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WRAPUP 2-China, India meet to focus on trade, despite mistrust

By Sui-Lee Wee NEW DELHI, Dec 15 (Reuters) - Chinese Premier Wen Jiabao, accompanied by more than 400 business leaders, will seek to boost trade with India and soothe tensions between the world's fastest-growing major economies when he visits on Wednesday. Wen's visit is the first by a Chinese premier in five years. He is accompanied by China's top tycoons, underscoring the growing commercial ties of countries which, between them, house more than a third of the world's population. "Impressive business delegations have accompanied Barack Obama and David Cameron, but when the Wen circus rolls into town with 100 of China's top tycoons, the red carpet needs to be a bit longer," said a commentary in the Hindustan Times on Wednesday. "Let trade do the talking, other issues that add to the trust deficit will hopefully get addressed on the way." The two countries, one-time rivals who went to war in 1962, are now entwined by their booming trade relationship and rising global clout. Both have stood together to resist Western demands in world trade and climate change talks, but they have also clashed over China's close relationship with Pakistan, fears of Chinese spying and a longstanding border dispute. Wen is expected to announce more Chinese investments in India or lower trade barriers to assuage the worries of Indian politicians, peeved that the Sino-Indian trade balance is heavily in China's favour. India's deficit with China could reach $24-25 billion this year, analysts said. The deficit rose to $16 billion in 2007-08, from $1 billion in 2001-02, according to Indian customs data. India has sought to diversify its trade basket, but raw materials and other low-end commodities such as iron ore still make up about 60 percent of its exports to China. In contrast, manufactured goods -- from trinkets to turbines -- form the bulk of Chinese exports. China is now India's largest trade partner and two-way trade reached $60 billion this year, up from $13.6 billion in 2004. "Economic ties constitute literally the bedrock of our relations ...

Both sides are keen to further enhance mutually beneficial trade and are looking at new initiatives," said an Indian foreign ministry spokesman on Monday. Still, total investment by China in India is small, amounting to only $221 million in 2009, representing only about 0.1 percent of China's total outward foreign direct investment stock in that year. That figure is seven times less than what China has invested in Pakistan, according to data from China's Ministry of Commerce. TIBETAN PROTESTS The Sino-Indian trade relationship is overlaid with political and strategic rifts. Beijing's longest running grudge against India is over its granting of asylum to Tibetan leader Dalai Lama, who fled to India in the 1950s following a failed uprising, setting off a chain of events that led to the war between them. Hundreds of demonstrators wearing orange T-shirts with slogans such as "Free Tibet Now" took to the streets of central Delhi, shouting "Wen Jiabao go back!" and "Tibet's independence is India's security." The Tibetan protests, which usually accompany visits by Chinese leaders to India, were peaceful, watched over by a heavy police presence. Security was also stepped up outside the Chinese embassy in Delhi. The Dalai Lama is due to visit Sikkim, an Indian state on the Chinese border, during Wen's visit to Delhi, something that could inflame tensions. FRAGILE RELATIONS The two nations have pursued divergent paths in their development: for India, a democracy, economic reforms began only in 1991; for China, a one-party state that implemented market reforms in 1979, catapulting the country's economy. Although both India and China have said they are exploring a possible free-trade agreement, no real progress is expected on that front as there is some scepticism in New Delhi that Beijing may only want to dump cheap manufactured goods on India's booming $1.3 trillion economy.. While the two are often lumped together as emerging world powers, China's GDP is four times bigger than India's and its infrastructure outshines India's dilapidated roads and ports, a factor that makes New Delhi wary of Beijing's growing might. "Relations are very fragile, very easy to be damaged and very difficult to repair. Therefore they need special care in the information age," China's envoy to India, Zhang Yan, told reporters in New Delhi. India fears China wants to restrict its global reach by possibly opposing its bid for a permanent U.N. Security Council seat or encircling the Indian Ocean region with projects from Pakistan to Myanmar. Long wary of Washington's influence in South Asia, Beijing's overtures toward New Delhi also come just a little over a month after U.S. President Barack Obama's trip to India, during which he endorsed India's long-held demand for a permanent seat on the U.N. Security Council and announced $10 billion worth of business deals.. French President Nicolas Sarkozy and British Prime Minister David Cameron also visited India this year. After Wen's Dec. 15-17 visit he travels straight to Pakistan, India's nuclear armed rival, for another two nights. In the days leading up to Wen's trip, China and India have agreed on a series of business deals. Chinese telecoms gear maker Huawei, whose imports were banned by India only in May over spying fears, said on Tuesday it aims to invest more than $2 billion in India over the next five years. India is the world's fastest growing mobile phone market and second only to China in subscribers. India's Anil Dhirubhai Ambani Group (ADAG) will sew up about $3 billion in loans from Chinese banks, while Reliance Communications will sign an accord with China Development Bank for a $1.93 billion, 10-year loan. . The loans are yet another example of the growing challenge the BRIC group consisting of the frontier markets of Brazil, Russia, India and China are giving Western banks, which have traditionally been the destination for companies like ADAG. (Additional reporting by Henry Foy and Abhishek Madhukar, Editing by Paul de Bendern and Miral Fahmy) Keywords: INDIA CHINA/ (paul.debendern@thomsonreuters.com; +91 11 4178 1005; Reuters Messenger: paul.debendern@reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved.

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