Mining China - India relationship
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Barun Mitra
Sep 8, 2014, 2:14:17 AM9/8/14
to Citizens-Initiative
India’s trump card in talks with China
The power is vested with India to reduce the price of iron ore by releasing supplies into the world market, writes Kai Xue, in Mint, Sept 3, 2014.
(Kai Xue is a corporate lawyer in Beijing advising on international mining projects.)
Earlier this week, India’s commerce minister Nirmala Sitharaman and her Chinese counterpart Gao Hucheng convened the joint economic group meeting to set an economic agenda ahead of a visit later in the month by President Xi Jinping to India. There were specific topics such as Chinese investments in industrial zones and high-speed rail across India. However, India’s overarching goal in economic ties is closing the large trade deficit that stood at $31 billion in 2013.
This has been India’s aspiration for so long that the next round of trade negotiations with China will have an air of futility; the same unresolved issues make a repetitive appearance over the years. India would like greater access for Indian information technology (IT) services companies in China and for pharmaceutical exports while China wants Indian restrictions on its electricity generation and telecom equipment exports dropped.
But India has an overlooked trump card to break this deadlock. In its arsenal, the Narendra Modi government can exercise a powerful policy option. It can decide to release 100 million tonnes of iron ore production into the world market. This means the power is vested in India to bring down the global cost of iron ore and thereby steel.
That’s enticing to China as Chinese industrialization is entering a phase of peak steel intensity and two-thirds of the seaborne trade in iron ore is already purchased by China. The market for iron ore is worth about $250-300 billion annually, meaning even a dip in price saves tens of billions of dollars for Chinese steel makers. This is the basis for a tremendous bargaining chip held by India that can be used to yield maximum advantage for both countries.
Read more at: http://www.livemint.com/Opinion/hNtJQrFrJckQZ8Mwv25YzJ/Indias-trump-card-in-talks-with-China.html
The power is vested with India to reduce the price of iron ore by releasing supplies into the world market, writes Kai Xue, in Mint, Sept 3, 2014.
(Kai Xue is a corporate lawyer in Beijing advising on international mining projects.)
Earlier this week, India’s commerce minister Nirmala Sitharaman and her Chinese counterpart Gao Hucheng convened the joint economic group meeting to set an economic agenda ahead of a visit later in the month by President Xi Jinping to India. There were specific topics such as Chinese investments in industrial zones and high-speed rail across India. However, India’s overarching goal in economic ties is closing the large trade deficit that stood at $31 billion in 2013.
This has been India’s aspiration for so long that the next round of trade negotiations with China will have an air of futility; the same unresolved issues make a repetitive appearance over the years. India would like greater access for Indian information technology (IT) services companies in China and for pharmaceutical exports while China wants Indian restrictions on its electricity generation and telecom equipment exports dropped.
But India has an overlooked trump card to break this deadlock. In its arsenal, the Narendra Modi government can exercise a powerful policy option. It can decide to release 100 million tonnes of iron ore production into the world market. This means the power is vested in India to bring down the global cost of iron ore and thereby steel.
That’s enticing to China as Chinese industrialization is entering a phase of peak steel intensity and two-thirds of the seaborne trade in iron ore is already purchased by China. The market for iron ore is worth about $250-300 billion annually, meaning even a dip in price saves tens of billions of dollars for Chinese steel makers. This is the basis for a tremendous bargaining chip held by India that can be used to yield maximum advantage for both countries.
Read more at: http://www.livemint.com/Opinion/hNtJQrFrJckQZ8Mwv25YzJ/Indias-trump-card-in-talks-with-China.html
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