By James Lamont in New Delhi and Jamil Anderlini in Beijing
Published: December 15 2010 16:23 | Last updated: December 15 2010 18:49
China has launched a bold financial move to deepen economic engagement with neighbouring India in an attempt to strengthen the often fractious ties between the world’s fastest- growing big economies.
On his first visit to New Delhi for five years, Wen Jiabao, China’s premier, said his 300-strong business delegation had struck $16bn worth of deals with Indian partners, underwritten by finance from Chinese banks.
The nearly 50 agreements – topping the $10bn orders for US companies that crowned the visit to India last month of Barack Obama, the US president – highlighted Mr Wen’s ambitions to lift trade and investment across the Himalayas.
The Chinese premier urged leaders in both countries, which are home to 2.5bn people, to set aside rivalries and use business to seize the opportunity to bring about “the rejuvenation of two ancient civilisations”.
Mr Wen told local business leaders in the Indian capital: “The 21st century is the Asian century. It is also the century where China and India can make great achievements.”
The wider economic engagement is spearheaded by financing deals between China Development Bank and top Indian companies like Reliance Communications, ICICI Bank, Essar and IDBI Bank. Other financial groups seeking to expand business with India include ICBC and Bank of China.
Debt-laden Reliance Communications, part of the empire controlled by Anil Ambani, is to gain low-cost finance from Chinese banks worth about $2bn.
State-owned China Development Bank has a mandate to transform itself into a market-driven commercial lender but it is continuing to play a political role as a key instrument of Beijing’s foreign policy.
It is often called on by the country’s leaders to provide cheap credit to the ruling Communist Party’s pet projects both at home and abroad.
In recent months CDB has lent money to a German bank, a South African platinum mine, Romanian wind power projects and Australian mining ports – as well as extending $20bn to Venezuela and $1bn to Angola to secure oil supplies for China.
Indian officials said a financial services pact was at the heart of Mr Wen’s three-day visit. While Indian banks operate in China, Chinese banks do not have a similar presence in Asia’s third-largest economy.
Mr Wen said he backed measures to boost business between financial centres like Mumbai and Shanghai, and envisaged the opening of “bank branches in each other’s countries”.
Talks with Manmohan Singh, India’s premier, would also aim to agree early negotiations for a regional trade pact, he said.
Although relations between China and India have been strained by concerns about Beijing’s territorial claims in the region, China has rapidly become India’s largest trading partner in goods. Bilateral trade is estimated at $60bn this year.
However, New Delhi has requested Beijing address a trade imbalance heavily skewed in China’s favour and take steps to improve market access for India’s IT industry, agricultural products and pharmaceuticals.
“The balance of trade lies heavily in favour of China and we would like to take measures to reduce this deficit. Despite crossing $60bn, the potential between our two countries is far bigger,” said Anand Sharma, India’s commerce minister.