Study On The Sino-indian Trade Relations And Trade Adjustment Cost

China and India, as the two largest developing countries, with its rapid economic and trade development, get more and more attention from the world. In recent years, with frequent contact with leaders of China and India, political and economic and trade cooperation has been continuously strengthened in two countries. At present, India has become China's tenth largest trading partner, eighth largest export market, while India's trade dependence on China to be relatively higher, by 2007, China has become India's second largest trading partner, the first largest source of imports and third largest export destination.Based on data of export products classified according to SITC REV.2 3, this paper explores trade relationship between China and India by analyzing changes of export trade structures and measuring countries'trade competitive power, complementarity, similarity index and Technology Sophistication of export trade. Empirical results showed that export trade structures of both countries have been optimizing, and technology contents have been rising. However, technical structures improvement of China's export is much higher than one of India. There exist differences on export trade structures and technology level between China and India. So there is not complete trade competition and but a relatively strong complementarity. Therefore, establishing free trade area between both countries can enlarge mutual trade and investment, bring complemented advantages into full play, accelerate adjustment of industry structure and advance of technology and achieve the"win-win"situation in final.Under the guide of the B index Brühart (1994) proposed & research on the relationship between NTB index and two related countries'industrial trade and the influence bring by it. The author made a survey on China and India's development of industrial structure from the years 1992-2006, showing different characteristics in these periods. On the other hand, the author computer the estimated cost of the two related countries'inter-industry trade adjustment on the premise of establishing a free trade zone. Generally speaking, the proportion of the marginal intra-industry is just 6.07% of the total Sino-Indian trade development which is a very small part. So, we can see the cost of Free Trade Area is very high for both countries in the trade. Therefore ,the author made a detailed analysis on the development of the marginal industrial trade in the related major fields, in which the primary products share the 28% proportion while the 54% shared by the finished goods . Base on the analysis on the proportion of the primary products and finished goods, we can get the conclusion that the trade adjustment cost is relatively small for the primary products in the process of the Free Trade Area. In the finished goods trading, there are 15 fileds which have a proportion of 12.19% have the higher cost in the industry trade adjustment process .while the cost for other fields is lower comparative. After the detail investigation & analysis of the industrial relationship of China and India as a whole , The adjustment cost is smaller if we establish free trade zone with India,which is good for we each other making full use of resources and complementary advantages to promote bilateral industrial restructuring and the technology level. and this is once more evidence for sino-India economic cooeration and investment between China and India. And this case would be a good reference for vast developing countries to develop and promote the trade cooperation each other in future.