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India- China relations in the current context

Search 19th June, 2020 Spotlight here: http://www.newsonair.com/Main_Audio_Bulletins_Search.aspx   

Topic: General Studies 2:

• India and its neighbourhood

There are two faces to India-China relations –

Face 1: A historical, civilizational dimension that linked our border regions with those on China’s periphery, Xinjiang and Tibet

A land border, among the longest in the world, remains to be mutually agreed upon between the two countries, and spells a protracted contest. The closed-door approach of the Chinese that has cut off all ties between our Himalayan regions and Tibet, ties that were people-centered, has compromised the historical, geo-civilizational dimension of these relations.

The Belt and Road Initiative (BRI) today leverages China’s resources, but there were antecedents; Nepal settling its border with China in the 1960s, China’s sharing of nuclear technology with Pakistan in the 1970s, Bangladesh importing Chinese military hardware in the 1980s, and Chinese backing for the military junta in Myanmar in the 1990s.

Face 2: Trade Relationships: Long-term presence and a significant stake in the Indian market

• Our trade relationship is grossly imbalanced, coupled with justified grievance about China’s reluctance to open sectors like IT and pharmaceuticals to Indian companies and its non-tariff barriers. 
• Our imports from China in 2018-19 amounted to $70.3 billion while our exports to China were $16.7 billion for the same period. Chinese investments into India since 2014 has changed the nature of the transactional trade relationship. The sectors involved include manufacturing, infrastructure, energy, automobiles, consumer goods, and real estate.
• Starting 2016, Chinese capital has entered the technology sector through investments and acquisitions of Indian startups. Chinese tech giants Alibaba (in Paytm, Snapdeal, BigBasket, Zomato) and Tencent (Ola, Flipkart, Byju, Swiggy) are some entrants. Mobile phone company Xiaomi is another big investor

What about Make in India?

• The dependence on Chinese goods is huge in India. Our Make in India revolution has not gathered critical velocity. Relocation of substantive supply chains, given the fact that these are located closer to final demand markets and China is a major such demand market, may not happen soon.
• Bringing investment into manufacturing in India will be really successful only if we upgrade our infrastructure including ports, and improve labour productivity and ease of doing business. Our exit from negotiations to conclude a Regional Comprehensive Economic Partnership, at a time when we want to be a hub and work with countries in the region to relocate supply chains, creates a new set of complexities.

BUT Chinese investment in critical sectors that impinge on national security deserves special scrutiny.

The Way Forward

• PM Modi must take the Opposition political parties into confidence on the nature of the crisis. 
• There is a need for an early political consultation between Delhi and Beijing on exploring ways to end the stand-off. Reports that Chinese troops are sitting on Indian Territory underline the importance of restoring status quo ante; this is unlikely to be achieved at the local level. 
• A renewed effort at resolving the conflict over the boundary dispute must necessarily complement the management of frequent crises on the Indian frontier with China. In recent years, Delhi has often proposed that the two countries must begin the clarification of the Line of Actual Control on an urgent basis. That would pave the way for a political settlement of the boundary dispute. 
• The reason why China manages to bully its way through disputes is not because of its military power, but because of economic interdependencies. India will do itself and the world a service if it were to weaken economic dependence on China.

Conclusion

The stakes involved impact India’s economic well-being but national security concerns cannot be ignored. The choices to be made are not easy, but difficult times such as these should spur the national resolve to make the necessary adjustments and craft rational responses.

Connecting the Dots:

• Economic nationalism
• India must reset the terms of its economic reliance on China. Suggest steps.