R N Bhaskar

Liu Youfa, 59, the Consul General, Mumbai, of China is a rare combination of being both an economist and a career diplomat. A Ph.D in economics, he taught for a year in China, then moved to the US to complete his studies at the Brigham Young University, and then returned to China to become a career diplomat. He climbed rapidly from being third secretary with the Ministry of Foreign Affairs (MFA) of PRC (1983-88), then second secretary (1988-94) (in Australia, and then Papua New Gunea), and then first secretary.

He has held senior diplomatic positions in Tanzania and Ethiopia as well.Just before coming to India he was Counselor and Minister Counselor of the Chinese embassy in the United States.

China is already India’s largest trading partner, overtaking even the US. But much of this has happened without active government support from either side. Do you think such a rate of growth is sustainable?
Good question. China and India are already the 2nd and the 5th largest economies in the world The prospect of bilateral trade is growing as much as we would like it to be. Since the 21st century, especially since the 2008 financial crisis, both India and China have joined hands to cope with the economic and financial shocks that many countries of the world have witnessed. Both countries have managed to maintain an economic growth momentum. 2011 was a very good year from trade.

This year, we hope to account for $73 billion of bilateral trade. Last year, 2012, despite all odds, we managed to achieve a trade of $70 billion. And the leaders of both countries expect this volume to be around $100 billion by 2015. But as an economist, I think that, being the second and the fifth largest economies in the world, trade has been falling behind economikc growth. The potential is huge.

Is the rate of growth sustainable?
Yes. As an economist, I am convinced it can be.

So you are happy with the way trade is growing.
Yes. But there are pre-conditions to sustainable growth. Two large economies can go on with trade, but they must move into industrial relationships. They must eventually move into the realm of joint ventures and joint production agreements. Today two-way investments are just a trickle.

This will help India and China in many ways. First it will restore the trade deficit from India’s side. No state can carry out growth without inflow of capital. China, luckily, is in the happy position of having accumulated capital. The second benefit is that it will create jobs, for both countries. Third, it will increase exports from the state of Maharashtra and from India. Fourth it will allow for more downstream exploitation of raw material and produce more value added products. Lastly, since I am in Mumbai and look after the western region, it would help Maharashtra earn more revenue for its economic and social programmes. The idea is to work with India to move quickly into value-added products. Once there is value-added, both governments could work out ways to benefit each other . India could export to China or the entire world. Most importantly, for India, it would help rebalance trade.

What are the sectors you are looking at?
India remains a substantial exporter of commodities. China can work, out something to process these commodities and value add them. One sector is textiles. India is good in designing branded products. China has surplus capacities. We can help process the cotton before it is exported – into yarn, cloth, we can dye them, and even make end products – garments or whatever.

That would give us the value added. Then there is iron ore, or copper ore. We can have downstream processing down here in India.There is the pharmaceutical sector. India is probably the second largest pharmaceutical industry in the world (China is the biggest). We could have joint ventures both in India and in China, though we would prefer the latter. Together, our countries represent the largest markets in the world. There is the IT industry. Yes we have some presence of Indian companies in China, but it is not enough. We should work together and climb the global value chain. Right now, China has reached such a stage that low-value manufacturing, low-technology companies, are not viable. We need to move up to high-end areas with excellent companies in India like Reliance, Tatas, TCS, and also work with associations of small and major manufacturers.

Have to begun talking to any state governments?
We have begun discussions with the chief secretaries of Karnataka and Maharashtra, and have received positive responses. We are talking to associations like AIAI [All India Association of Industries) and IMC (Indian Merchants Chambers) among others. A delegation from IMC is already in China to explore ways to work together, to help identify projects.

What about infrastructure?
India will have to catch up with infrastructure. It is the base on which urbanisation and modernisation takes place. Our infrastructure has made our economy that much more vibrant. Infrastructure requires both hardware and software. China has the hardware, and India could have the software. Eventually, both sides will benefit. We are looking at underground railways, metros, technology and finance.

What about agriculture?
As an economist, I see agriculture as an umbrella. Food is just one part of the spectrum. There is forestation, dryland farming, animal husbandry and fishery. In all these areas, China has technologies which India may want to use. Our success can be seen in the way despite having less arable land and less water than India, we have more agricultural production and much more value added. Good land is not enough. You need better crops, land preservation, fertilisers, pesticides And these are areas where the governments may want to work together. We could do this with bilateral exchange programmes and scholarships. We could work on water conservation/management both at the government level and the people level.

How does China view education?
China is proud of its primary education. We are good in this area, better than even the US. We are also good in higher education. India is good in middle education. I think both sides could learn from each other. You have a formidable advantage in English – which has become the business language in your country. We could use some of those strengths,.We could promote on-the-job-training programmes as well. I have recommended to my government the need for educational institutions on both sides to engage in joint study programmes, and that degrees awarded by institutions on both sides are recognised by each other.

What are the things you would like to see improve?
Let me quote something popular: “It takes two to tango”. First, we need more dialogue with India, more high-level and personnel exchanges in order to to promote mutual understanding, to make the bilateral relationship more rewarding. Second, both sides will have to re-adjust their policies where both countries can use their own competitive advantages to mutual benefit. Third, we need to work on the problem of visas. In my consulate, in Mumbai, we issued 78,000 visas last year. We would like both sides to promote such people exchange. Fourth, we need to carry out more project cooperation. That will help reduce any political distrust. We need to overcome the political Himalaya between both countries. I am glad we have had 14 high-level dialogues between both countries already, and the 15th is in the pipeline. It is my hope that both countries will have the political vision to get this done as quickly as is possible.

India has worked with Chinese companies in telecom and power, But both sectors have their own set of problems with such technology tie-ups. Why?
There are several reasons: First, both countries, and their respective companies, are trying to understand each other. They are on a learning curve. Second, there is a historical legacy which both will have to overcome. Third, both have yet to formulate a strategy to make each other a strategic ally; they have yet to understand the full potential of each other. Finally, projects are undertaken by companies who often don’t share the benefits they enjoy with the general public. We need them to be publicised. This is where the media can help.