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When the dragon comes calling

Srinath Raghavan
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Diplomatic scorecards are notoriously difficult to draw up. The game goes on for too long and the points scored are often incommensurable. Yet the temptation to pronounce an immediate verdict is difficult to resist. Indeed, during the Chinese Premier’s recent visit, the only question that seemed of interest was: who got the better of the other? However, any serious assessment of the visit should focus on questions of continuity and change. After all, India will have to deal with this Chinese leadership for the next decade or so.

Let us start with the big picture. Did Premier Li Keqiang’s decision to visit India on his first official trip abroad indicate anything significant? Many seasoned Indian observers, including former diplomats, have sought to deny this. Premier Li himself insisted that the visit was meant “to demonstrate the high importance the Chinese government attaches to India.” This, in turn, reflects the wider international considerations confronting China.

‘Pivot’ to East Asia

From a strategic standpoint, China faces a worsening situation along its maritime periphery in the East China and South China seas — thanks to its own swaggering style in recent years. The United States has seized the opportunity to announce a “pivot” to East Asia. The Chinese naturally assume that the move is aimed at them. More worrying to Beijing is the new government in Tokyo — under the leadership of Shinzo Abe — that seeks to reinterpret, if not rewrite, Japan’s pacifist Constitution and to invigorate ties with countries like India.

From an economic perspective, too, the situation seems less than sanguine. The U.S. is promoting a Trans-Pacific Partnership (TPP). Signed in 2005 by Brunei, Chile, New Zealand and Singapore, the TPP has drawn the interest of five other countries: Australia, Malaysia, Peru, Vietnam and Japan. The TPP has an ambitious tripartite agenda. It aims at a regular Free Trade Agreement with provisions for protecting intellectual property; at the creation of investor-friendly regulatory frameworks and policies; and at emerging issues, including measures to ensure that state-owned companies “compete fairly” with private companies and do not put the latter at a disadvantage. China regards the TPP as an economic grouping directed at it. Here too, the immediate cause for concern is the position of Japan. Prime Minister Abe has announced his intention to push for Japan’s entry into the TPP and his willingness to take on the strong agriculture lobby that opposes the idea. The Chinese are well aware that a successful TPP may eventually compel China to come to terms with it — just as China had to do with APEC and WTO.

In this context, it not surprising that the Chinese leadership wants to reach out to India. Beijing knows that India is a “swing” power in the present strategic constellation. Its choices could alleviate or exacerbate China’s problems. Premier Li was seeking reassurance as well as reassuring India when he publicly stated that “we are not a threat to each other, nor will we ever contain each other.” China also knows that the TPP will not be welcome to India either. Moreover, the Chinese are keen on expanding economic ties with India, especially by tapping into Indian markets. They also want to begin negotiations with India on a China-India Regional Trading Arrangement (RTA).

All this opens a few windows of opportunity for India. These are unlikely to remain open forever, so it is important that we make the most of them. The government has been quick off the blocks, but more needs to be done.

First, there is the possibility of progress on the boundary negotiations. So far, the Chinese seemed reluctant to follow through on the political parameters agreed upon in 2005. In particular, they were less than happy with the provision which suggested that areas with settled populations would not be up for grabs. When Premier Wen Jiabao visited India in 2010, he openly said that the boundary dispute would take long to settle. The current Chinese leadership appears to have a different stance. Both President Xi Jinping and Premier Li have indicated that they would like to move forward as soon as possible. It is conceivable that they are offering progress on this issue to palliate India. But it would be unwise to prejudge this issue. Besides, any progress, however limited, will be in our interest.

The Chinese have also indicated that they want to strengthen the mechanisms for maintenance of peace and tranquillity along the frontiers. But it is unlikely that they will agree to commence an exercise on clarifying the Line of Actual Control. The Chinese have always insisted that this would be a distraction from the main task of settling the boundary dispute. In any case, given the differences between the two sides’ perceptions of the LAC — especially in the Ladakh sector — such an exercise would be doomed to failure.

Greater market access

Second, there is an opportunity to press for greater market access for Indian firms in China. New Delhi has rightly insisted that further deepening of economic ties will depend on redressing the prevailing imbalance in trade. The Chinese leadership, too, is aware that the current pattern of trade is unsustainable. Premier Li has said that his government will work towards rectifying this situation both by facilitating market access to Indian companies and by encouraging Chinese firms to increase investment in India and expand trade in services.

Even as the government keeps the pressure on this issue, it should get its own act together for attracting investment from China. To be sure, New Delhi has expressed interest in Chinese investment, particularly in infrastructure. But it hasn’t put its money where its mouth is. Take the case of China Light and Power (CLP), which has invested in a 1320 MW power plant in Jhajjar, Haryana. This is India’s largest foreign direct investment in this sector. The plant was commissioned ahead of schedule in 2012. Since then, it has languished for the lack of coal supplies from Coal India Limited. The CLP’s position is fast becoming untenable, but the government has not been responsive. This can scarcely be encouraging to other Chinese firms contemplating investment in India.

Regional issues

Bilateral matters apart, the two sides also seem poised to work together on regional issues like Afghanistan. Interestingly, it was China which suggested earlier this year that they begin a dialogue on Afghanistan. Both countries are concerned about the situation in Afghanistan after the NATO withdrawal in 2014. Instability in Afghanistan is bound to impact on existing and proposed investments of India and China in that country. China has already made a successful bid for the copper mines in Anyak and is keen to acquire stakes in extraction of other natural resources.

In talking to India, China’s interest may simply be to secure support for its increasing presence in Afghanistan. But there seems to be more in play here. Beijing is evidently not confident that Pakistan will be able to secure Chinese interests in Afghanistan after the western forces pull out. This is not to suggest that China’s strategic relationship with Pakistan is weakening. Indeed, Premier Li has had a rather good visit to Pakistan. Yet Pakistan’s ability to deliver in Afghanistan, especially if the security situation markedly worsens, is open to question.

The simple fact is that the main outlet for any resources to flow into China will be through the north of Afghanistan. Pakistan and its proxies have no influence in these parts. Conversely, the groups whose writ runs in these areas have a good relationship with India. At any rate, if Afghanistan descends into something like a civil war, Pakistan cannot be of much help to China. It is in Beijing’s own interest, therefore, to ensure that Pakistan doesn’t stir the pot too vigorously after 2014.

So, the present strategic conjuncture presents interesting possibilities for India. New Delhi should neglect the naysayers and press ahead with engaging China on all fronts.

(The writer is Senior Fellow at Centre for Policy Research, New Delhi)

The new Chinese leadership wants to reach out to India and New Delhi should make the most of the opportunity to move forward on the strategic and economic fronts


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