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India–China Trade: Asymmetrical Developments and Future Prospects

Author

Listed:
  • Sunandan Ghosh
  • Manmohan Agarwal
  • Adrita Banerjee

Abstract

This article seeks to provide an overview of the evolution and analyses the changing composition of trade between India and China over the period 1983–2017. We find that Chinese exports are almost completely concentrated in manufactures, especially finished equipment goods, whereas Indian exports consist of both agriculture and manufactures and over time have shifted predominantly to intermediate goods. Further, both the countries are exporting those commodities to each other in which they have a revealed comparative advantage, with China’s exports being more diversified. We employ vector error correction estimation and show that China’s exports to India are dependent on India’s household consumption expenditure, while India’ exports to China are correlated to Chinese manufacturing value added. Finally, we calculate the share of each country’s commodity-wise export to the partner in their respective total exports with a view to studying prospects for India–China trade. We conclude that for further trade expansion, diversification is extremely necessary, and Indian exports of inputs to Chinese industries need to change substantially to accommodate the changing nature of China’s industrial structure. JEL: F14, F15, O24

Suggested Citation

  • Sunandan Ghosh & Manmohan Agarwal & Adrita Banerjee, 2019. "India–China Trade: Asymmetrical Developments and Future Prospects," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 20(1), pages 70-93, March.
    • Handle: RePEc:sae:soueco:v:20:y:2019:i:1:p:70-93
    DOI: 10.1177/1391561419840137
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    References listed on IDEAS

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    More about this item

    Keywords

    India–China trade; commodity concentration; revealed comparative advantage; vector error correction model;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy

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