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High expectations before China visit

High expectations before China visit
As Prime Minister Narendra Modi leaves for Beijing this week – an important destination for any Indian leader – expectations will be high about what the visit achieves.

This desire for a breakthrough in Sino-Indian relations will be an important marker in terms how New Delhi acts upon China’s move to establish an alternative international financial structure that goes beyond the International Monetary Fund and the World Bank, besides the Asian Development Bank, where Japan dominates, on the urging of its net security provider, the United States of America.

A key element to an alternative financial structure is the establishment of the Asian International Investment Bank (AIIB) that Beijing proposed in August, 2014. India name was suggested for the President’s post, which was to be housed in Beijing. Both countries had been trying to get their quota (membership payments) increased in the IMF for greater impact on their voting powers. However, both nations have been thwarted in their attempts by the original Bretton Woods group, which laid the foundation for the two institutions.

It would be interesting to see whether the AIIB, a multilateral institution, is discussed in a bilateral forum. During the rule of the United Progressive Alliance (UPA), the Sino-Indian relationship was formulated as one of ‘cooperation and competition.’ America’s attempt to co-opt India into being its regional balancer opposed to China was thus put on the backburner by New Delhi. Such diplomatic strategy optionalisations, one could argue, remains a key strategy.

Whether Modi continues with this delicate dance, or brings in subtle shifts in the UPA position, is going to be keenly watched. To return the favour of hosting the Chinese delegation in Modi’s hometown of Ahmedabad, Xi Jinping will receive the Indian prime minister in his own city of origin called Xian, which is located in north-western China.

This reflects a certain personal chemistry that could be building between the two leaders. This bond will be crucial in breaking the logjam on the boundary discussions being held at the level of special representatives of both governments. A key element of that is China’s stubborn refusal to exchange maps of the contentious territories in India’s north-east and northern tip. These maps reflect the perceptions of the two countries about their borders and also the forward movement that could have taken place in the eighteen rounds of talks.

Modi will also have to make up his mind about the massive Chinese investment in Pakistan. China’s decision to heavily invest in Pakistan’s infrastructure and industrial base need not be viewed by India as a zero sum game. If Beijing invests $46 million and uses the money in a way that is qualitatively different from Washington’s aid, China will gain positive influence over various stakeholders in Pakistan. Indian could, in turn, tap into this sphere of influence for achieving common goals like reducing or actually eliminating terrorist cum non-state actors, who are proxies in Rawalpindi’s books.

India’s trade deficit with China rose to a whopping USD 37.8 billion last year. New Delhi must also address this massive trade imbalance. As a note of cooperation, Beijing could open up some of areas where there are road blocks. Xi had himself noted during his trip to India that there are more private investments being made by Indian businessmen than Chinese in India.

The five-year trade and investment plan signed on at the ministerial level should add zest to the economic relations between the two countries. The Ministry for External Affairs had stated that this plan “(L)ays down a medium term roadmap for promoting balanced and sustainable development of economic and trade relations between China and India, on the principle of equality and mutual benefit. The main objectives of the plan are  (i) reduction of bilateral trade imbalance; (ii) strengthen investment cooperation to realize US$ 20 billion investment from China in 5 years; (iii) a transparent, stable and investor friendly business environment; and (iv) enhanced cooperation between Chambers of Commerce and financial sectors.”

The growing naval reach of the two countries are increasingly being viewed by many regional countries as a sign of severe competition. While there could be some truth to that belief, it also cannot but be pointed out that as the two large economies of Asia they would seek to project power in times of need.

An understanding needs to be reached between Modi and Xi that this projection is not perceived as a threat to the national security interests of both nations. For that, confidence building measures may have to be devised that reduces the hazard of getting into contestations of trivial kinds. China, in any case, will need to define how much of the South China Sea and East China Sea it considers to be its own. The author is a senior journalist
 
Pinaki Bhattacharya

Pinaki Bhattacharya

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