Why China and India Need Each Other

Recent rumblings that the Indian government is making it difficult for Chinese companies to export telecom equipment to Indian operators (or may even issue an outright ban on security grounds) is just the latest development in a two-step-forward, one-step-back dance that China and India are trying to master, albeit awkwardly.

From a tiny base of $2.9 billion in 2000, bilateral trade between China and India has grown explosively over the past 10 years. It reached $52 billion in 2008, retreated somewhat in 2009 due to the global financial crisis, and will likely cross $60 billion in 2010. To put these numbers into perspective, China's bilateral trade with the entire Latin American region and the entire continent of Africa is about $110 billion in each case. Over the past decade, China-India trade has grown at a 40 percent annual rate, twice the pace of growth in either country's trade with the rest of the world. China is now India's largest trading partner. In turn, India is now China's 10th-largest trading partner.