Category: India vs China

China’s growing focus on Indian Ocean irks India

Reuters | Aug 31, 2010 | 5:15pm IST

India China relations India expressed concerns on Tuesday about China’s influence in the Indian Ocean region, the latest sign of tension between the Asian giants who are competing for resources and geopolitical power in the region. India’s Foreign Minister S.M. Krishna’s comments to parliament follows a row between the two countries over China’s denial of a visa to an Indian army general that angered New Delhi and clouded their slowly improving military ties. "The government of India has come to realise that China has been showing more than the normal interest in Indian Ocean affairs," Krishna told lawmakers. "We are closely monitoring the Chinese intentions. We are closely monitoring the developments in the Indian Ocean."

India worries that China’s military is seeking to extend influence over countries such as Sri Lanka that New Delhi has traditionally counted within its sphere of influence. Beijing’s territorial claims this year over the South China Sea have only bolstered such fears. While trade has grown 30-fold since 2000, the tension highlights how economic ties alone may not be enough to resolve the two countries growing friction over their disputed borders and role as emerging global powers. China has invested in the Gwadar port in Pakistan, the Sri Lankan port of Hambantota and the mining and energy sectors in Myanmar, part of a strategy to protect shipping lanes in a region that feeds 80 percent of China’s and 65 percent of India’s oil needs.

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China: India military ties on track despite visa row

Reuters | Aug 28, 2010 | 9:56am IST

China said on Saturday that military ties with India remained on track, despite a visa row that some reports said led to a freeze in defence contacts between the two big neighbours. An Indian defence source and some Indian news media said on Friday that defence ties with China were suspended after Beijing refused a visa to an Indian general from disputed Kashmir, where Pakistan and China also hold territory. But the Indian Defence Minister A.K. Antony said "ties with China will continue", and now China’s Ministry of Defence has also denied any freeze in ties with the Indian military. "China has not suspended military exchanges with India, and nor has it received any notification from India of any such suspension," the press office of the Chinese ministry said in a statement faxed to Reuters.

India and China have limited military ties, focused on visits by military chiefs and defence officials and occasional, small joint exercises. But the official Chinese statement indicated that Beijing did not want the quarrel to curtail those contacts or seriously damage the overall relationship. China is now India’s biggest trade partner and the spat, one of several over the last few years, is unlikely to snowball. Friction is, however, also unlikely to abate entirely. Border disputes and mutual wariness remain. India holds 45 percent of the disputed Himalayan region of Kashmir, while Pakistan controls a third. China holds the rest.

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India approves Chinese telco gear orders -Reuters

Reuters | Aug 20, 2010 | 5:36pm IST

India has allowed two telecoms firms to buy equipment from China’s Huawei and ZTE after the Chinese firms agreed to New Delhi’s tighter rules to address security concerns, sources said on Friday. This year, India barred some local mobile phone operators from placing orders with Huawei and ZTE on security concerns, resulting from its suspicion that Chinese equipment might have spying technology embedded to intercept sensitive conversations and government communications. A source with direct knowledge said Tata Teleservices, which had applied for government approval to buy telecoms gear from Huawei and ZTE, received the goahead after the Chinese firms accepted all the conditions set by India. “They (Huawei and ZTE) have said they agree with all the new terms and conditions, after which the government cleared applications,” the source said.

Last month, India tightened rules for telecom gear imports, saying vendors must allow inspection of their equipment and share design and source codes in escrow accounts. Separately, an application by Reliance Communications, India’s second-biggest mobile operator, to order equipment from ZTE has also been approved, another source said. The Indian government’s move to bar the Chinese firms had hit their growth in a booming market that is the world’s fastest-growing by subscribers and is getting ready for rollout of 3G and broadband networks. ZTE’s second-quarter profit fell below market expectations after the Indian restrictions. Continue reading

Q+A – India confronts land grabs in industrialisation push

Reuters | Aug 19, 2010 | 5:53pm IST

The government is trying to strike a balance between farm interests and industry as it faces a series of violent protests against attempts to take over land, a debate that has consequences for investment and internal security.


For many Indians, land is the only asset or social security that they possess and is a mark of social standing. Nearly 60 percent of India’s 1.2 billion citizens depend on farming for a living and each hectare of farmland supports five people. Most projects require huge amounts of land. South Korea’s POSCO’s proposed steel mill in Orissa will be built on 1,600 hectares. A six-lane highway between the Taj Mahal city of Agra with New Delhi will require 43,000 hectares. Compensation ranges from between $4,300 a hectare, in the case of top steelmaker ArcelorMittal’s proposed plant of over 4,400 hectares in Jharkhand, to $14,600 per hectare, offered to farmers displaced by POSCO’s Orissa mill. Despite the seemingly attractive prices, farmers have few other livelihood options and land taken over for industrialisation has been blamed for displacing hundreds of thousands of people. Protests against land being taken over have become more visible as the economy expands and the rich-poor gap widens.


India’s century-old land acquisition law gives the state the right to take over land for public purposes with little compensation. Critics say the government interprets “public” to include private investments and this amounts to land-grabbing. They want private firms to buy the land from the owners at market rates. India is considering a new law which would guarantee market or higher rates.


Analysts cite problems in acquiring land as the biggest hindrance to rapid industrialisation of Asia’s third-largest economy, pointing out to several stalled highways, power utilities and factories. Prominent amongst these are multi-billion dollar investments by top steelmakers like ArcelorMittal, South Korea’s POSCO and Tata Steel. Protests over mining on tribal land in Orissa have stalled plans of British-based mining group Vedanta Resources Plc to extract bauxite. Continue reading

RBI policy mopping excess liquidity – Mukherjee

RBI policy mopping excess liquidity – Mukherjee | Reuters

The Reserve Bank of India’s (RBI) “appropriate monetary policy” is absorbing excess liquidity and helping efforts to tame inflation, the finance minister told parliament on Wednesday. Pranab Mukherjee, responding to an opposition-sponsored debate on inflation, also said rising prices were a cost of rapid expansion of Asia’s third-largest economy. “If I want to compromise with growth rate of 5 percent, or 5.5 percent, if I want to compromise with my export growth, if I want to do that, I can surely control the inflation,” he said. Wholesale price index, India’s most closely watched inflation measure, have risen more than 10 percent from a year earlier for the past five months. The index rose 10.55 percent in June and is expected to record a double-digit rise in July.

Spiralling prices have led to street protests against the Congress party-led government, and the opposition parties have accused it of not doing enough to control prices. “Appropriate monetary policy is mopping up excess liquidity,” Mukherjee said. “We have ensured the excess liquidity in the market has been mopped … The Reserve Bank is keeping its eye constantly on that.” The RBI has said it will manage liquidity to ensure an excess does not prevent policy signals from being transmitted to the monetary system.  Continue reading

No plan to curb India iron ore exports now – official

Reuters | Mon Jul 19, 2010 | 5:55pm IST

The government has no plans to curb iron ore exports, a senior government official said on Monday, easing concerns of an imminent hike in export duty. "At the moment there is no such formal proposal," said the official, who is close to formulating policies in the mining sector and who declined to be named. "After the last hike (in April), there is nothing on the table." Steel Minister Virbhadra Singh said last Friday India’s export tax on iron ore should be raised to at least 20 percent, as more of the non-renewable resource should be conserved for domestic steelmakers. However, an iron ore analyst with a foreign institutional investor said the possibility of a hike in iron ore export taxes in future could not be ruled out. "The trend in mining levies is higher – if you look at royalties, transport fees and taxes," the analyst said. "It is possible that on iron ore lump exports there could be a hike to 20 percent." The analyst said iron ore fines could also be subject to an upward revision, although the government is unlikely to cease exports altogether.

India’s steel industry has been lobbying for curbs on iron ore exports so that more of the resource is available to them at low prices. India last raised the export duty on iron ore lumps in April to 15 percent from 10 percent. Last December, it introduced a 5 percent export duty on iron ore fines. The government official said curbs on iron ore fines, the powdery byproduct of mining iron ore lumps, was not feasible due to a lack of demand in the domestic market. Over 70 percent of India’s iron ore exports comprise fines that are mostly bought by China, which has the technology to blend it with high-grade ores procured from Australia and Brazil. "We feel if there is a complete ban there may not be full utilisation of the fines and that could lead to other problems," the official said.  

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European central banks buy bonds; stocks, euro surge

Reuters | Mon May 10, 2010 | 3:49pm IST

European central banks began buying euro zone government bonds under a $1 trillion global emergency rescue package agreed on Monday, sending the euro and European stocks and bonds surging on relieved markets. The "shock and awe" plan — the biggest since G20 leaders threw money at the global economy following the collapse of Lehman Brothers in 2008 — triggered a global stock market rally after panic selling last week. But it left longer-term questions about whether Europe’s weakest economies can manage their debt and how the European Union can develop more coherent economic and fiscal policies to underpin the single currency. The European Central Bank immediately began implementing its part of a deal hammered out by EU finance ministers, central bankers and the IMF in marathon weekend negotiations.

The package of standby funds and loan guarantees that could be tapped by euro zone governments shut out of credit markets, plus central bank liquidity measures and bond purchases to steady markets surprised financial analysts by its sheer scale. The euro rose by more than 3 percent to above $1.30 and the FTSEurofirst 300 index of top European shares surged by 5.6 percent by 0900 GMT, after falling 8.9 percent last week to a seven-month low on Friday. "The euro zone is certainly regaining confidence," European Commission President Jose Manuel Barroso told reporters, hours after an 11-hour meeting of EU finance ministers ended in the early hours of Monday as Asian markets opened. Risk premiums on peripheral euro zone sovereign bonds plummeted, as did the price of insuring them against default on the volatile credit default swap market, while German bund futures tumbled by a two full percentage points as investors sold safe-haven debt. "The EU has taken a decisive action to stamp out the speculative attack against the euro and this should be sufficient to bring some calm into the market," said Klaus Wiener, head of research at Generali Investments.       

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