The Curious Case of India and China

October 28, 2013, 9:36 am Comment

Original link is here

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Kyodo News-Pool/Getty ImagesManmohan Singh, left, prime minister of India, holding talks with Xi Jinping, president of China, sitting right opposite Mr. Singh, in Beijing, China, on Wednesday.

During his recent visit to China, Prime Minister Manmohan Singh of India said that when the two Asian giants shake hands, the world takes notice. Although the statement stands true, the real question to ask is whether the media and the security and diplomatic community in the two countries make much of this handshake. It can be argued India-China relations comprise a slew of missed opportunities, and these two have added yet another chapter to this narrative.

In recent years, India and China have engaged in a strategic dialogue, the term “strategic” being used loosely. The fifth edition of the dialogue was hosted by New Delhi in August. The leaders have been able to have uninterrupted annual summit-level talks, interact at annual meetings of the so-called BRICS countries and meet on the sidelines of Group of 20 and other global forums. India and China have had abundant high-level engagement.

Yet the conversation has not evolved. A 20th century grammar continues to define what surely must be the most important 21st century partnership. The only visible sign of deepening engagement remain the trade ties between the two countries that both governments use liberally to demonstrate the imagined “closer relations” and “successful” conduct of diplomacy.

It can be no one’s case that the growth of India-China trade relations has been facilitated by government actions. The relationship has grown despite the unwillingness of the two governments to go beyond contentious issues that are a carryover of the past. Two phases have defined this trade relationship: the Karol Bagh-Guangzhou phase, where the New Delhi shopping district among others in India saw a flood of cheap goods from Chinese manufacturing hubs, and the Mumbai-Shanghai phase, in which bigger enterprises in each country began to engage in trade.

Small business owners and traders in both India and China saw an opportunity and initiated a process of economic engagement that led to the flooding of Indian markets with affordable Chinese products, including mobile phones, firecrackers and even idols of Indian gods and goddesses. The entrepreneurs working at the bottom of the business pyramid crafted the first wave of Sino-Indian economic engagement, often taking huge risks and working under regimes unfavorable to conduct of business.

Increasingly these small traders have had company. Large industrial houses in Mumbai and Shanghai and other business centers have seen value in the relationship. Indian companies have been procuring high-value equipment in power, telecom and manufacturing sectors at competitive prices, and are now even raising commercial loans at favorable rates in China. Chinese businesses are showing an interest to invest in India’s infrastructure sector and are seeking increasing share in the growing consumer markets. The business communities have created this economic relationship based on opportunity and needs.

On the other hand, the governments in New Delhi and Beijing have shown remarkable consistency. Pedantic and unwilling to display leadership in resolving or nullifying the political hurdles, both governments have been guilty of holding back the economic integration of the two Asian giants.

The diplomatic and security establishments have undermined attempts to move the conversation beyond borders, visas and historic suspicions. Now anything and everything in the bilateral relationship is a security discourse. Basin level conversations amongst water experts and river communities are increasingly treated as a ‘security narrative’. China’s interest in the growing ports and roads and highways sector is limited by an imagined ‘security threat’ and India’s development of its northeast, instead of being viewed as an investment avenue for Chinese firms, is perceived to challenge the historic sovereign claims of China.

The Beijing and New Delhi relationship is prisoner to such conversations around security, and in many instances these originate out of Washington, London and Canberra and are not necessarily organic Indian and Chinese debates. The idea of a contest in the ‘Indo-Pacific’ and growing ‘Chinese Hegemony’ are now finding space in bi-lateral conversations. As a result, India and China are nowhere close to integrating land, water, men, material, markets and resources – imperatives in realizing the immense potential of the relationship. Every engagement has an inflexion point and what some in the Indian research community wonder is whether the current summit is that point for the two countries. The question to be asked, therefore, is whether the current visit has injected new life in the path toward sustainable reconciliation.

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Biju Boro/Agence France-Presse — Getty ImagesIndian army personnel at the India-China border at Bumla pass in Arunachal Pradesh, on Oct. 21, 2010.

Some aspects of the India-China relationship must be examined if we seek to address this. The first aspect must be the border. While the imprecise Line of Actual Control has been a source of occasional tensions between India and China, it has to be acknowledged that confrontations along the border have not taken a violent turn. Nonetheless, the frequency of such face-offs and the increasing military capabilities in the backdrop of rising nationalism on both sides amplify the possibility of such incidents spiraling out of control.

In this regard, the Border Defense Cooperation Agreement signed by India and China is a significant step that takes forward initiatives agreed upon by both parties to maintain peace and tranquillity along the border since 1993. Steps under the agreement, like the exchange of information regarding military exercises, the possibility of setting up of hotlines and an agreement to not follow or trail each other’s military patrols, are important, albeit incremental gains.

Naysayers continue to push pessimistic views. One school of thought represented by analysts like Brahma Chellany, argued that China used the Depsang incident in April 2013 to arm-twist India into agreeing to Chinese terms on border management. In the spring this year, Chinese troops had crossed deep into Indian territory and set up camp in Depsang Valley, Ladakh.

On the other hand, those (mostly the business community as of now) who see value in engagement want to move beyond the border issues and make it less significant to propelling economic relations. For them, the border agreement is a way to achieving this. Pessimists, however, abound, and instead of seeing the situation for what it is — full of opportunities, if one chooses to recognize them — they push a “status quo” line. The traction that this group is able to generate in the media and public sphere, which feeds off Sinophobia, completely overwhelms any counterview. Hence, a lasting border solution must be what the countries should seek, and the current arrangement can only be a temporary dressing for the festering wound that will hold the relationship back.

Both sides, sadly, have been petulant on the issue of liberalizing visa policies. The recent episode in which the Chinese Embassy issued stapled visas (signifying a refusal to recognize their state as part of India) for sportspersons from Arunachal Pradesh, and the resultant uproar from the Indian side killed the possibility of opening up the visa regimes. All that was required was some bureaucratic flexibility and magnanimity on China’s part and some creativity on India’s part – linking a liberalized visa regime to agreeing with India’s position on the Arunachal Pradesh issue (for visa purposes), without prejudice to historic territorial claims. Yet again, China maneuvered itself into a position from where retreat would mean a loss of face, and yet again India failed to grab the opportunity when it presented itself.

The trade imbalance of almost $20 billion with China continues to be a prickly issue, and the two missed another chance to address this when the visit failed to create pathways for increased Chinese investments in India. Although Mr. Singh articulated his interest in attracting Chinese investment to India before he embarked on his visit, concrete steps in this direction remain elusive. Chinese investment in setting up industrial parks and other infrastructure projects is one obvious hedge against the trade deficit.

Enabling the establishment of service centers by Chinese power companies in India is certainly a big step forward and a positive emerging from the current talks. This would allay concerns raised by some in the Indian security establishment on the proliferation of Chinese equipment in the power sector. These alarmist concerns related to the possibility that India, were it to purchase such equipment from China, could be stranded with the proverbial white elephants because of a lack of supply of spares and services.

Water made it to the laundry list this time and must be viewed as a significant positive as this must certainly be a first when China has agreed to such a conversation with a lower riparian. The two have agreed to share hydrological data on transborder rivers and exchange views on associated topics of mutual interest. This gives India the window to approach China with regard to the construction of dams on the Brahmaputra. Similarly, the memorandum of understanding on roadways and transportation identifies several areas for cooperation, including sharing knowledge in transportation technology, road construction standards, road safety plans, joint research and sharing experience related to public-private partnership models. This can be seen as laying the foundation for creating infrastructure to connect Asia.

Economics has proved to be a major factor in political reconciliation elsewhere. However, in the case of India and China, economic engagement is hitting a political wall. Only a political thrust can help realize what should otherwise seem inevitable: India and China becoming the world’s largest bilateral trade partnership.

India has to learn from others. The United States is implementing its pivot strategy in Asia in an attempt to create partnerships to balance a rising China, yet Washington has reached the $500 billion mark in its trade with Beijing. Japan, which had the most unfavorable image among Chinese according to a local opinion poll, manages a $300 billion trade engagement. Despite political differences and contests, there is pragmatism at work here.

Today, India requires $1 trillion of infrastructure investment every five years for at least the next two decades. China has the potential to be the largest stakeholder in this effort. Investments by China will also automatically create security hedges favoring India and help offset the trade deficit. In return, India offers China the opportunity to continue its impressive economic growth. Its capacities in steel, cement, power and industry can now be deployed in the transformation of India, and in return such economic ventures will boost China’s gross domestic product by some basis points. We are at that political moment when Asia could be integrated like never before.

Unfortunately, the two pillars of the dawning Asian century are still prisoners to their perceived insecurities and imagined magnificence. They seem condemned to “never miss an opportunity to miss an opportunity,” as one wise man had once remarked.

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