Wednesday, June 11, 2014

my take on the Chinese foreign minister's visit to India...

A lot has been said and written on the Chinese foreign minister's visit to India. Most of the writings focused on the huge economic opportunities waiting to be unleashed and a few talked about the Chinese rigidity as far as the border and territorial issues are concerned.

I wanted to add to this debate making a qualification to the India-China economic engagement. While I am all for trade and economic engagement, lets not be under the illusion that the basic nature of India-China relations is being altered through such interactions. Economics is important but it has a limited utility. Two, lets not get carried away by the Chinese rhetoric. It should be kept in mind that there is a huge gap between the Chinese rhetoric and actions. Here's my analysis, substantiating these arguments.

Chinese Foreign Minister Wang Yi was in Delhi to meet the new Indian Prime Minister Narendra Modi and his foreign policy team in order to gauge the new leadership's mood towards China and the major powers. Sticking to the usual rhetoric, Wang Yi said India and China are "natural" partners while remaining rigid on stapled visas and border issues.

Going by the MEA statement, the Chinese foreign minister and the Indian officials discussed all issues of significance.

For the rest of the article, click here.



It is likely that it must have been all economic, trade and investment from the Chinese side. From the Indian side too, trade is an important area, particularly the trade imbalance which should have been a point of emphasis. Current estimates suggest that the trade imbalance is heavily in favour of China to the tune of $35-45 bn. Wang Yi responded to this issue by saying that China will be happy to import more from India though this is not the first time that Beijing has assured India in this regard.

Wang Yi focused attention on the infrastructure sector which the Chinese are keen on. India has to diversify its export items to China in order to create some leverage. Trade imbalance is bad on its own but more importantly it creates certain dependencies on China which need to be countered. India has to be able to create counter-dependencies and in the absence of which Beijing could hold India to ransom during conflicts. Beijing banning the export of rare material to Japan following a naval incident in September 2010 should serve as an eye opener to India. The fact that India is a huge market for China should give India some leverage too.

Detailing the Chinese interest in investment in India, the minister proposed a larger share of the Indian pie in key sectors such as power, telecom and infrastructure. Infrastructure demand within China having peaked, Beijing is clearly on a look out for new destinations, particularly in Asia. China wants a share in all - expressways and highways, railways and high speed trains. Infrastructure is one area in which the Indian government is likely to make massive investment in the coming years given the huge shortage not just on the border, but inland and maritime as well. Talking on this aspect, the Chinese foreign minister is reported to have told the Indian side China's willingness to share its expertise in high speed trains and bullet trains, an expertise he claimed as their own , as well as help India in upgrading its railways and highways.

If India has to build high speed and bullet trains, why not approach the masters of the technology from whom China copied and developed such as Japan. Japan is already prominent in India's infrastructure projects, including the golden quadrilateral highway linking Delhi, Mumbai, Calcutta and Chennai; Delhi metro and the Western Dedicated Freight Corridor (DFC).

Another area that figured prominently in the discussions is the issue of access to Chinese markets, at least in two critical sectors of IT and pharmaceutical products. Of China's $25 bn IT market, 80% is controlled by the Chinese state owned enterprises, which do not encourage any outsiders' entry. On the other hand, the Chinese are interested in forming joint research working groups wherein they stand to gain in understanding the Indian advantages. Similarly on the pharmaceutical sector, China has been slow in responding to Indian requests. The lengthy process of four to five years that Indian pharmas have faced in entering the Chinese market has had a dampening effect on India gaining access to the Chinese market. Here again, China is interested in setting bilateral working groups through which China may come to learn from the Indian experience and expertise.

Border issues are reported to have figured prominently during the talks. On the question of border incursions, the visiting official noted that such incidents are inevitable when the border is not demarcated. However, it is strange for a Chinese leader to state that issuing stapled visas to people from Arunachal Pradesh was a sign of "goodwill" and "flexibility." His precise response was: "In the eastern sector of China-India border, relatively big area is in dispute. This is an objective fact. However, people living in those areas need to interact with each other. So, as a special arrangement, we have resorted to stapled visa to address the need of the local people to travel. This is a gesture out of goodwill and out of our own flexibility. If we do not do that, we will not be able to address the question concerning the outbound and overseas travel of these people. This practice has been going on for relatively a long period of time, and if it is acceptable to the Indian side, it could be continued in the future because it does not undermine or compromise our respective positions on the boundary question…will also be able to help us address the issues concerning travel of people living in those areas." The Modi Government needs to respond appropriately to such comments before China oversteps dangerously.

It does not appear that China is in any hurry to find a mutually acceptable solution to the border issue. As the Chinese premier said a few years ago, they want the border issue to be left to the future generations to sort it out. Their lack of interest comes from the thinking that the possibly strenuous talks on the border and territorial issues will stall the ongoing and future cooperation in the economic arena. The Chinese have been clear on this aspect, evident from the Chinese delegations that come along with major visits - it is always a big business delegation that accompanies their premier or the president. It simply goes to show that they are clear about and able to dictate what they seek in this bilateral relationship.

Lastly, India needs to get a lot more clarity on what it expects from China. For all the economic engagement that India may have with China, it should not be under the illusion of its impact on the overall India-China relations. Economic and trade relations serve a limited utility of creating prosperity on both sides but that constituency may not be able to deflect a conflict altogether. There are multiple imperatives including nationalism that works in the conduct of inter-state relations. For all the talk of natural partners, China's policy on Arunachal Pradesh and stapled visas has remained problematic. India should understand that there is a huge gap between the Chinese rhetoric and their actions. India has to be realistic about, as Prime Minister said during his campaign days, "Beijing's possible expansionist designs." This is not to suggest that India should not cooperate with China where it might maximise India's own power and gains but be realistic to say a No when it is not to India's advantage.

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