China – India Merchandise Trade: Opportunities and Challenges

Abstract

Using the export data at HS 2-digit level, the paper shows that China has maintained a stable export basket over time. By comparison India has intensified exports of competitive products indicating greater penetration into the world markets. The export structures of China and India demonstrate a large number of opportunities indicating greater possibilities of augmenting the trade structures. For both economies, the number of bilaterally competitive products is less than the number of internationally competitive exports. The competing interests that constitute the challenges, between China and India, in products with high intensity of low priced unskilled labour weigh down the bilateral competitiveness despite presence of international comparative advantage. The behaviour of China’s bilateral competitiveness vis-a-vis India has become more consistent with products demonstrating competitiveness both at the bilateral and international levels. The pattern of India’s bilateral competitiveness vis-a-vis China continues to be in tandem with India’s international competitiveness, albeit to a lesser extent than before. The performance of India’s bilateral exports seems to have been restricted due to procedural delays. By comparison, China’s exports to India exhibit relative departure from international competitiveness demonstrating its ability to penetrate the Indian markets.

Keywords: India, China, comparative advantage, international, bilateral

JEL Classification: F1