensus and signed the Panchsheel Agreement, which basically dealt with Trade and Intercourse between India and Tibet region of China in Beijing. Panchsheel became the guiding principles of India-China bilateral relationship. Zhou Enlai‘s trip to India in June 1954 was a symbolic messaging about China‘s intent and philosophy. It was historic in the sense that a communist head of government was making a peacetime visit to a non-communist state.

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Sino-Indian War The Sino-Indian War , also known as the Sino-Indian Border Conflict , was a war between China and India that occurred in 1962. A disputed Himalayan border was the main pretext for war, but other issues played a role. There had been a series of violent border incidents after the 1959 Tibetan uprising, when India had granted asylum to the Dalai Lama. India initiated a Forward Policy in which it placed outposts along the border, including several north of the McMahon Line, the eastern portion of a Line of Actual Control proclaimed by Chinese Premier Zhou Enlai in 1959. Unable to reach political accommodation on disputed territory along the 3,225-kilometerlong Himalayan border, the Chinese launched simultaneous offensives in Ladakh and across the McMahon Line on 20 October 1962. Chinese troops advanced over Indian forces in both theatres, capturing Rezang la in Chushul in the western theatre, as well as Tawang in the eastern theatre. The war ended when the Chinese declared a ceasefire on 20 November 1962, and simultaneously announced its withdrawal from the disputed area. The Sino-Indian War is notable for the harsh mountain conditions under which much of the fighting took place, entailing large-scale combat at altitudes of over 4,000 metres (14,000 feet). The Sino-Indian War was also noted for the non-deployment of the navy or air force by either the Chinese or Indian side. The border row brought significant changes in China‘s approach towards India. China‘s nuclear test on 1964 added additional fear among Indian minds and key policy makers. Both the nations had lost mutual trust and confidence and since then it has been a great challenge to leave misunderstandings behind and forge a new relationship. Such process of forging friendly ties requires a strong determination and greater initiative to promote their friendship. It is obvious that the India – China border conflict in 1962 brought about serious damage to the friendship between the Chinese and Indian Peoples and that led to a long term conflict has still not been vanished. Hence, it had really been one of the greatest challenges to change the mindset and look for zenith in India – China relations, which had reached to nadir in the aftermath of 1962 conflict.

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The cause of the war was a dispute over the sovereignty of the widely separated Aksai Chin and Arunachal Pradesh border regions. Aksai Chin, claimed by India to belong to Kashmir and by China to be part of Xinjiang, contains an important road link that connects the Chinese regions of Tibet and Xinjiang. China's construction of this road was one of the triggers of the conflict.

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Country comparison

Republic of India

People's Republic of China

Population

1,210,193,422

1,339,724,852 (2010 Census)

Area

3,287,240 km² (1,269,210 sq mi)

9,640,821 km² (3,704,427 sq mi)

Population density

382/km² (922/sq mi)

139.6/km² (363.3/sq mi)

Capital

New Delhi

Beijing

Largest city

Mumbai

Shanghai

Government

Federal republic, Parliamentary

Socialist, Single-party state

First Leader

Democracy Jawaharlal Nehru

Mao Zedong

Current Leader

Manmohan Singh

Xi Jinping

Official languages

Hindi, English, Assamese or " Assamiya ", Bengali, Gujarati, Kannada, Kashmiri, Standard Chinese Konkani, Malayalam, Marathi, Manipuri, (Mandarin), Mongolian, Nepali, Oriya, Punjabi, Sanskrit, Sindhi, Tibetan, Uyghur, Zhuang Tamil, Telugu and Urdu

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Main religions

>10% each: non-religious, folk religions and Taoism, Hindu (80.5%), Muslim (13.4%), Christian Buddhism.