Thursday, 25 September 2014

Happy Birthday Narendra Modi. With love - Xi Jinping

When we talk about India and China, the first thing that is highlighted in our minds is that these two giants contribute 2/5th to the total population of the world. Therefore, a Chinese President’s visit to India (after 8 years) bewitched global media.

For China, India is a part of its South Asian policy which itself is a part of its peripheral diplomacy. But for India, the visit embarked the biggest objective of including China in Indian economy to achieve the developmental goals. As per World Bank estimates, India requires $110 billion investment in infrastructure to come at par with Middle Income countries or we can say that India requires $1.6 trillion investment in infrastructure over the next 10 years to prove his metal in the geopolitical arena.

To make the visit a success, Indian Prime Minister Narendra Modi made personal gestures to the Chinese President by breaking various protocols (the same gesture he received from Japanese PM Shinzo Abe during his Japan visit). India knows that Xi Jinping will be in power at least for the next 8 years and he is very powerful in China and almost projects himself as not only the President but also as the ‘Chairman’ of China, so it was important to lure him through such gestures. Unfortunately, the border incursions by the PLA of China breed suspicion and diverted the purpose and objective of the visit and brought security issues back to the forefront. Prime Minister of India raised the border issue with China for the first time ‘publicly’ and categorized it as the foundation of overall Sino-India relationship. In return, Chinese President used an encouraging formulation with regards to the border agreements in the joint statement by calling to settle the boundary disputes at the earliest. It is an unusual formulation with respect to a Chinese President, irrespective of the actual delivery of the promises.

Absurd claims by the Chinese consulate of Mumbai, of Xi Jinping planning to invest $100 billion in India (when its total investments worldwide is $80 billion) and thereby Indian media going berserk over the issue of reduction in the contemplated investments disappointed Indian masses. There is a huge difference between investment and supply contracts, therefore only MoU were signed and China will only realize the objective of investing $20 billion in India over the next five years. Moreover, Chinese investment in India will come in the form of ‘Investor Funds’ (usually 5-10 year) which will create production capacity in India and not in the form of ‘Sovereign Funds’ (usually 30-40 years) which creates infrastructure. But it’s reasonable because sovereign funds take time to negotiate.

Two issues drive China’s foreign policy in Asia Pacific region –
  1.       The very serious economic difficulties being concealed by China which is weakening the Chinese economy week by week.
  2.     Chinese isolation in Western Pacific region. One after the another frictions from his neighbors, and over arching it is the US’s strategy of a rebalance, which is on hold but not gone till now. China has a nightmare that it will solidify when India will join US as an ally in the region.

But China also contemplates that India is a very independent player with a sense of strategic autonomy and India will never be a part of any camp. This is soothing for Chinese ears.

Despite being his most ambitious project, China didn’t talk about the Maritime Silk Road project except at a very low key and not at all in the official address to the media because it knows that India is not willing to buy it, but on the BCIM corridor (Bangladesh-China-India-Myanmar) issue, China has got a positive reply from India. Chinese MSR project is actually a repost to the American rebalance and it is busy to garner support from wherever it can. It got enough support in the Indian Ocean but Western Pacific region didn’t give him enough leverage. Also, India has also come up with MSR’s counter, with a project named MAUSAM/ MAWSIM (in Arabic) – Maritime Routes and Cultural Landscapes. It aims to reconnect and re-establish communication between countries of the Indian Ocean and reinvigorate the traditional sea links and cultural landscapes.

China will upgrade Indian Railways, supply us bullet trains, set up Industrial Parks, especially in Maharashtra and Gujarat. But there is a hurdle in the trade balance too, because Chinese banks are very reticent to lend to Indian Corporate houses (Chinese investments in India currently lies at $415 million) except to blue chip companies like Reliance, and there is no direction from Govt Of China to them to look at the Indian market as a serious investment destination. Also, the sectors in which India has strengths, like pharmaceutical industry, China is not giving market access to India till today. But in a joint statement, China has agreed to look up to the demands of opening up their domestic markets for Indian Pharmaceutical companies, IT industry, Agricultural products.

India seeks Civil Nuclear Cooperation with China but if it is established then India would be left with no grounds to oppose the same cooperation of China-Pakistan, except that India has a NSG waiver and Pakistan doesn’t. Also there is no sufficient need and evidence for India to go for a civil nuclear partnership with China, but if it needs to expand its resource allocation base, India could eye towards South Korea in this matter.

Broadly, the recent bilateral visit of Chinese President was accompanied with mixed signals from China where on one side it used positive signals to enlarge futuristic cooperation of our bilateral relationship, whereas on the other side, the security issues were dominating the negotiation tables too. Since 1988, India has a strategy to carry on the relationship with both China and Pakistan on two parallel tracks – One is the dispute resolution track for which the framework was set up in 2003 and the other is economic cooperation and development.

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