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Tensions between Chinese and Indian traders escalate

January 3, 2012

Two Indian traders, veteran China hands, were recently hauled up in a Beijing court for non-payment of dues to their local suppliers in Yiwu, a major wholesale supplies city on China’s Eastern sea board. Deepak Raheja and Shyamsunder Agrawal, were taken to court by locals who had not received payment for goods purchased by the company the duo work for. The two Indians had been held hostage by the local traders for two weeks. Indian nationals, the two businessmen were represented in court by S Balachandran, who works in the cultural department of the Indian Consulate, Shanghai. Things took a turn for the worst, when court officials refused to let Mr.Balachandran, a diabetic eat at regular intervals. The heavy interrogation, coupled with being surrounded by many people, led Mr. Balachandran to faint and be admitted to the local hospital, a cause for which New Delhi launched a formal complaint and summoned Mr. Zhang Yue, Deputy Chief of Chinese Embassy to the Ministry of External Affairs.

The case which isn’t uncommon between Chinese and Indian traders sees many businessmen on both sides of the border often get hurt. The distrust which already exists between the two countries, excels when greed overtakes business deals. With trade between China and India booming, and expected to reach US$100 billion by 2015, unethical traders and businessmen on are out to make a fast buck, by trying to out-do their brothers across the border. Yiwu which is a major city for traders who buy goods to sell for cheap in bulk, sees both sides of the coin – Chinese and Indian businessmen both try to out smart each other, tricks to trade are tried and more often than not one party gets burnt. Over the years, diplomats on both sides of the border have helped traders fight cases to regain their money long after the goods have exchanged hands, money which many times runs into billions of dollars and most often isn’t recovered. Over 100 Indian traders reside in Yiwu, last year Indian merchants bought over US$15 billion worth of goods from the market.

Trade disputes are one of the biggest issues that diplomats on both sides of the border have been addressing for years, and yet, businessmen often naive, often over intelligent either get cheated or cheat thy neighbor. The Indian mission recently released an advisory for traders and businessmen it follows – Fraudulent Trade between India and China and how to avoid it

Dos and donts
The Indian company must run a complete credential check on the prospective Chinese partner before entering into an agreement.  In this regard the Embassy / consulate can provide a list of companies that provide credit certification services in China.

One should also insist on having the registration document and other agreements signed with the Chinese company attested by the Embassy of India or the relevant Consulate. It was urged that the Indian company must not trust any B2B site for list of importers/exporters from China as most of the cases of trade dispute have emerged from such B2B sites.

As far as possible, Indian companies should desist making an advance payment until and unless the quality and quantity of product is ensured. If at all they do so, both the parties should operate through an ‘Escrow account’ or ‘Bank guarantee’ route before making any payment.

The Indian company must not release LC without inspecting the actual product in the consignment, the note said. Also a provision must be incorporated in the agreement that provides releasing LC only after the Indian company is satisfied with the quality of the product in the consignment.

Before investing in China also read – Before investing in China – consider this

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