ISAS Working Papers

Merchandise trade between India and China has accelerated rapidly in recent years. China is now India's largest trading partner while India is also one of China's major trade partners. The rise in trade reflects an enhanced economic engagement between the two countries. A notable aspect of the growing trade, however, is its increasing imbalance. The balance of trade is not only in China's favour , but also exhibiting an increasing trend over time. This paper examines the relative competitiveness of Indian exports in the Chinese market as a key factor in explaining the imbalance in bilateral tr ade. The competitiveness of Indian exports is empirically assessed against those from the Southeast Asian countries , with the latter assumed as major competitors of Indian exports on account of the similarities in products exported and factor endowments.