For all the pomp and circumstance, Prime Minister Narendra Modi’s recent visit to China will likely only be remembered for his plain-speaking. And it is by no means a small achievement. For years, Indian political leaders have gone to China and said what the Chinese wanted to hear. Modi changed all that when he openly “stressed the need for China to reconsider its approach on some of the issues that hold us back from realizing full potential of our partnership” and “suggested that China should take a strategic and long-term view of our relations.” In his speech at Tsinghua University too, Modi went beyond the rhetorical flourishes of Sino-Indian cooperation and pointed out the need to resolve the border dispute and in the interim, clarify the Line of Actual Control to “ensure that our relationships with other countries do not become a source of concern for each other.” This is a significant shift in Indian traditional defensiveness vis-à-vis China and should put the relationship on a firmer footing.
The Chinese are masters at beguiling their interlocutors. So even as Modi was being given a red-carpet welcome on his high-profile visit to China and Chinese leaders were expressing hopes that Sino-Indian ties can be taken to a new level, China’s state-owned television network CCTV was showing a map of India that did not include Jammu and Kashmir and Arunachal Pradesh — the two territories disputed between the two countries — while reporting on the prime minister’s visit. There is a method to this Chinese madness, of course.
Chinese President Xi Jinping became the first Chinese head of state to visit India in eight years in September 2014 and was warmly welcomed in India by Modi. But the visit was overshadowed by a border crisis when PLA troops entered Indian territory in Chumar, Ladakh. Given this reality, it is vital for Indian leadership to move beyond rhetoric and insist on tackling the really thorny issues that have been bedeviling this relationship for years now, making it difficult for the bilateral relationship to achieve its full potential.
The border issue remains the biggest stumbling block. This military restiveness on the Sino-Indian border does not bode well for regional stability as the military balance along the long and contested border is rapidly altering in Beijing’s favor with the modernization of Chinese military and civilian infrastructure in Xinjiang and Tibet. Chinese military modernization has far outpaced Indian defense modernization, raising concerns about New Delhi’s ability to deter a limited conflict with China.
Trade ties too haven’t grown to an extent where they can ameliorate political tensions. China’s annual trade with India is only a fraction of its trade with Europe, Japan, and the United States. Indian exports to China are primarily dominated by raw materials and iron ore. The challenge confronting New Delhi is thus to match the level of Chinese exports to India and diversify the country’s export basket. Even as bilateral trade between China and India is moving towards the $70 billion mark, India’s trade deficit with China has soared from $1 billion in 2001-02 to over $40 billion. This rising trade deficit in China’s favor is problematic for India, as is the Indian failure to use its core competencies to enter the Chinese market.
Modi’s focus has been on engaging China economically to further India’s developmental needs. Underscoring Indian openness for business, Modi encouraged Chinese business to invest in India as firms signed deals worth more than $22 billion. Many of the contracts were for Chinese banks to finance Indian firms, and also included deals in the telecom, steel, solar energy, and film sectors. Other agreements included an agreement for the China Development Bank to fund a power plant for Adani Power, as well as a steel project between Indian conglomerate Welspun and two Chinese firms. Modi welcomed potential Chinese investment in sectors including housing, renewable energy, high-speed rail, metro, ports, and airports, adding that India is eager to draw on China’s expertise in mass manufacturing.
The PRC is entering markets in South Asia more aggressively through both trade and investment, as well as improving linkages with South Asian states through treaties and bilateral cooperation. Following this up by building a ring network of roads and ports connections in India’s neighborhood and deepening military engagements with states on India’s periphery, China has firmly entrenched itself in New Delhi’s backyard. China’s plans for a maritime silk road connected by cross-border infrastructure will further cement Beijing’s role in the region as regional states have lapped up China’s invitation to join this initiative. India too has been invited but it remains ambivalent about the project and is yet to make up its mind.
There are clearly new opportunities to significantly expand India’s economic cooperation with China for mutual benefit. The Modi government, with its decisive mandate, is better positioned than its predecessors to give a new direction to India’s China policy. Beijing should have used the Indian prime minister’s visit to reach out to India more substantively than before. But once again China has shown that it willing to muddle along when it comes to India, if only to keep India perpetually on the defensive. Modi has broken the mold during his visit and it should be an interesting ride for India-China relations from here onward.