China has a $9 billion (Rs35,370 crore) trade surplus with India. So, it’s no surprise this issue features prominently in the current talks between the two countries.
An easy explanation is that China has an undervalued currency, which prices Indian goods out of the market there. That’s the policy hole that large parts of the world have fallen into. So, it is good to see Prime Minister Manmohan Singh stay clear of this and focus on two other issues—better access to the Chinese market and the need for Indian firms to diversify their export basket.
There is little doubt that China has kept the yuan at artificially low levels. But that’s changing fast. The Chinese currency has touched an all-time high against the dollar this week. A stronger yuan and higher inflation in China would be an opportunity for Indian firms to start correcting the trade deficit, even as the government works on getting better market access for Indian goods.