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China PM on India charm offensive, offers trade boost


Chinese Premier Wen Jiabao (L) talks to India's Prime Minister Manmohan Singh during Wen's ceremonial reception at the presidential palace in New Delhi December 16, 2010. Wen began a visit to India on Wednesday, pledging to improve market access for Indian companies and insisting the world was big enough for both Asian giants to prosper as partners. REUTERS/B Mathur
Chinese Premier Wen Jiabao (L) talks to India's Prime Minister Manmohan Singh during Wen's ceremonial reception at the presidential palace in New Delhi December 16, 2010. Wen began a visit to India on Wednesday, pledging to improve market access for Indian companies and insisting the world was big enough for both Asian giants to prosper as partners. REUTERS/B Mathur

By Sui-Lee Wee and Abhijit Neogy

NEW DELHI (Reuters) - Chinese Premier Wen Jiabao pressed on with a charm offensive in India on Thursday, offering support for New Delhi's bid for a greater role in the United Nations and agreeing on an ambitious target of $100 billion in trade between the rising Asian powers by 2015.

Relations between the world's two fastest growing major economies are tense, despite the booming trade relationship between them. Nearly 40 years after they fought a war there are still rifts over disputed borders, and suspicion in New Delhi over China's regional ambitions and its close ties with arch-rival, Pakistan.

But both Wen and Indian Prime Minister Manmohan Singh exchanged vows of amity and goodwill, appearing to brush under the carpet a series of differences that have dogged relations for decades.

"I believe with our joint efforts, through the visit, we'll be able to raise our friendship and cooperation to a high level in the new century," said Wen, standing alongside Singh at the Indian presidential palace after a formal red-carpet welcome ceremony.

Wen's visit, the first by a Chinese premier to India in five years, has looked carefully choreographed to improve ties between two countries that between them are home to more than a third of the world's population.

At least 34 Tibetan protesters were arrested for taking part in anti-China demonstrations in New Delhi on Thursday.

Arriving with more than 300 business leaders on Wednesday, Wen said that India and China were not rivals and there was room in the world for both powers to develop.

"There is a trust deficit, a trade deficit but certainly not a charm deficit," said broadcaster CNN IBN Deputy Editor Sagarika Ghose.

Singh responded in kind to Wen's effusive words before they went into a meeting behind closed doors: "A strong partnership between India and China will contribute to long-term, peace, stability, prosperity and development in Asia and the world."

BOOSTING TRADE

China's willingness to increasingly engage with India on key issues such as their dispute over boundaries, as well as free trade talks, could stem from a realization in Beijing that China needs India's support in increasingly significant international platforms such as the G20.

The two sides said they wanted bilateral trade to cross $100 billion by 2015 from $60 billion in 2010, partly driven by greater access for Indian firms to Chinese markets.

Wen offered plenty of compromises during his visit but gave few details on when and how the thorny issues, including reducing India's trade deficit with China, would be addressed.

India's trade deficit with China is by far the highest among its trade partners and could touch $25 billion this year, which would account for around a fifth of India's total expected annual deficit.

India has sought to diversify its trade basket, but raw materials and other low-end commodities such as iron ore still make up about 60 percent of its exports to China.

"We would like our pharmaceuticals, we would like our agricultural commodities and we would like our IT services, all of which we are brand leaders internationally, to come into China," said Indian Foreign Secretary Nirupama Rao said.

India and China are the world's fastest-growing major economies. But India fears China wants to curtail its rise as a global power, and is concerned about Beijing's close security ties with Pakistan where Wen arrives on Friday on the second part of his trip.

India and Pakistan have fought three wars since independence from Britain in 1947 and Delhi broke off peace talks after Pakistani militants attacked Mumbai in 2008, killing 166 people.

The China-India statement on Thursday outlined Beijing's support for U.N. Security Council Resolution 1267, which calls for sanctions against the Lakshar-e-Taiba militant group that New Delhi blames for the attack and accuses Pakistan of harboring.

India also fears China wants to restrict its global reach by possibly opposing its bid for a permanent U.N. Security Council seat or encircling the Indian Ocean region with massive projects from Pakistan to Myanmar.

China reiterated its support for India's aspirations to play a greater role in the Security Council, but it stopped short of expressing full backing for India.

CHARM OFFENSIVE

Long wary of Washington's influence in South Asia, Beijing's overtures toward New Delhi come just a little over a month after U.S. President Barack Obama's trip to India, during which he endorsed India's long-held demand for a permanent seat.

India has sewn up almost $50 billion in commercial deals with the United States, France and China over the past few weeks. The number of foreign leaders visiting, with Russia's president due next week, highlight the growing importance of India on the world stage.

Wen's avuncular style contrasts sharply with that of Singh, who is seen as shy and lacking charisma. Singh is also engulfed in what may be India's biggest corruption scandal, threatening the stability of the Congress party-led coalition government.

Wen announced on Wednesday that Chinese companies would sign deals with Indian firms worth more than $16 billion ranging from power equipment to telecoms gear -- underscoring business was driving the relationship, for now. Chinese banks will provide the bulk of lending for these deals.

Although both India and China have said they are exploring a possible free-trade agreement, no real progress was made on that front during the visit as there is skepticism in New Delhi that Beijing may only want to dump cheap manufactured goods on India's booming $1.3 trillion economy.

"Gradually, the whole relationship seems to be becoming better than before ... on the economic side, the private deals signed yesterday show things might be becoming a little more equitable," Bhaskar Roy, a political analyst told Reuters.

China is now India's largest trade partner and two-way trade is expected to reach $60 billion in 2010/11 compared with $3 billion in 2001/02 -- illustrating the phenomenal growth rate.

Still, total investment by China in India is small, amounting to only $221 million in 2009, representing about 0.1 percent of China's total outward foreign direct investment in that year. That figure is seven times less than what China has invested in Pakistan, according to official data.

While the two are often lumped together as emerging world powers, China's GDP is four times bigger than India's and its infrastructure outshines India's dilapidated roads and ports, a factor that makes New Delhi wary of Beijing's growing might.

(Additional reporting by C.J. Kuncheria, Henry Foy, Krittivas Mukherjee and Matthias Williams in NEW DELHI, Christopher Buckley in BEIJING; Writing by Paul de Bendern; Editing by Miral Fahmy and Alex Richardson)

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