India's trade deficit with China has reached a significant milestone, surpassing $100 billion for the first time. This development has prompted Beijing to take measures aimed at addressing the growing economic imbalance between the two nations.
Trade Deficit Overview
In 2022, bilateral trade between India and China peaked at $135.98 billion, with China's exports to India rising to $118.5 billion, marking a 21.7% increase from the previous year. Conversely, India's exports to China declined to $17.48 billion, a 37.9% decrease. This disparity resulted in a record trade deficit of $101.02 billion .
China's Strategic Responses
To mitigate the trade imbalance and enhance economic relations, China has initiated several strategies:
Currency Adjustments: China is considering allowing the yuan to depreciate, which could make Chinese goods more affordable for Indian consumers and potentially boost India's exports to China. This move is also in response to U.S. tariffs on Chinese imports, which have impacted China's trade dynamics .
Investment Initiatives: Beijing is encouraging Chinese manufacturers to establish production facilities in India. This strategy aims to reduce the trade deficit by increasing India's exports to Western markets through Chinese investments, rather than relying solely on imports from China .
Diplomatic Engagements: China has expressed its willingness to engage in discussions with India to address the trade imbalance. These talks focus on enhancing market access for Indian products and resolving trade barriers that have hindered the growth of India's exports to China .
India's Response and Outlook
India has acknowledged the trade deficit and is actively seeking ways to reduce it. The Indian government is exploring measures to enhance the competitiveness of its exports and is engaging in dialogues with China to address the underlying issues contributing to the trade imbalance.
While these efforts indicate a mutual interest in improving trade relations, the path forward will require sustained cooperation and commitment from both nations to achieve a more balanced and equitable trade partnership.