India and China are amongst the fastest growing economies in the world. Over the years their trade relations have seen a growth.

Sectors that attracted maximum FDI equity inflows from China

Data Source: https://dipp.gov.in/

China is among the top FDI contributors in various Industrial sectors of India. Today, Chinese mobile handset companies Xiaomi, Vivo and Oppo occupy more than 75% of Indian mobile handset market.

Some of the major multinational corporates from china have set up business in India.

India’s ranked at 63^rd position in 2020. The country’s ranking on the World Bank’s Doing Business Report (DBR) of 190 countries, has improved from 142nd position in 2014 to 63rd position. It has earned a place among the world’s top 10 improvers for the third year in a row.

Trade across Borders: India has simplified starting a business by incorporating electronic memorandum of association and articles of association. India currently ranks as a substantial nation for cross border trade and business investment by the World Bank Cross border trading has now been simplified with the start of post-clearance audits, upgrading port infrastructures, and enhancing the electronic submission of documents.

Custom Clearances: The Central board for excise in customs (CBEC) has simplified Indian customs single window project to facilitate trade. This enables one step submission of custom clear documents on an online portal. Only three mandatory documents are required for customs purposes. Computerized transactions have reduced risks and created a simplified system wherein, chances of inspections have been reduced.

Infrastructure Development: There has been an increase in infrastructure development projects due to reduction in the time and cost of obtaining construction permits. Various municipal corporations in metro cities of India have developed a fast-track approval permit for building projects. Cost of obtaining construction permits has reduced from 23.2% to 5.4% of the economies per capita. These provisions were enabled to ease the process of doing business in India and reaching out to investors around the globe.

Resolving Insolvency: Issues like resolving insolvency have been made easier by promoting reorganization proceedings in practice. As a part of Ease of Doing Business in India, the country has strengthened access to credit by amending its insolvency law. Secured creditors are now given absolute priority over other claims within insolvency proceedings.

As a part of ease of doing business in India, the country has strengthened minority investor protections by increasing the remedies available in cases of prejudicial transactions between interested parties. India made enforcing contracts easier by introducing the National Judicial Data Grid, which makes it possible to generate case measurement reports on local courts.

Paying Taxes: To promote ease of doing business, India made paying taxes easier by replacing many indirect taxes with a single indirect tax, the GST, for the entire country. India also made paying taxes less costly by reducing the corporate income tax rate and the employees’ provident funds scheme rate paid by the employer.

The Employee State Insurance Corporation (ESIC) has developed a fully online return filing with online payment. Due to the introduction of e-verification system, there is no physical touch point for document submission with the income tax authorities.

Business Reform Action Plan (BRAP) 2019 – 372 new action plans were introduced under the BRAP 2019. It included new sectors such as Healthcare and Hospitality, Central Inspection system, Trade License, Registration under Legal Metrology, and Registration of Partnership Firms & Societies. This reform includes the future plans and growth of previous plans by the states and union territories in India.

The Government of India has worked on creating a conducive environment by streamlining the existing regulations and eliminating unnecessary requirements and procedures to help businesses grow. The focus is on reduction in compliance burden by using technology, third party assessments, and faceless human intervention.

India and China have been participating in bilateral trade since 1950. Over the years various treaties and agreements came into force between the two nations. With growth of technology, the focus of trade and investment has changed towards security and social responsibility between the two nations.

Social Security Agreement
The Social Security Agreement was discussed, and a draft was shared by India. After an increase in the number of professionals being employed in both nations, the need of such an agreement was expressed by both India and China. A technical meeting during 28-29 May 2018 took place, which involved various discussions and negotiations on the issue of social security. Such agreements protect professionals working abroad and provide benefits like avoidance of double security contributions and facilitating remittances.

Strategic Economic Dialogue (SED)
The SED was focused on the Macro – Economic Corporation and there are five key working groups that work on different sectors with maximum economic output in both the nations.

The sixth Strategic Economic Dialogue was held during September 2019 in New Delhi. Various important matters were discussed.
       •  Ease of doing business in India and China
       •  Infrastructure
       •  Energy development 
       •  Regulatory procedures

It is a regular meet held between the two nations in accordance with a MoU signed during April 2005. The 9th dialogue between the two nations was held during September 2019 in New Delhi. The focus was on various economic matters and in depth discussions took place to enhance the economic benefits for both nations.

Focus areas of India – China Financial Dialogue

China is an annexed ODR platform in India, thus any dispute arising between parties of two nations can be resolved through an online mode by various methods.

The ODR platform between India and China covers the following issues:

• E-commerce like trademarks, copyrights and small claims
• Divorce and maintenance
• Road accident liabilities
• Contractual disputes

• Petroleum Sector: A MoU is being drafted for cooperation between the nations on leveraging the sheer size of the market between the two nations. Also, a Joint Working Group is being created to increase facilities.
• Railway Sector: A MoU was signed on the railway sector in 2014. Two actions were signed under the MoU for cooperation in areas of speed raising, feasibility for high speed rails, training etc. 320 Indian railway officers were trained under these measures in a China based training center. 
• Air Service Agreement: China and India have approved 42 frequencies for each countries carrier, and China has used all its frequencies. China looks forward to more frequencies by India, whereas India has almost utilized 80% of its frequencies.

A Double Taxation Agreement exists between India and China. The agreement faced various amendments in 2018 to improve its guidelines and follow the international standards. The amendments are based on Base erosion and profit shifting (BEPS) projects. The BEPS are tax avoidance strategies that exploit all kinds of gaps and mismatches and move the profits from higher tax jurisdiction to countries with lower tax.

China being one of the prominent trading partners of India has on going import and export exchanges with various Indian industries.

Top 5 Import and Export items from China

https://dipp.gov.in/sites/default/files/FDI_Synopsis_China.pdf

https://niti.gov.in/sites/default/files/2020-10/Draft-ODR-Report-NITI-Aayog-Committee.pdf

https://eoibeijing.gov.in/economic-and-trade-relation.php

http://niti.gov.in/ic/niti-aayog-development-research-centre-dialogue

https://eoibeijing.gov.in/india-china-cooperation.php