Sino-Saarc Trade Relations: Commentary and Analysis

Abstract

As close neighbors, South Asian countries have developed strong ties with China in terms of having increased investments and trade in the region. The trade relations have brought new opportunities for China and South Asian economic and trade cooperation among them. The first part of the paper discusses in detail the China and South Asia trade relations which have substantially been increased over the years. However, it has been noted that a huge trade surplus seems in favor of China. The study also examined the SAARC countries’ trade performance with China and found that almost all the countries in the region have a huge trade deficit with China and at the same time almost all the countries in the region are dependent on their major imports from China. India is the largest trade partner of China in the region followed by Pakistan and Bangladesh. The study also reveals the fact that only landlocked countries in the region have a higher share of intra-trade within the region when compared to their trade with China. Based on the UN COMTRADE and Trade Map database, the comparative advantage index and trade integration index was used to measure the trade between China and South Asia region. Results show that the trade structures of China and South Asia experience certain competitiveness, and also have a lot of complementarities. Chinese exports to South Asia have a wide range of categories, export manufactured goods are the main products. South Asian exports to China are the low value-added primary products and semi-finished products. The Sino-SAARC intra-regional trade potential of the region was computed to bridge the huge trade deficit of the South Asian nations. In this context, the study analyses the trade structures of China and South Asia and finds that there are various products for which the South Asian countries have full capacity to meet the import demands of the fellow countries in the region. But, these products are being currently imported from China instead of importing from within the region. The study also highlights the factors contributing to the low level of trade in the region.