China, India seek to create new economic engine

China and India, both with a billion-plus population and emerging as the world's two rising powers, are seeking to join efforts to create a new engine of the global economy.

"I am confident that we will view bilateral relations from a strategic height..., jointly nurture new bright spots in cooperation among Asian countries, and create a new engine of economic growth of the world," Chinese Premier Li Keqiang said during his visit to India, the first leg of his maiden foreign tour after taking office in March.

Against the backdrop of a faltering global economy dulled by the lengthy recession in the EU and lukewarm recovery in the U.S., analysts expect cooperation between the two populous emerging economies, especially in trade and investment, to help paint a brighter picture.

Zhang Yansheng, a foreign trade expert with the National Development and Reform Commission, said the two countries' economies are broadly complimentary with each other, with China strong in manufacturing and India good at outsourcing, indicating room for further cooperation.

In 2012, two-way trade between the nations amounted to 66.5 billion U.S. dollars. China is now India's second largest trade partner, while India is China's biggest partner in South Asia.

The two countries aim for bilateral trade to reach 100 billion U.S. dollars by 2015.

While the growing trade has brought concrete benefits to both countries amid sluggish markets elsewhere, some Indians may find it disconcerting as the trade is heavily skewed in China's favor, a particularly sensitive issue for India with its ballooning current account gap.

"China never had the intention to pursue a trade surplus. Only a dynamic trade balance is a sustainable trade relation," Premier Li stressed in India.

Liu Xiaoxue, an expert on Sino-India trade from the Asia-Pacific Institute under the Chinese Academy of Social Sciences, attributed the persisting imbalance mainly to India's less sophisticated production lines.

India's exports to China are mainly cotton and minerals, while China offered manufactured goods such as industrial equipment.

During Li's stay in India, the two sides agreed to take measures to address the issue of the trade imbalance, including cooperation on pharmaceutical supervision, stronger links between Chinese enterprises and the Indian IT industry, and completion of negotiations on agro-products.

As long as trade keeps flowing, the two sides can gradually resolve the imbalances in the process, said Liu.

Both Liu and Zhang agreed weak manufacturing and infrastructure are the main areas restraining India's development and in which China can play a more constructive role.

"Given the size of the two countries' markets, bilateral investment is not growing fast enough," said Liu, suggesting investment restrictions in India is mainly to blame.

As material and labor costs in China rise, India, which aims to improve its manufacturing and create more jobs, can serve as an ideal transferring base for Chinese businesses, she said.

In a joint statement issued on Monday, the Indian side said it welcomed Chinese enterprises to invest in India and participate in the country's infrastructure development.

The cooperation potential between the two countries is huge provided they foster a peaceful environment for common development, Liu said.

"As the world's two major developing economies, the vital thing is to always stay on a track that is conducive for growth to push for the common interests for the less developed regions," Zhang said.

Only in that way can the two countries really become the new engine of the world economy, he added.