Question

How will the import of steel from India into the Chinese markets lead to integration of markets for steel in the two countries?

Answer 1

Import of steel from India into China will lead to integration of markets of both countries in the following ways:

i) It would create a favourable balance of payments situation for India which China would correct by exporting goods manufactured in its own country.

ii) It would link manufacturing processes of heavy industries in both countries that are dependent on iron and steel.

iii) It would lead to infrastructural developments in both countries to meet up with the demand. This would lead to creation of employment opportunities and generate investment

Answer 2

Integration of markets for steel in the two countries will take place as follows

(a) Due to imports from India, choice in the Chinese market will increase.

(b) Producers of steel in both countries will compete with each other to get increased market share.

(c) Prices of similar varieties of steel in the Indian and Chinese markets will fluctuate and tend to become equal after some time.