Millennium Post

Modi turns friend, not foe

Narendra Modi’s hobnob with China is not sudden and new. His relation with China was established well before he became prime minister. As chief minister of Gujarat, he first visited China in November 2011. His attempt for special relationship with Japan churned after he visited China. His first visit to Japan was in November 2012. He visited China four times and Japan only once before he became the prime minster. If the number of visits is any indication for leg up in the relation, China is ahead of Japan. In both the cases, Modi’s priority was to attract foreign investment in Gujarat.
With Modi legacy spurred after he became prime minister, the Chinese media Xinhua was upbeat on highlighting  Modi’s message that ‘developing relation with China was one of the important tasks of India’s diplomacy’. The Chinese media was also quick in reporting the reciprocation by Chinese Premier Li Keqiang’s exhilaration that China was willing to enhance mutual trust with India. Both side’s eagerness to renew the relation unleashed a hope for putting a lid on the mistrust created after India – China conflict.   

China seemed quite comfortable working with  Modi. He turned friend rather than a foe. During his visits to China as chief minister, Modi was active in courting Chinese investment. A larger chunk of Chinese investment of $900 million are centred in Gujarat. Once debarred to invest as telecom investors, being suspected for hacking defence information, under UPA, the Chinese are now in the priority list of Modi government for foreign investors. During the recent visit of Indian delegation to China, led by the Vice President Hamid Ansari, Indian Commerce Minister Nirmala Sitharaman signed MOUs with her Chinese counterpart for setting up four industrial parks in India with Chinese investment.

The haste on Chinese side to make thaw in India-China relations sprung with the change of guards in Chinese leadership in 2012. The surge in India-China trade relation led China realise that in the event of gloomy western economy, which decimates export prospects, India stands saviour to Chinese economy. China emerged the biggest trading partner of India since 2011-2012. But the gushing export by China led to a yawning gap of trade deficit. For one US dollar worth of India’s export to China means three US dollar worth of imports from China.

India-China relations took a new dimension with the escalation of Japan’s interests in India beyond commercial relation and India’s reciprocation to it. The visit of Japan’s Imperial couple Emperor Akihito and Empress Michiko in 2013 (30 November-5 December) after five decades reaffirmed the new dimension in the relation between India and Japan. Till now, Japan was reticent in acknowledging India’s growing role in Asia Pacific region. Now, even Japanese Prime Minster Shinzo Abe has a special affinity to Modi. He is one of the three personalities in Abe’s twitting list.
Surged by tense with the growing India-Japan relation, the Chinese Premier Li Kequiang made a sudden and unscheduled visit to New Delhi, a week before Manmohan Singh visited Japan in
May 2013. China Institute of International Studies in China viewed India’s strong relationship with Japan ‘a way to counter-balance China’s growing influence in the Asia Pacific region’.

This churned a new era of triangular relations between India-Japan-China. The relationship deepens after  Modi became prime minister. China was assertive that India should accept China’s importance to India after China became the largest trading partner of India.  The Chinese media Xinhua in an article jumped on Indian media suggestions that Modi must accept China’s superior position in Asia, not only economically, but militarily.

Japanese vying for Modi’s heart began with Japan looking for alternative destinations for investment, after China turned sore. After a spurt in Japanese investment in China since 2006, Japanese investment in China plunged in 2013. It declined by 32.5 per cent in 2013. It is said that much of Japanese Prime Minister Shinzo Abe’s economic reforms in Japan will not bear fruits without a significant contribution by emerging markets in driving the growth of Japanese industry. India is expected to play a predominant role in this perspective. Modi was quick in responding to Japanese eagerness. Even though he is delaying his visit to Japan due to his budget burden and disappointed Modi lover Japanese,  Modi left no stone unturned to reaffirm his fervent interest for Japanese investment. Among the few visits of dignitaries, he took time out to meet Uniqlo Chairman of Japan – a rare case of any Indian prime minster greeting a foreign investor individually during his initial period of ruling.

Politically, India-Japan relation was always smooth. However, certain economic hangovers are looming large on Japanese investors in India. The issues of retrospectives taxes, slapped on Mitsubishi and Honda, and the problem of land acquisitions, which is delaying Delhi Mumbai Industrial Corridor (DMIC) project, are shadowing Japanese interests. During his visit to Japan after budget,  Modi has to reaffirm his policy reforms and the better governance, which he committed in his election manifesto. He has to ensure that adequate attention is given to nail the unpredictable irritations and red tape which caused Japanese dither on investment. 

Chinese investment abroad is much smaller than Japan. In 2013, China’s overseas investment amounted to $90 billion against $135 billion by Japanese. The advantage of Japanese investment is that it is poured by Japanese private sector, along with high technology transfer. In case of China, the investment is by state sectors mainly.
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