Talking trade and peace with China

SRINATH RAGHAVAN

From India’s standpoint, attracting Chinese investment is imperative for reviving growth. Besides, its deepening ties with Japan, Australia and Vietnam have opened up more room for manoeuvre in Asia

Xi Jinping’s visit was billed as the third by a Chinese President. This may be right in a technical sense; not so from a historical perspective. Mr. Xi is actually the fourth Chinese President to visit India. The first was Chiang Kai-Shek, President of the Republic of China.

Chiang visited India in early 1942 — soon after Japan entered the Second World War. As the Tokyo typhoon swept Southeast Asia, India became vital for China’s survival. Chiang travelled to India seeking to persuade the Indian National Congress to fully support the British war effort. His long meetings with Nehru and with Gandhi did not yield much. And Chiang returned with little more than the spinning wheel that Gandhi had gifted to his wife.

India’s strategic role

Yet the visits by Presidents Chiang and Mr. Xi have more in common than the Gandhian spinning wheel. For one thing, they underscore India’s importance in any Asian security architecture. In the 1940s, when the hegemon in Asia — Britain — was knocked off its perch by a rising power, India played a pivotal strategic role in stopping Japan in its tracks. Today the situation is very different. Yet, as China’s swaggering rise rattles its neighbours, India is seen as a key player in ensuring a balanced regional order.

Further, both the visits point to the strategic quadrangle of China, Japan, India and the United States. In 1942, China sought American assistance in enabling India to hold Japan at bay. Now it is India and Japan that are working together against any unilateral Chinese attempt to rewrite the rules of the game in Asia. And the Americans are keenly backing their moves.

These wider considerations clearly underpin Mr. Xi’s desire to woo India. At any rate, his visit may turn out to be rather more successful than the maiden foray by Chiang. From China’s standpoint, India now appears an attractive destination for investment. Prime Minister Modi has given unprecedented political salience to infrastructure and industry. So, the Chinese are well placed to play to their strengths. From India’s standpoint, attracting Chinese investment is imperative for reviving growth. Besides, its deepening ties with Japan, Australia and Vietnam have opened up more room for manoeuvre in Asia.

In commerce, testing the waters

Yet, for a range of reasons, it may be prudent to temper expectations. First, China is not rushing to open its coffers to India. Prior to the visit, Chinese officials had claimed that Mr. Xi would commit to invest at least $100 billion. But the five-year plan inked by the two sides envisages $20 billion of Chinese investment. Clearly, Beijing is waiting to see if New Delhi can walk the talk. This is not surprising. Outside of Gujarat, China’s experience with big ticket investments has not been encouraging. This is precisely why the Prime Minister received Mr. Xi in Ahmedabad. Moreover, China — unlike Japan — does not have long experience of working in India.

Nevertheless, China’s inclination to test the waters implies that India’s trade deficit may not be adequately offset by capital inflows. To be sure, the Chinese have also agreed to improve market access for Indian firms. But it remains to be seen whether they will deliver on this. The economic imbalance between India and China, then, may not be set right anytime soon.

Second, Mr. Modi appears lukewarm to Mr. Xi’s ambitious plans for building multiple “silk roads.” Although India has finally agreed to consider the Bangladesh-China-India-Myanmar (BCIM) Corridor, it is unlikely to move with alacrity. India’s own backward linkages from the Northeast leave much to be desired. In such a situation, going ahead with a corridor — connecting the Northeast with these countries — will be seen as working mainly to China’s advantage. Nor does the proposed “maritime silk road” connecting China’s coastline with various hubs in the Indian Ocean have much traction in New Delhi.

Placing these proposals in the ice pail is not good idea, however. India must realise that these routes will come up irrespective of its participation. Countries across the region are drooling at the prospect of big infrastructure and cheap Chinese finance. Sri Lanka and the Maldives have lapped up Mr. Xi’s plans for a “maritime silk road.” India, too, could benefit much from joining these ventures. For instance, the upgradation of our coastal infrastructure would considerably aid our emergence as a serious maritime — not just naval — power. Concerns about Chinese presence in the Indian Ocean can be overdone. In the past three years, New Delhi has put in place practical arrangements for maritime security with Sri Lanka and the Maldives, Seychelles and Mauritius.

Border ‘incursions’ and claims

Finally, there is the disputed boundary which cast a shadow on the summit. The Prime Minister rightly observed that peace and stability along the borders was crucial to realising the enormous economic potential of Sino-Indian relations. But his call for the resumption of talks on clarifying the Line of Actual Control (LAC) was off-beam. This can hardly help prevent “incursions”.

The LAC is supposed to divide the areas that are under Indian and Chinese control since the end of the 1962 war. The line, however, was not mutually agreed upon by the two sides. This was because the war ended with a unilateral ceasefire and the subsequent withdrawal by China. In the Ladakh sector, the question of where exactly Chinese forces stood after the war remains contested. The areas where Chinese “incursions” occur are claimed by both sides as lying on their side of the LAC. In the Arunachal Pradesh sector, the Chinese treat the McMahon Line as the LAC. But they challenge India’s claim that the Line should follow the watershed or the highest line of mountains. They point out that the coordinates of the McMahon Line — as set out in the Simla Conference of 1914 — depart at places from the watershed. These “grey areas” south of the watershed are the places where Chinese “incursions” occur in this sector.

Given these differing notions of the LAC, any exercise in clarification is unlikely to succeed. We can only agree to disagree. The good thing is that we know the areas of disagreement. What’s more, both sides will continue to intrude into these areas. At one level, this is tactical jockeying. Chumar, for instance, is the only place along the LAC in Ladakh which the Chinese cannot directly access. Hence, the spurt in Chinese probing near Chumar. Demchok is one of two “mutually agreed disputed areas,” but that does not stop India from going ahead with its activities. At another level, “incursions” are essential for both sides to keep alive their territorial claims.

Towards settlement

Indeed, the only way to put an end to “incursions” is to settle the boundary dispute. It is worth recalling that under Prime Minister A.B. Vajpayee, India had initially insisted on talks to clarify the LAC. By 2003, however, the government came round to the sensible view that these would not help and that it was essential to kick-start negotiations on the boundary by appointing special representatives. The subsequent agreement of 2005 provides an ideal basis for settlement by mutual concessions. It acknowledges India’s concerns over places like Tawang by tacitly agreeing that settled areas are not up for bargaining. It takes China’s demands into account by suggesting that the watershed principle may not be ironclad.

All along, a settlement has proved elusive owing to political concerns. Governments in both India and China have baulked at the prospect of selling a deal to their domestic audiences. Having insistently laid claims to Arunachal Pradesh, Beijing is concerned about dropping them for good. Indian governments, for their part, have paled at the thought of pushing through a constitutional amendment — one that will require two-thirds majority in both Houses as well as ratification by 50 per cent of the State legislatures. The problem is not just of numbers. Even governments with commanding majorities such as those led by Nehru, Indira Gandhi and Rajiv Gandhi have hesitated to grasp the nettle — owing mainly to opposition from within their own party and concerns about adverse political fall out.

In the run-up to the summit, Mr. Modi and Mr. Xi were projected as powerful and decisive leaders. As such, they should be ideally placed to take a serious crack at resolving the boundary dispute. Mr. Modi is supposedly free of the baggage that weighed on the Congress party. He is certainly capable of making a persuasive public case for a settlement. Instead of going down the rabbit-hole of LAC clarification, the government should move boldly to settle the boundary dispute with China.

(Srinath Raghavan is Senior Fellow, Centre for Policy Research, New Delhi.)