Xi sees factory China and back office India as global engine

The "world's factory" and the "world's back office" could together drive global economic growth, Chinese President Xi Jinping said as he began a rare visit to India on Wednesday, playing down mistrust that has long kept the Asian giants apart.

India's new prime minister, Narendra Modi, is determined to build closer relations with the world's second-largest economy, whose leader arrived on Modi's 64th birthday armed with pledges to invest billions of dollars in railways, industrial parks and roads.

"As the two engines of the Asian economy, we need to become cooperation partners spearheading growth," Xi wrote in a column in The Hindu newspaper before landing in India, where he received a warm and carefully choreographed welcome.

He said that, together, China's strong manufacturing base and India's software and scientific skills had massive potential both as a production base and for creating a consumer market.

Xi flew with his wife directly to Ahmedabad, the main city in Modi's home state of Gujarat, where the Indian prime minister greeted him with a handshake and a bouquet of lilies.

Modi is keen on Chinese investment to help balance $65 billion in annual trade that is heavily tilted in China's favor. He is also seeking more access for India's IT services and pharmaceuticals to China.

The visit coincides with a slowdown in China's economy, which has prompted Chinese companies to look abroad for growth opportunities.

A $6.8 billion deal to set up two industrial parks for Chinese investment in India was on the cards, a senior Chinese official said in New Delhi, at a separate event where another $3.4 billion worth of agreements was signed between Chinese and Indian firms.

Indian airline IndiGo, the country's largest by market share, said it had sealed a $2.6 billion agreement on the sidelines of the summit with Industrial and Commercial Bank of China (ICBC) to finance more than 30 new aircraft.

Further deals worth tens of billions of dollars were expected to be announced on the three-day visit, dwarfing the $400 million invested by China in India over the past 14 years.

The leaders may also discuss working together on civilian nuclear programs and seek a solution for a long-running travel visa row, Indian officials said.

DRAGON AND ELEPHANT

Modi hopes the leaders of the world's two most populous nations will establish a personal rapport to match the warmth he shares with Japanese Prime Minister Shinzo Abe, who wished him happy returns in a phone call on Wednesday morning.

But beyond the smiles and the commercial embrace, ties between nuclear-armed India and China are marked by competition for energy and regional clout as well as a festering border dispute that led to a brief war 52 years ago.

Days before the two leaders shook hands and smiled in Ahmedabad, friction emerged over an alleged Himalayan border incursion by China and over a pact between India and Vietnam to explore for oil and gas in parts of the South China Sea claimed by Beijing.

In his column, Xi said the "Chinese Dragon" and the "Indian Elephant" both cherished peace and shared one of the most dynamic and promising bilateral relations of the 21st century.

In one sign that India wanted the Xi visit to be a success, New Delhi asked the exiled Tibetan spiritual leader, the Dalai Lama, to reschedule an event in the capital so that it would not clash with the Chinese president's trip there on Friday.

The Dalai Lama, whom Beijing labels a separatist seeking an independent Tibet, has lived in India since fleeing across the Himalayas after a failed uprising against Chinese rule of his homeland in 1959.

Police detained a small group of Tibetan protesters from outside China's embassy in Delhi on Wednesday. Other Tibetans were held in Gujarat.

MODI'S "INTENSIVE" FOREIGN POLICY

In a little more than 100 days since he came to power, Modi has engaged in what his government has described as "an intensive state of global engagement", reaching out to smaller neighbors and clasping Japan's Abe in a bear hug on his first major trip outside South Asia. He is due to visit Washington and New York at the end of the month.

India has taken a tougher stance on Beijing's practice of issuing stapled, rather than printed, visas to Indian citizens from the disputed regions of Arunachal Pradesh and Ladakh. Foreign Minister Sushma Swaraj told her Chinese counterpart she expected China to accept a "one India policy".

"When they raised with us the issue of Tibet and Taiwan, we appreciated their sensitivities. So we also want that they should understand and appreciate our sensitivities regarding Arunachal," she told reporters earlier this month.

India said on Tuesday it would firmly defend its 3,500-km (2,200-mile) border with China after domestic media reported a new face-off on the frontier.

"Given Modi's focus on boosting flagging infrastructure and manufacturing investment, India will increasingly focus its economic diplomacy eastward," said Sasha Riser-Kositsky of the Eurasia group in a research note on Wednesday.

"Yet despite these enormous investment pledges, Modi's pronounced nationalism and continued wariness about China will limit India's warming with Beijing while driving deeper strategic cooperation with Japan."

Modi is not the only regional leader seeking strategic influence, defense partners and economic opportunities.

Earlier this month, Abe visited Bangladesh and Sri Lanka, asserting Tokyo's interest in a region where it has ceded influence to China.

Xi followed this week with trips to the Maldives, the Indian Ocean island nation that New Delhi has long considered its area of influence, and Sri Lanka, where the two sides built on a blossoming relationship by agreeing to launch negotiations for a free trade agreement.

(Additional reporting by Manoj Kuma in NEW DELHI; Writing by John Chalmers andFrank Jack Daniel)