Trade Strategy between China and India

 a.  What would the outcome be when the two most populated countries join together in a trade union? So far there are only theoretical opinions on the merger but in the years to come the world will experience first hand on the impact of these two giants. Together the two nations have agreed to launched its 12th five year plan to continue to develop its infrastructure. Beijing has continued to encourage its domestic Chinese firms to invest in India's market. India has opened its market to Chinese entrepreneurs, particularly in its pharmaceutical and telecommunications industry. The two countries are planning on forming a bilateral trade to greatly increase the economic activity of the two. When China and India compete with one another, both countries lose. However when the two join hands in a bilateral trade agreement, both countries gain significantly. The most important incentive in encouraging trade between the countries is to lower China's surplus with India.

b. The merger of the two giant markets will bring prosperity to both countries. India has a great opportunity to attract Chinese investors and further develop its infrastructure. It will be interesting to view the Law of One Price take place between the two markets. Currently trade between China and India is heavily unbalanced which is evident in the trade surplus. However as the countries open their markets up to each other, prices should meet in equilibrium. The equilibrium of prices will balance out the trade surplus and leave both countries better off in the long run.

c. Political and economic interest led to this prominent situation. Both countries seek to develop its infrastructure. The best solution is to continue encouraging domestic firms in both countries to invest in each other. Only time will move the markets of China and India forward. By establishing a bilateral trade agreement, the economies of both countries will become accessible which will decrease trade expenses on both sides.

link: http://www.chinadaily.com.cn/bizchina/2013-05/22/content_16518339.htm