India's exports to China surge by 31% in April-July, despite tensions at LAC

India’s exports to China have jumped by 31% to $7.29 billion from April to July 2020, despite a slump in the economy and tensions at the LAC. The border dispute does not seem to have affected the bilateral trade between the two nations, as exports to China increased by 30.71% as per the analysis of the monthly trade data on Commerce Ministry’s portal.

However, the overall Indian exports have registered a negative growth of 29.99% from April to July. The country’s overall exports contracted by 29.99% to $75.01 billion from last year’s $107.14 billion.

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Whereas, exports to China increased to $7.29 billion up from $5.57 billion in the same period last year. The exports to China registered in these four months is the highest since 2007-08. With the latest surge, China now shares a total of 9.71% of Indian total exports during April-July, against last year’s 5.2%

Annually, China’s share in total Indian exports has witnessed a gradual increase but this year it has gone up sharply. In the last financial year, China was the third-largest importer of Indian goods, while the US was the largest importer, accounting for 16.94% of exports, and the UAE stood as the second-largest, with 9.21% imports.

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COVID-19 impacts trade activities

It is possible that the jump in Indian exports to China during April-July 2020 was due to old pre-contracted orders being shipped once port operations resumed after the COVID-19 lockdown.

Trade activities were disrupted in China during January-March 2020 following the pandemic outbreak.  While in India, the lockdown was imposed on March 24 after the COVID-19 outbreak hit the country in February. On March 25, the Home Ministry issued lockdown guidelines, allowing operations of railways, airports and seaports for movement of cargo and inter-state movement of goods.

In January 2020, there was a 23.15% increase in exports to China, compared to that of the previous year. However, following three months — February (-13.62 %), March (36.66%) and April (-20.69%) — saw a decline in the exports as against last year. The slump in exports was then followed by a sharp during May, June and July.

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India and China agree to resolve border issues

Amid the LAC faceoff, the Working Mechanism for Consultation & Coordination on India-China Border Affairs (WMCC) held its 18th meeting on Thursday. The Ministry of External Affairs revealed that the Indian and Chinese delegation had an in-depth exchange of views on the existing situation in the border areas. Reaffirming the agreements reached between the respective Foreign Ministers and Special Representatives, both countries agreed to continue working towards complete disengagement of troops.

As per the MEA, they reached a consensus to resolve outstanding issues in a speedy manner. The delegations maintained that restoration of peace in the border areas was essential for the overall development of bilateral relations. Additionally, India and China acknowledged the need for close communication to ensure complete disengagement. While the Indian delegation was led by MEA Joint Secretary (East Asia), the Director-General of the Boundary & Oceanic Department of the Chinese Foreign Ministry led the Chinese delegation.

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