He said China and India are two large countries and Beijing challenges New Delhi to compete with it in equal terms.
"We should not fear competition from China. There is no reason to envy China. If at all, we should try to emulate China," he said addressing the 7th Northeast Business Summit organised by the Ministry of DoNER.
Despite what is reported in some sections of media about growing competition between India and China, trade between India and China is booming and China has become India's largest single trading partner, he said.
Chidambaram's statement came amidst a controversy over the detention and subsequent release of Indian businessmen in Yiwu, China, following a business dispute.
India also had issued an advisory asking its traders to "stay away" from the busy commodity centre.
Indian diplomat S Balachandran was also "manhandled" at a court and fainted as he tried to secure the release of the two traders on December 31, prompting India to lodge a protest.
"China, a competitor, challenges us to compete in equal terms," Chidambaram said.
The Home Minister said if China can build world class road, India should be able to build world class road and if they can build world class railway line, right up to Tibet, India should be able to build world class railway line across the Northeastern states.
"And that is how it will be, it should be," he said.
Chidambaram said today India has cordial relations with three neighbouring countries -- Bangladesh, Myanmar and China -- which have borders in the Northeast.
"Today, we have a Bangladesh, with whom we have the best of relations, a Myanmar with whom we hope to have very good relations in the short term, and China, a competitor, challenges us to compete in equal terms," he said.
He said the opportunities of business from Northeast with these neighbouring countries is enormous and limitless and urged businessmen from all over India, to look at the potential of the Northeast.
"Seize the opportunities of the Northeast, grow businesses and help these states to grow along with the rest of India," he said.