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 □. The rough road gaining up on India 4 1. The One Belt One Road strategy 5 1. Chapter Content and Roadmap 5 CHAPTER 2 8 THEORETICAL BASIS AND LITERATURE REVIEW 8 2. Review Cotton Commodity 8 2. Scoping review 11 2. Sample Profile Results 19 4.

Key findings 30 4. 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. 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.

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. 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. 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. 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. 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).

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. 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. 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. 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. 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. 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. Quantitative Research 3. 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. 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. billion, which was a decrease of 16. as compared to the previous year. trillion dollars. Source: World Bank Database Fig. Export level for China and India Between 2000-2016 Source: World Bank Database Fig. 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. 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. 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. Total 13 43. Frequency Table Fig 4. Showing the Ware Effect on India From Chart 2, many respondents don’t think the past Indo-China war continues to affect current and future trade relations between the two nations. Other participants raised issues that the war could continue to obstruct improvement of current trade relations. QN 3: Do you think the failure of China recognizing the sensitive issues raised by India on Maritime silk road and other initiatives will make trade collapse? Responses Participants Yes, it may gradually slow 21 It will decrease sharply and rise up 5 Not really 34 China approach to trade will make India withdraw 54 Statistics China maritime N Valid 13 Missing 17 China maritime Frequency Percent Valid Percent Cumulative Percent Valid 0 9 30.

Total 13 43. From the chart, it can be established that both governments have put in place various trade initiatives to boost bilateral trade by resolving the ensuing border disputes. QN 5: Do you think border disputes between the two nations will create mistrust when advancing in bilateral trade? Responses Participants Yes 43 No 25 not sure 12 Statistics Border disputes efforts N Valid 13 Missing 17 Border disputes efforts Frequency Percent Valid Percent Cumulative Percent Valid 0 10 33. Total 13 43. Missing System 17 56. Total 30 100. Total 30 100. Fig 4. Showing Cotton Import and Fig 4. Showing Cotton Export 4. Key findings There is an excellent history between India and China when it comes to this trade. According to World Bank, in the recent years, China has seen a GDP annual growth of 10% and India 9%. This profound between these two countries has affected the flow of savings, product market, investments natural resources as well as environment and people.

Both India and China have had a great reception of attention more so China when it comes to international companies’ management as well as business. Although both countries have gained this attention independently and that is why this study offers a comparison approach China and India trade reality (Kalish, 2006). Keys to Trade success in both countries 4. But still, there are other spoken dialects in China. Bhasin, 2007). On the other hand, India has ethnic and linguistic diversity. India is made up of a combination of cultures, races, tongues as well as religions with over 22 recognized languages and an estimate of 1600 dialects spoken. Social Structures. Opportunities created by the trade 1. Urbanisation which is currently taking place in China. The vast Chinese urbanization process requires the country to hire foreign architecture. On the other hand, there is also major growth in residential construction in India.

This is brought about by the rise in purchasing power which is being enjoyed by Indian middle classes, therefore, making automobile industry a booming sector. Lastly, there are other fields in which investors can be advised to explore in India such as biotechnology, health tourism mining, and food processing. The trade has huge benefits to both countries Theoretically, both India and China enjoy both range of medium to long-term advantages from this trade. When it comes to China, these advantages can be depicted from its good infrastructure, relative microeconomic stability as well as development model which generates employment. On the other hand, in India, these advantages are its conic positioning in offering ICT services, the rapid growth of business sector not forgetting the environmental situation which I less critical than in China.

There are various challenges involved in the trade. An example of these companies is Lenovo a computer company division of North America IBM, TCL that is a division company of French Alcatel among others. In India, the firms include Dr Reddy which a pharmaceutical Beta pharm from German, Tata which is car brand company for Jaguar, Land Rover, plus which is UK steel company among others. Quer et al. CHAPTER 5 Conclusions 5. Summary It has been observed that China and India are the major economic shareholders in Asia. From the analysis of the quantitative research it is revealed that the emergence of Sino-Indian trade was a well-calculated motive for creating favorable trade policeis between China and India. As a result, a thriving bilateral trade relationship has been reported in the past years as influenced by geopolitical factors, border dispute and security matters with trade level remaining constant for a long time period.

The recent trade cooperation through trade initiatives and economic exchange has boosted trade between the two countries. Also, the trade scale has grown significantly enhancing the trade status in both countries. In the recent past, growth in trade and economic relationship has been witnessed with China becoming the largest trading partner of India. The market size and strategic position of China make it the leading importer of cotton. Suggestion From the findings of this study, it has been estanlished that both China and India are enjoying mutual benefits from cotton farming and trade. Therefore, it would be appropriate for the governments of these two countries to acquire new development strategies for ensuring that local residenst are also benefiting from such bilateral partnerships. Consequently, the two governments should eliminate any trade restrictions that are imposed on the citizens of their countries so that, people can diversify their trade into other commodities.

For purposes of imporving the trade relations between China and India, the two countries can form a trading bloc that protects them from economic fluctuations experienced in the international markets. India's global trade potential: The gravity model approach. Global Economic Review 35. Beckert, Sven. Empire of cotton: A global history. Vintage, 2015. Broadman, Harry G. Africa's silk road: China and India's new economic frontier. World Bank Publications, 2011. Chen, J. D. “Choice of market entry mode in China: the influence of firm-specific factors,” Journal of General Management, (2005): Vol. No. pp. Florio, Christopher M. From Poverty to Slavery: Abolitionists, Overseers, and the Global Struggle for Labor in India. com (2016). Moon, Chung-in. Changing Patterns in South Korea’s Relations with China and India: The Way Forward. Emerging China: Prospects of Partnership in Asia (2014): 201. Palit, A. No.

Panda, R. Sethi, M. Kumaran, M. A study of bilateral trade flows of China and India. Taneja, Kanchan, and Nassir Ul Haq Wani. Economic Performance of Indo-China Merchandise Trade: An Analysis of RCA and RID Approaches. Journal of International Economics 5. Vol. No. Pg. Winters, Alan, and Shahid Yusuf, eds. Dancing with Giants: China, India, and the global economy. World Bank Publications, 2014. Wu, Yanrui, and Zhangyue Zhou.  Journal of Service Science and Management (2015) Vol. No. pp. Yang, W. W. and Zaballa, J. J. Eds. La Presencia Española en Países de Fuerte Crecimiento: China e India, Círculo de Empresarios, Madrid. Zheng, P. I could not have imagined having a better advisor and mentor for my Master study. My sincere thanks also goes to professors for transmission their knowledge, staff at Hunan University for coordination, as well as my fellow students for your helping and supporting.

Without they precious support it would be difficult for my Master study. Last but not least, I would like to express my deepest appreciation to my parents and siblings for all their support and encouragement.