Bilateral relations

Apparently both countries have today replaced previous foreign policy preferences of non-alignment with a more pragmatic and non-ideological approach, or what some observers call “multi-alignment with all” (Mohan 2015b). Both countries endorse the capitalist market and free trade, despite state-managed policies continuing, although India has average tariff levels that are more than twice as high as in China. The unresolved (border) problems remain an issue but, at the same time, there seems to be a pragmatic move away from geo-political anxieties and uncertainties to a more geo-economically based convergence in both bilateral and multilateral

Elephant and panda - India and China 153 foreign policy relations and even development models. Recently though there have been several eruptions of what might escalate into military conflict.

India’s foreign policy gradually changed from a socialist to a capitalist vision, which came with a shift away from conservatism, nationalism and politics to letting economics dominate and finally a change away from being anti-Western leader of the Third World to becoming a foreign policy actor in its own right (Mohan 2006). Likewise, China’s foreign policy also moved away from overtly relying on Maoist ideology to a situation today where the relationship with the United States overshadows all other relations. Nevertheless, bilateral links between India and China have improved and new alliances have been sought through diplomatic and economic rapprochement. This also implies less concern about national sovereignty - the traditional hard core of approaches dealing with ‘balance of power’ - towards a more pragmatic relationship where geo-economic matters, until recently, have played an increasing role.

The trade imbalance in China’s advantage causes some tensions. Chinese non-tariflf barriers are only a small part of this. The problem is India’s uncompetitive manufacturing sector. The deficit problem is more complicated because trade primarily takes place via sea-lanes, while cross-border trade remains underutilized due to perceived security threats, difficult geography and reluctance by Delhi to implement policies and support land-based trading. India has sought to diversify its trade basket, but raw materials and other low-end commodities still make up the bulk of its exports to China. In contrast, manufactured goods, from trinkets to turbines, are exported from China into India. India-China bilateral trade reached $84.44 billion in 2017, a historic milestone. It included an astonishing 40 percent increase in India’s exports to China (Times of India 7 March 2018).

The two countries continue to face impediments in moving from bilateral trade to mutual investment, although, according to a consulting firm, “there are about 150 Indian companies operating in China compared with 40 Chinese companies doing business in India” (Huang 2010, 122). This has changed dramatically since Chinese investment in India increased to $8 billion in 2017 from $1.6 billion in 2014. Alibaba has invested in PayTM, Snapdeal and Zomato. In the next three years, during the Modi regime, investment grew five-fold to $8 billion. This makes the Chinese presence in the Indian market very prominent where four out of the top five brands are Chinese (Gatewayhouse 2020).

In this context, it is interesting to note the increasing economic cooperation and exchange between cities and private companies through the liaison and critical role of consulates.

The regions of the Yangtze River Delta and the Pearl River Delta of China have had significant cooperation with Indian enterprises, a result that can be attributed to the efforts of the Indian consulates in Shanghai and Guangzhou. Investments by Chinese enterprises such as Huawei Corporation and Zhong Xing Telecommunication Equipment Company Limited (ZTE) in Maharashtra and Bangalore were also made possible by the Chinese consulate in Mumbai.

(Ni 2010,148)

Also, the BCIM economic corridor initiative (Bangladesh, China, India and Myanmar), with railways, highways, personnel and information flows, tourism, energy links and people-to-people contacts, has contributed to almost $1 billion in trade between India and China. However, recently, India skipped the Chinese-initiated ‘Belt and Road’ global investment programme, and that had severe repercussions for the BCIM corridor initiative as well.

Nevertheless, bilateral relations continue to be upgraded but cannot acquire a real strategic dimension if the border disputes remain unresolved. The Sino-Indian entities as regional Asian giants appear fated to become economic and possibly political competitors, although at the same time there is a pragmatic wish for increasing cooperation from both government and the private sector. Despite their mutual good wishes about partnership, there are still unsettled issues given the countries’ old enmities, complicated neighbourly relations in South and Southeast Asia, a nuclear détente, and two of the world’s biggest armies with almost 3.5 million troops. According to neorealist thinking (Frankel 2011), China is seen as aiming to dominate Asia, and once it becomes the world’s largest economy, it will be in an advantageous position to twist its neighbours’ arms even further. However, seen through more pragmatic liberal lenses, there are more areas of mutual interest and cooperation, especially in economic affairs, than traditional security approaches can comprehend.

Despite these contradictions, and important interruptions along the border, steady rapprochement between the political elites in Delhi and Beijing gradually matured and stronger bilateral confidence-building measures in 2010 did show political will to enhance cooperation and even regularize military ties. This involved navy and army exercises and a memorandum of understanding signed with a whole variety of military exchanges and measures including regular ‘strategic dialogues’ about the border issues (Godwin 2011, 121). These measures signified a more coherent effort to accomplish and rely on a geo-economic approach, which would allow more space for non-state entities in the conduct of economic and political exchanges between the two countries.

Recently, though, there have been several eruptions of what might escalate into military conflict. For the first time since 1967 there were clashes between unarmed soldiers in Himalayan Galwan Valley in June and later a stand-off along the Line of Actual Control in Ladakh. This has turned public opinion in India virulently anti-China and the Modi government has banned 118 Chinese apps and Huawei and FZ from establishing the 5G internet structure due to security concerns. India’s sanctions against China and closer ties to the US could either result in a serious conflict (Kapur 2020), or, as a recent

Elephant and panda - India and China 155 joint statement underscores, the two countries will continue to uphold the “series of consensus” reached at the leadership level - where a key template is their common conviction that China and India are not competitive rivals or each other’s threats, but cooperation partners and each other’s developmental opportunities. As one key observer notes,

The biggest gain is that a war has been averted and a new phase of constructive engagement of China with a sense of realism becomes possible. This is a moment of truth to rethink the entire foreign policy trajectory the government followed in the recent years.

(Bhadrakumar 2020a)

Furthermore,

Fundamentally, India needs to come to terms with China’s rise and should have the composure and maturity to regard it as an inexorable historical process. The country is caught in a time warp - entrapped between an irascible parliament on one side and an ill-informed nation on the other side. Our zero-sum mindset has done colossal damage. We must jettison it forever and refocus on constructively engaging China so as to take advantage of that country’s meteoric rise for our country’s development, which is the number one priority today.

(Bhadrakumar 2020a)

The only winner of a conflict between the two Asian giants is the United States of America, who will use all means to confront any challenge to US hegemony and unilateral dominance. As one commentator puts it: “India should be extremely wary of getting entangled in the US China tensions” (Bhadrakumar 2020b).

 
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