Last week I saw a beautiful designed interactive map on the website of The Economist, visualizing the border dispute between India, China and Pakistan with their respective claims of territory. The solution of this conflict will be enormously important for the stability in Asia, because it can escalate very fast and potentially become an international crisis.
Source: The Economist
This situation is now persisting for several decades and no solution is in sight. What we see at the moment is that trade and economic cooperation is more important and no country addresses the topic to not further increase the diplomatic tensions. On the other hand there will be a point in the future when the economic ties are so strong, that the solution of all border issues will be a necessity. Obviously all sides have to make concessions, which is very difficult when nobody wants to show a slightest sign of weakness.
History showed that borders are only stable in the long run, when they respect the affiliation of the people to a certain culture. In the case of China, India and Pakistan we have three countries where the religion and ethnic affiliation are major points for distinction and separation.
The partition of India showed drastically what happens, when the course of a border is changed too fast without enough consideration of the effects. In the current situation the leaders of the respective countries have to think about reshaping the border in a way that nobody loses its face. It will be essential to avoid flight and expulsion by designing a generously visa system or some kind of flexible border for the people living in the affected regions. It would be really interesting in this context to visualize the border area together with population to see who is actually living in the disputed areas.
Recently, China and India held their first Strategic Economic Dialogue (SED), which arose from a visit of China’s President Wen Jiaobao to India last December. During this top-class event, several ministries led by Montek Singh Ahluwalia from the Indian Planning Commission and Zhang Ping, Chairman of the National Development and Reform Commission talked about the further development of their bilateral economic relationship. This is indeed a step to a more institutionalized relationship and one can see that both sides are willing to foster bilateral trade.
After reaching the goal of $60 billion in 2010, the bilateral trade is expected to reach $70 billion this year and up to $100 billion by 2015. The biggest issue is still the negative balance of trade which accounted for a trade surplus of $20 billion to China’s favour in 2010.
To actually analyze what is traded between the two countries I used the data available from the International Trade Center and visualized it with IBM Many Eyes. You can explore the data by clicking on the respective image to get access to the interactive visualization. It is possible to sort by commodity cluster, group and commodity for the years 2008, 2009 and 2010.
On the import side there are still relatively few commodities imported by China. By far the most important commodity is iron ore and its concentrates, which accounted for about 54% of China’s import from India. Other major traded commodities are cotton (10%), copper (3%), diamonds (3%), granite (1%) and ferro-alloys (1%). Together those commodities accounted for about 3/4 of China’s import from India. It becomes clear that the Indian side would like to diversify the export portfolio to reduce the dependency from raw materials.
Fig. 1: China's import from India in 2010 (ITC 2011)
The structure of China’s export to India is not very different from China’s general export portfolio. Commodities from Machinery and Electrical industries (47%), Chemicals & Allied industries (19%), Metals (10%) and Textiles (7%) represent about 84% of China’s export to India. The most important goods are mobile phones and telecommunication equipment, computers, flat rolled products of iron, TV’s, electric transformers, steam turbines, fertilizers, antibiotics and textiles.
Fig. 2: China's export to India in 2010 (ITC 2010)
The SED is a step into the right direction, because problems are addressed and both sides are willing to solve the remaining issues. Nevertheless, one can be still skeptical about India’s focus on pharmaceutical and IT products in this case, because those are exactly the industries China plans to invest massively into.
In IT outsourcing, India’s advantage of being able to address English speaking countries is not transferable to the Chinese market. However, Tata business consultancy for example is expanding operations on the Chinese market but focusing more on software development solutions for Chinese corporations and cities.
In the pharmaceutical sector, both countries are specialized in producing generics, but are investing more and more into R&D with the goal to develop state-of-the-art drugs in the future. Additionally, the requirements for foreign companies to get drug approval in China are very high.
Even for multinational Indian companies the Chinese market is hard to address. They face problems reaching from cultural and language barriers to hidden subsidies, different consumer behaviour up to general business behavior.
It is not secure that the focus on the sectors mentioned above will help to diversify the export portfolio and calm down the voices in India who are skeptical about the deepened economic relationship with China. China on the other hand is very interested in the Indian market, because of the huge potential for cooperations in the infrastructure sector. Indian companies could for example profit from Chinese know-how in the planned construction of India’s high-speed railway system and the further expansion of the telecommunications network. Therefore, China will most likely grant India better access to its domestic market in general.
The proposed long-term goal of a bilateral FTA with India can only become reality under those circumstances, if the economic disequilibrium in favor of China is eased. Despite all the problems, it seems promising that trade is capable to overcome the differences in a relationship which is very peculiar in many ways. To name are the unsettled border dispute, friction in the South China Sea, the Indian Ocean and the relationship to neighbors like Vietnam, Burma and Pakistan.
Sources and reading list:
- Karackattu, Joe T. (2011) : Institute for defense studies and analyses : India-China Strategic Economic Dialogue: Another Positive Step
- Patil, R (2011) : Hindustan Times : India Inc and the great walls of China
- The Economic Times : Open China market to Indian IT and pharma products: Montek Singh Ahluwalia
- Harris, G (2011) : The New York Times : China and India making Inroads in Biotech drugs
- Hu, Y (2011) : China Daily : India’s Tata Consultancy to triple investment in China
- The Hindu (2011) : China’s push to domestic IT industry to hit Indian plans
- Parbat, K (2011) : The Economic Times : Bharti Airtel calls up China’s ZTE for 4G rollout
- Bery, S. (2011) : Business standard : Hindi-Chini buy buy
- Bagchi, I (2011) : The Times of India : India looks east, to Vietnam and Myanmar
- The Times of India (2011) : China-India talks on border disputes to be held soon
- Singh, B (2011) : The Times of India : About supremacy, not sea
- The Hindu (2011) : Indian team hardsells tobacco again to China
- Zhang, Y (2011) : China’s Ansteel to Build India Steel Plant
- International Trade Center (2011) : Trade Map
Google launched its GoogleMaps traffic service this week in Germany, which provides real time traffic data and history for our german “Autobahn”. The tool is very nice and better then everything else on the market. Because Google doesn’t officially explain how the Software works I got curious.
There were three possible solutions which came to my mind, where they could get the data from:
- Data from the ministry of transport and the sensors they use for traffic control.
This is not very likely because the level of detail in GoogleMaps is too good (not enough sensors in the street) and the state most likely wouldn’t give Google any data after the problems with Streetview in Germany. - Google buys the data from other companies, for example navigation system manufacturers.
This is also not very likely, because in a while Google will be their biggest competitor and those devices usually dont have an option to send the GPS data back to the headquarter in realtime. - Google uses the data of Android and other Smartphones with activated GPS and GoogleMaps feature.
I think it works like described in the third option (Crowdsourcing), because of several advantages for Google.
It doesn’t cost anything because everybody who uses the Maps service on a Smartphone agrees to the terms of Google. A Smartphone with integrated GPS can send its position to a central database, which can be combined with map data and analysed with statistical algorithms.
Some people will argue that there are not that many smartphones on the market yet. This is true, therefore the launch of the service was first in US and now expands to other countries. Actually one doesn’t need that many smartphones, you only need one, once in a while…
The picture above is from Google Earth and shows a highway intersection in Germany. In contrast to Google Maps one can observe green, yellow, red and black dots instead of coloured lines.
My theory is that some of those dots belong to a car with a smartphone which runs GoogleMaps. When you click on a dot it shows the actual speed of this dot and the colour indicates if it is above or below the average speed driven usually on this part of the highway. To get a sufficient amount of data points, the same device can send positioning data every 200m or 10s. While observing some dots which had a constant speed it is possible to actually track down cars changing the highway lane.
With only a few devices passing by once in a while and historical speed data, Google traffic is capable to deliver a very good estimation of the current traffic situation. When there is new data for a certain part available, the oldest data is fading out and the newest data points are regarded more important to the algorithm.
I assume that the service is first launched on highways because many cars are passing by in a certain time period and the likelihood of one possessing a smartphone is higher. This leads to the assumption that the traffic data quality is more dense and better in urban areas, where more smartphones are in use. In cities Google could face the problem to distinguish between very slow cars and pedestrians…
I guess most people are unaware of what happens with their data when they use free apps. Even if the data is encrypted and unpersonalized, it is interesting what companies can do with it and that the government is usually to late to anticipate those developments. It is a brilliant idea and I am sure it will help optimizing transportation and lead to the substitution of other navigation systems in a while.
It would be great to have a OpenStreetMap application for Smartphones, which uploads the data to a online database accessible for the public, especially scientists!
India imported goods from China worth 31 billion US-Dollar in 2008, which made up 10% of total import that year. From China’s point of view the export share was about 2,2% of total export. Figure 1 gives a detailed overview about the most imported goods with their share in the total import and export of the respective country.
Fig.1: India's Import from China in 2008
Primarily interesting are several industries, from which the first one is the telecommunication and IT sector. India is at the moment the world’s biggest importer in the listed category (HS 852520). Goods included are especially mobile telephones, computer hardware and hardware for transmitters, but also batteries, telephones and TV-receivers in lower quantities. This is not a surprise, because India is investing in its public and private IT-infrastructure and China has a comparative advantage in those sectors worldwide.
Mobile communication is a sector with enormous growth rates in most developing countries, because of the many advantages for governments, citizens and companies:
- The infrastructure is not as expensive, as it would be to built landlines, which in fact doesn’t exist in most rural areas.
- The government can auction off mobile phone licences to the private, or semi-private companies and make money.
- The citizens (also in rural areas) get easily connected to the modern telecommunication systems, with benefits for the people in private, but also for the economy a hole.
Deregulation and Liberalisation are the driving forces behind this development, which usually leads to lower prices through competition and a decent infrastructure, when the incentives for private companies were prioritised the right way. Thus, millions of people with a relatively low income can afford a simple mobile phone and communicate. To estimate the growth potential in mobile telecommunications in India and China, we can set the total number of mobile phone contracts into relation to the total population of those countries in contrast to the situation in the EU for example. Whereas in average every EU citizen had at least one mobile phone contract in 2008, this share was 30% in India and 48% in China.
Fig.2: Share of mobile phone contracts per person in relation to the whole population
Another import good is Chinese coal (90% of total coal import), which is needed to meet the growing energy demand for electricity in India. The energy consumption rises with economic growth but the resources are small, respectively the extraction technology is not sufficient. More and more coal, gas and oil has to be imported (30%) from other countries. Chinese coal is especially in a key role, because the Indian energy mix consists to 50% of coal. The The US Energy Information Administration (EIA) projected that the Indian coal imports could triple until 2030, because the demand from power plants and iron and steel making industries increases.
China on the other hand is also massively using coal for its energy supply (70%), but the coal deposits are huge, so that China can export its over capacities.
Iron, chrome, lead, copper and zinc ores are the most important metals exported to China in terms of size and total export share, ranging from 80% up to 100%. Most of those metals are used in China to produce steel but also electronics. In the year 2009 China was accountable for about 47% ot the world’s steel production and spend almost 50 billion US$ on imports of iron ore, which was 83% of iron ore traded globally (Bose, UN 2010).
Particularly important is the trade of aluminum where China is India’s biggest export partner and India is China’s second biggest import partner. Aluminum is used in several sectors, like the automobile, chemistry and electronics industry. Chrome and zinc ores are important in steel refinement and lead ore is needed in the production of batteries (Mineral Information Institute 2010).
Remarkable and the second most important export good is cotton. This is not surprising because China is the world’s biggest producer and importer of cotton, which is been used in the textile industry. India is behind China the second biggest producer and exports over capacities not needed in the domestic industry (USDA 2010). China is the biggest export market for India’s cotton (42%) and India is China’s second biggest procurement market (28%) after the USA (UN 2010). Cotton from India is attractive for China because of the low costs of labour and transport, compared to even highly subsidised US-Cotton.
How important the imports from India are to China one could see in the first month of 2010, when the demand for cotton increased after the recovery of the world economy. The production level increased with a much lower rate then the demand, as a result the prices were rising and supply decreased. In this situation the Indian government imposed an export stop for Cotton and even worse for China were crop shortfalls because of drought. Finally China had to buy relatively expensive cotton from USA to meet the demand of its textile industry (Businessweek 2010).
A surprise the export of hair in the worth of 92 million US$ to China. This interesting fact has cultural reasons. India is the biggest exporter of hair in the world, because many Hindu women sacrifice their hair in a temple for religious purposes. This hair is sold by the temple for charity and a lot of it is sold to China, where it is processed, cleaned, coloured. After this “refinement” a lot of it gets sold to US and European hair salons. Globalisation can be quite astonishing sometimes (BBC 2001, UN 2010)!
Also interesting is the export of soybean oil cake to China. This so called oil cake is a by-product of oil extraction from soy beans and is used as food but also to feed animals. China covers 98% of its total import of oil cake from India and it can be assumed that most of this is used as animal feed, if one considers that China is now the biggest meat producer in the world (China Daily 2009).
We saw the importance of metal ores in general measured by volume and export share. The further growth is dependent from a healthy and prospering Chinese construction industry and real estate market. Assumed the housing bubble will burst, one can expect negative effects on the Indian economy as well. The Indian government recognized this problem and tries to diversify the exports, by demanding a reduction of numerous tariff and non-tariff measures from China. Trade promotion is planned in sectors like IT, pharmaceutics, agribusiness and machine construction.
A cooperation from China is very likely, because it is interested to foster the trade with India. From China’s perspective India is in terms of import share only important for iron ore, cotton, chrome ore, aluminium, hairs and soy cake where the shares are double-digit. In case of doubt China could source those products from other countries and India would have a problem (The Times of India 2010, Hindustan Times 2010).
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