Bilateral Trade Between India and China in Raw Cotton Commodity

Where references have been used from books, published papers, reports and web sites, it is fully acknowledged in accordance with the standard referencing practices of the discipline. Student’s signature: Date: Copyright Statement Permission is herewith granted to Hunan University to circulate and reproduce for non-commercial purposes, at its discretion, this thesis upon the request of individuals or institutions. The author does not reserve other publication rights and the thesis nor extensive extracts from it be printed or otherwise reproduce without the author ’s written permission This thesis belongs to: 1. Secure □, and this power of attorney is valid after= 2. Not secure □. 7 The rough road gaining up on India 4 1. 8 The One Belt One Road strategy 5 1. 9 Chapter Content and Roadmap 5 CHAPTER 2 8 THEORETICAL BASIS AND LITERATURE REVIEW 8 2.

1 Review Cotton Commodity 8 2. 2 Scoping review 11 2. 1 Sample Profile Results 19 4. 2 Key findings 30 4. 3 Keys to Trade success in both countries 30 4. India and China as FDI destinations 30 4. Cultural Differences Between China and India 30 4. Recent scientific research has shown that both China and India are currently commanding a 13. 88% of the world’s GDP (Panagariya, 2013). The researchers have associated this massive success to the ever-increasing population of the countries, citing that it is a favorable factor for finding affordable labor and ready market for the finished products. As a motivator for this study, the researcher was particularly determined at establishing the factors influencing the adoption of cotton farming in the bilateral trade between China and India. It was a unique scenario that, these countries have ventured into an agricultural partnership that would surpass every other farming activity in the whole region.

As at now, both countries account for 13. 88% of the world's GDP. Given their population strength in the world, they have reclaimed a high position in the trade. Ideally, bilateral trade indicates good economic relations. Increase in population in both countries has boosted trade to more than $70 Billion in 2017. Cotton forms part of the commodities exported from India to China and vice versa. 2 Background and Significance According to Biswa N (2009), the countries have even more latent for swift economic growth as emerging markets documented by international organizations. They dominate the world economy through the vast trade market they connect. China is currently the largest exporting nation whereas India exports have had a substantial global growth in the past decade. The paper endeavors to analyze the robust bilateral growth between the two states to comprehend the significant exports the countries partake in.

Despite all this, India reached a point of concern the minute the trade debit amid China, and it touched 36 billion US dollars in 2013 (Panda, 2016). However, Inventiveness have been put in place to recover trade relations as well as asset collaboration. In place is also a memorandum of understanding (MoU) for cooperation on manufacturing parks they agreed on recent Fig. 1 Showing India’s Top Exports to China. Fig. In the current times, China has been registered as the greatest importer of cotton (Taneja, 2014, p. 5 Cotton trade between India and China There are a number of political as well as technical obstructions that hinder direct trade between China and India. However, some Indian produces still find their way into China via ports like those in Malacca as well as Indonesia (Beckert, 2015).

It is vital for the large amounts of Indian raw cotton to be imported into China via the intense density junk trade that takes place in the states neighboring the South China Sea. This trade in raw cotton forms a portion of a multifaceted Indian Ocean trading ecosphere. Sunil Khandelwal, who is the CFO of Alok Industries claims that India’s most prominent fabric manufacturer through incomings, the good’s production, shall get to the great crowning of approximately 6,000,000 million tons come to the end of 2017 before starting to deteriorate (Taneja, 2017). As a result, the textile manufacturer will be forced to use synthetic fibers or alternatively result in using exclusively imported cotton. When compared to other chief agronomists, cotton plants in India are positioned extensively for the reason that their hand picking system is superior to theirs, e.

g. , the United States as well as Australia. According to Volkert (2014), come 2020, we are likely to be looking at 7,020,000 tons of cotton consumed by the textile industry. Over four years from 2010, the demand for cotton in India has risen by twenty-five percent. In the same year, China’s was using up 10,000,000 tons of cotton while producing just 6,600,000 tons per year (Volkert, 2014 p. 8 The One Belt One Road strategy One Belt One Road initiative is one of the ambitious projects to be rolled out a single country. With OBOR programme, China seeks to establish vast economic cooperation and expansion across Europe, Asia and Africa (Sen, 2016). When compared to other countries like Brazil as well as Australia, they have a higher yield because of automated means of harvesting.

Despite this factor, the other reason behind India’s little harvest is that the Indians depend on the monsoon falls; they have poor collecting skills as well as deficiency of irrigation amenities, paired with non-availability of superior seeds in addition to increasing pest outbreaks (Florio, 2016). 9 Chapter Content and Roadmap In the subsequent sections of the paper, the researcher has a compiled a chronologically organized report in which Chapter Two presents the Theoretical Basis and Literature Review, Chapter Three contains Research Methodology, Chapter Four is Data Analysis and lastly, Chapter Five contains Conclusions. CHAPTER TITLE SUBTITLES CHAPTER CONTENT Two Theoretical Basis & Literature Review Review of Cotton Commodity Scoping study of the trade between China and India Scoping Review 1) Background 2) Aims &Approach 3) Other objectives Three Research Methodology Research Methodology 1) World Bank database 2) Articles and journals 3) Google Scholar In both qualitative and quantitative research 1) Secondary data 2) Questionnaires 3) Quantitative research:- • Sino-Indian trade relationship • Trade between China and India • Trade flows between China and India • Analysis of relative competitiveness • Fundamentals of Sino- India trade cooperation • Gravity model approach Research hypothesis A number of possible hypotheses were stated related to the aims Four Data Analysis Data analysis Sample profile results of the research conducted (from questionnaires) Key findings The major findings of the research Keys to trade success in both countries 1) India and China as FDI destinations 2) Cultural differences between China and India (ethnic, language, social structure and religious) Other key business success factors in both China and India Opportunities resulting from the trade eg.

Urbanization, consumer goods, banking, infrastructure, among others The trade has huge benefits in both countries Medium and long-term benefits of the trade There are various challenges involved in the trade Discussing a variety of challenges posed to the trade The trade between India and China can be expanded and be a global or continental trade Explaining the ways in which the trade can be expanded Five Conclusion Summary Summarizing the work and giving a brief conclusion Suggestions Proposing some recommendations to help the trade to become better Shortcomings and need for future research Explaining ways in which the trade has failed and what needs to be done about it Tab. In 1992 a bilateral trade relationship that is complete was agreed upon by both nations.

A fresh eon of trade relations was felt in the year 1994 due to the twice taxation pact that was signed by India and China. The countries also took advantage by agreeing to be discourse associates in the Association of Southeast Asian Nations. In the year 2003, the relations were further upgraded by the signing of the Bangkok agreement. The agreement included more trade predilections between India and China. Cotton, slag& ash, ores plus iron& steel are the chief products of Indian exports to China. Distinct stress on reserves as well as trade in services in addition to knowledge-grounded subdivisions should be present to upsurge the degree of exporting Indian produce to China. The additional latent goods of trade amid China and India are rubber, oil seeds, marine products, medical & optical apparatus, salt, plastic, dairy products in addition to inorganic chemicals.

There is a huge latency in other sectors like education, IT, tourism, biotechnology and even the economic sector (Aseema 2012). The chief products that consist of Chinese exports to India are cement, oils, nuclear reactors, mineral fuels, organic chemicals, machinery, boilers as well as silk. as a result, many of tge larger IT companies in India invest directly in local operations within China (Bhattacharya, 2009). One major benefit resulting from this trade is rapid economic growth. Bilateral trade has been boosted by the growth rates plus the sheer size of these economies, thus promoting trade in bigger economies which can buy and sell. For instance, in 2008, China’s economy grew by 9. 0% while India's grew by 7. But, thr cumulative bilateral FDI is less than 500 million dollars.

Since Chinese and Indian companies are still in the process of learning how to operate and succeed in each other’s economies, investment across borders remains very low. Unlike trade, FDI demands greater knowledge of and commitment to the host economy and in most cases follows trade linkages (Zheng, 2009, p. The lingering distrust resulting from the 1962 brief war as well as unresolved border disputes are the major obstacles to bilateral investments between the two nations. For instance, in Juli 2008, companies from China together with two others were prevented by the Indian government from investing in the country, particularly in port infrastructure projects, due to security reasons. Broadman (2011) indicates that this short-term problem is due to the imbalance that exists on the limit China has currently set in India on the number of goods that they can export.

On the other hand, goods and products from China are in demand due to the competitive nature they impose in India. Arvind (2013) submits that the demand of raw materials from India of material such as iron sand and iron ore has in the recent year shifted due to regulations by China, the government in real estate, the dawdling development of China’s economy and the overloading of iron and steel segments. These raw materials which account for the majority of exports from India are no longer in great demand. This is the primary purpose behind the growing trade deficit. 2 Aims and Approach The primary aim of this review was to hold trade between this two country’s usefulness of this trade risk that we have to face vide scope of employment and how we can handle it free flow trade in the commodity sector.

3 Others Objectives included: 1. To expose how the trade between the two countries works 2. Finding the advantages of the trade between India and China. Explore the different opportunities generated by the trade between them 4. 1 Secondary data This is a method of data collection that is based on reviewing data from the various documentation. In this case, the method will be used to evaluate various studies done on the topic to collect additional information on the subject. Some of the sources that will be analyzed include; journals, articles, books, magazines, documentaries, government documents on trade and any other relevant source that can provide information on the topic. 2 Questionnaires Different questionnaires will be delivered where the selected sample population will be expected to answer various questions.

The questionnaires aim at shedding issues of trade between China and India. General question 3. 3Quantitative Research 3. 1 Sino-Indian Trade Relationship China and India are termed as the most populous countries in the world with export-oriented policies to realize extensive economic growth. Xiao et al. (2015) argue that the thriving bilateral trade relationship is influenced by the past prolonged geopolitical conflicts, security issues and the border dispute with trading amounts remaining small and growth relatively small for the longest period. For ten years, from 2000 to 2011 the trade volume increased by 25 times (Xiao et al. Also, its average annual development reached 36 times high than Chinese annual growth rate. As of 2008, the volume of Sino-Indian trade reached 43. 8 billion, which was a decrease of 16. 3% as compared to the previous year.

1 trillion dollars. Source: World Bank Database Fig. 1: Export level for China and India Between 2000-2016 Source: World Bank Database Fig. 2 : Import level for China and India Between 2000-2016 Trade level in the two nations offers a ground for analyzing trade flows as well as give comparison based on various determinants (Panda, Sethi and Kumaran, 2016). The figures above depict a big difference of trade volume between the two nations. In this model, an assumption is made that a nation's comparative advantage is 'shown' in trade patterns (Palit and Nawani, 2012). Past researchers have contributed to this approach in explaining trade patterns in different nations. Past empirical studies on China trade based on RCA approach have factored objectives during analysis of the overall competitiveness of China's exports from a regional perspective.

RCA between China and India is export and import of various products. RCA is measured by calculating Balassa Index for different products. 6 Gravity Model Approach The gravity model approach is used to describe the flow of trade between the two nations as determined by each nation's GDP and the distance between them. Its formula can be illustrated as: Mxy=KJβxJϼyBαxy Where Mxy denotes import flow from country y to x, Jx and Jy are country’s x and y GDP respectively whereas Bxy refers to the distance between China and India’s capitals. The gravity model employs cross-sectional figures to determine trade relations and impacts for a period of time. The cross-sectional data is collected over a period of time also known as panel data which result in a useful data than the original cross-section information.

This method is advantageous as it depicts various relations over time among variables and monitors unnoticeable trade partnerships. Within this period, the survey responses were monitored on a regular basis. Reminders were sent after every two weeks. Finally, the results of the survey were as follows, 1. Number of responses:118 2. Number of partial responses: 16 3. 1 Sample Profile Results The sample questionnaires below represent how sampled firms from both China and India operates in regards to a number of employees, foreign ownership shares, the scope of operation, turnovers, location of head offices and branches. Graph 1 represents sampled industrial firms. The respondent was issued with to choose one of 10 industrial sectors by the questionnaire. QN 1: Have bilateral trade initiatives aided China while hindering India's trade development? Participants Yes 74 No 51 Not sure 10 Frequency Table Bilateral trade aided China Frequency Percent Valid Percent Cumulative Percent Valid 0 10 33.

0 Total 13 43. Frequency Table war effect on India Frequency Percent Valid Percent Cumulative Percent Valid 0 9 30. 2 The war has greatly affected current relations 1 3. 0 Total 13 43. 0 Missing System 17 56. 7 Total 30 100. QN 4: Do you think there are any efforts from both governments to improve bilateral trade? Responses Participants Not really 11 Yes, various initiatives have been proposed 61 China is reluctant to engage India 39 Statistics Government efforts N Valid 13 Missing 17 Government efforts Frequency Percent Valid Percent Cumulative Percent Valid 0 10 33. 9 China is reluctant to engage India 1 3. 0 Total 13 43. 0 Missing System 17 56. 7 Total 30 100. 7 Total 30 100. 0 cotton imports Frequency Percent Valid Percent Cumulative Percent Valid 0 10 33. 9 Very Little 1 3. 0 Total 13 43. 0 Missing System 17 56. Chinese prosperity changed when market-oriented economic policies were introduced by Deng Xiaoping in 1978 whereas in India the transformation began when the regime began taking steady paces centered on market-oriented strategies to respond to the financial crisis in the 1990s.

(Huang, 2008). The late 20th and early 21st century were marked by the sudden allure of India and China as key players on the global scene. According to World Bank Database, China most populous country with over 1300 million people trailed by India with a population of 1,100 million people. As such, both countries make the leading economies globally in terms of buying power equivalence with China ranked number two and India position four. The closer India cultural distance encourages its FDI while on the other its greater geographical distance geographical distance discourages FDI and therefore these acts as an inward FDI decisive factors which only affect Inia and not China. Cultural Differences Between China and India The difference in culture between China and India acts as a key for negotiation when it comes to trade between the two countries, and they can be grouped into the following categories 1).

Ethnic origin and Language. The Han ethnic group of China covers 95% of the Chinese population, and the Chinese culture is said to have evolved from without interference from a foreign culture and is said to be more homogenous as compared to Indian Culture. The main spoken dialects in China is mandarin spoken by 850 million people, therefore, making it the world most spoken language. In contrast, China society has not faced any religious influence with only Taoism, Buddhism, as well as Confucianism trying to have a profound and lasting effect in China. 4 Other key business success factor in both India and China When describing the key factors between the success of business between this two countries, other factors like the success of foreign companies in both India and China should not be forgotten.

In China, there is a strong completion between the domestic companies and foreign multinationals. On the other hand, companies and individuals who want to invest in India need to seek advice first even in a process where a local partner is involved. (Adams, 2007). When it comes to India, the sector is also limited although the number foreign banks which are being established are rising. China is opening a huge scale in infrastructure projects. The large infrastructure projects are opening good opportunities for both construction and design industry. It also has a power shortage in some areas causing overdependence on oil and poor quality of coal thereby making renewable energy a field with great trade opportunity. When it comes to India, there is a need for the economy to make remarkable investments in areas such as electrical grid, railway network modernization as well as public and urban strengthening.

(Zaballa, 2006). Having an environment, which favors more minor businesses as compared to large-scale industrial plants, makes it difficult to attract FDI. Inadequate civic investment and deprived regulatory structure, which inhibits entrance of private investors, makes India have inadequate infrastructure. (Zaballa, 2006). 7 The trade between China and India can be expanded and be a global or continental trade In recent past years, China and Indian companies have made international acquisitions changing them into international companies. Thus, there is need for China to diversify its export market in order to minimize the vulnerability of its exports. Even though the Chinese economy is faced with challenges, the country is still developing new techniques for imporving its economic performance. For instance, the engagement in the development of Silk Road project is a significant move that is aimed at imporoving the trade ties between China and India.

The project will possibly facilitate the tarnspoartion of both raw and processed cotton between the countries. As a result, the bilateral trade is likely to yield more benefits thus surpassing other notable producers like India, Pakistan and USA. There are also other forms of threats that may possibly result in the decline of cotton production. Some of these incude: fluctuation in prices, changes inlabour costs and competition from other recognized producers such as Paksista and USA. Civilization is also posing a threat because the land that was formally set for agriculture is continuously being encroached and turned into settlement areas. Key findings have attributed the success of cotton trade in both countries by naming India and China as the FDI destinations.

The success is associated with ease of doing international business with critical surveys stating policy liberations, market growth and low cost of labor as decisive factors. There should be improvements in methods of collecting data by engaging only those respondents with adequate knowledge about cotton farming and trade. Consequently, there should be funding from the government to assist the prospective scholars in financing their activities in order to compile elaborate results. 0 References Adams, J. “Investing in opportunity,” Families in Business, January/February, (2007): pp. 45-49 Batra, Amita. 1, pp. 40-53 Bhattacharya, Swapan K. , and Biswa N. Bhattacharyay. "Gains and losses of India-China trade cooperation-A gravity model impact analysis. Cheru, Fantu. "Emerging Southern powers and new forms of South-South cooperation: Ethiopia’s strategic engagement with China and India.

" Third World Quarterly 37. Claver, E. and Quer, D. "Different paths to power: The rise of Brazil, India, and China at the World Trade Organization. " Review of International Political Economy 22. Kalish, I. China and India: The reality beyond the hype, Deloitte, available at http://www. deloitte. Panda, Bibekananda, and D. Rama Krishna Reddy. "Dynamics of India-China Trade Relations: Testing for the Validity of Marshall-Lerner Condition and J-Curve Hypothesis. " IUP Journal of Applied Economics 15. 1 Vol. " J. World Trade 40 (2010): 553. Sinha, Aseema. "Global linkages and domestic politics trade reform and institution building in India in comparative perspective. " Comparative Political Studies 40. "Sustainable Human Development: Corporate Challenges and Potentials the Case of Bayer CropScience's Cotton Seed Production in Rural Karnataka (India). Pg. 3 Warmington, Eric Herbert. The commerce between the Roman Empire and India.

Cambridge University Press, 2014. Xiao, Y. , Zheng, X. , Hu, L. , & Chen, Q. Research on the Factors of Trade Growth between China and India—An Empirical Analysis Based on Constant Market Share Model. 1 pp. Zaballa, J. J. “Reflexiones en Torno al Pasado, presented y Futuro de la economía India”, in Bustelo, P. , Cacho, L. " Thunderbird International Business Review 51. 0 APPENDIX1:QUESTIONNAIRE NUMBER QUESTIONS YES NO NOT SURE YOUR POINT OF VIEW NO RESPONSE INDIAN COMPANY CHINESE COMPANY 1 have bilateral trade onitiatives aided china while hidering indias trade development? 2 has the 1962 india -china war affected trade relations between the two nations? 3 do you think the failure of china recognizining the sensitive raised by india on maritime silk road and other initiatives will make trade collapse 4 do you think there any efforts from both governments to improve bilateral trade? 5 do you think border disputes between the two nations will create mistrust when advancing in bilateral trade? 6 has exports and imports of raw cotton to and from china and india improved ? 8.