Wen says world big enough for India and China growth

Chinese Premier Wen Jiabao waves as he attends the India-China Business Cooperation Summit in New Delhi December 15, 2010. Wen said Wednesday there was enough space in the world for both China and India to grow and that the world's fastest-growing major economies were not competitors, but partners.

NEW DELHI (Reuters) - Chinese Premier Wen Jiabao began a visit to India on Wednesday, pledging to improve market access for Indian companies and insisting the world was big enough for both Asian giants to prosper as partners.

Wen said he was looking forward to an early launch of negotiations for a free trade agreement between the world's two fastest-growing major economies, despite Indian worries that it might be a dumping ground for cheap manufactured goods from China.

"China and India are partners for co-operation, not rivals in competition. There is enough space in the world for the development of both China and India," Wen told business leaders at the India-China Business Cooperation Summit in New Delhi.

"China takes seriously the trade imbalance between our two countries," Wen said, adding that he would discuss with his Indian counterpart Manmohan Singh ways to substantially increase trade volumes and may open up the Chinese economy to Indian IT, pharmaceutical and agricultural companies.

"The fast economic growth between China and India has been an important engine for the world economy."

In remarks seen as an effort to play down tensions between the two rivals, who still distrust each other, Wen said Chinese companies would sign deals with Indian firms worth more than $16 billion ranging from power equipment to telecoms gear.

Wen's visit is the first by a Chinese premier in five years and he brings with him more than 300 business executives. The two countries, home to more than a third of the world's population, fought a war in 1962 and relations remain uneasy despite their booming trade relationship and rising global clout.

Both have stood together to resist Western demands in world trade and climate change talks, but they have also clashed over China's close relationship with Pakistan, fears of Chinese spying and a longstanding border dispute.

Wen announced more Chinese investments in India to assuage the worries of Indian politicians, peeved that the Sino-Indian trade balance is heavily in China's favor.

Wen also asked India to ease restrictions on investments, capital flows and the movement of people, a thorny subject.

India's deficit with China could reach $24-25 billion this year, analysts said. The deficit rose to $16 billion in 2007-08, from $1 billion in 2001-02, according to Indian customs data.

India has sought to diversify its trade basket, but raw materials and other low-end commodities such as iron ore still make up about 60 percent of its exports to China.

In contrast, manufactured goods from trinkets to turbines form the bulk of Chinese exports.

TRADE PARTNERS

China is now India's largest trade partner and two-way trade reached $60 billion this year, up from $13.6 billion in 2004.

"Impressive business delegations have accompanied Barack Obama and David Cameron, but when the Wen circus rolls into town with 100 of China's top tycoons, the red carpet needs to be a bit longer," said a commentary in the Hindustan Times.

"Let trade do the talking, other issues that add to the trust deficit will hopefully get addressed on the way."

Still, total investment by China in India is small, amounting to only $221 million in 2009, representing 0.1 percent of China's total outward foreign direct investment stock in that year.

That figure is seven times less than what China has invested in Pakistan, according to data from China's Ministry of Commerce.

Wen is the latest in a series of world leaders visiting India to seek great access to its economy, set to expand by around 9 percent in 2010/11.

U.S., French and Chinese leaders have clinched deals worth almost $50 billion in total with India in the past few weeks.

But the Sino-Indian trade relationship is overlaid with political and strategic rifts.

Beijing's longest running grudge against India is over its granting of asylum to Tibetan leader the Dalai Lama, who fled to India in the 1950s following a failed uprising, setting off a chain of events that led to the war between them.

Hundreds of demonstrators wearing orange T-shirts with slogans such as "Free Tibet Now" took to the streets of central Delhi, shouting "Wen Jiabao go back!" and "Tibet's independence is India's security".

Six Tibetan protesters were arrested at the Taj Palace hotel, after attempting to enter the main gates waving flags and chanting slogans. Wen is staying at the luxury hotel but was not there during the scuffles.

"Don't pull me, India is a free country," shouted Tenzin Deki as she was forced into the vehicle.

The Dalai Lama is due to visit Sikkim, an Indian state on the Chinese border, during Wen's visit to Delhi, something that could inflame tensions.

FRAGILE RELATIONS

The two nations have pursued divergent paths in their development. For India, a democracy, economic reforms began only in 1991. China, a one-party state, implemented market reforms in 1979.

While the two are often lumped together as emerging world powers, China's GDP is four times bigger than India's and its infrastructure outshines India's dilapidated roads and ports, a factor that makes New Delhi wary of Beijing's growing might.

India fears China wants to restrict its global reach by possibly opposing its bid for a permanent U.N. Security Council seat or encircling the Indian Ocean region with projects from Pakistan to Myanmar.

Long wary of Washington's influence in South Asia, Beijing's overtures toward New Delhi also come just a little over a month after U.S. President Barack Obama's trip to India, during which he endorsed India's long-held demand for a permanent seat on the U.N. Security Council.

After Wen's December 15-17 visit he travels straight to Pakistan, India's nuclear armed rival, for another two nights.

(Additional reporting by Henry Foy, Matthias Williams and Abhishek Madhukar; Editing by Paul de Bendern and Alex Richardson)