Emerging trilateral synergy
India, Japan and China are actively forming a new developmental axis for third countries in Asia
Gone are the days when the US sneezes, Japan gets a cold. Today, Japan can say 'No' to the US. Despite USA's grave concern over the Chinese Belt and Road Initiative (BRI), the recent visit of Japanese Prime Minister Shinzo Abe to China shows Japanese willingness to justify Chinese President Xi Jinping's initiative. This will be a turning point in the Sino-Japan bilateral relation, which has been shackled by age-long political hostility. The volte-face of Japan is viewed as a silent negation to Trump's protectionism. To this end, Modi's visit to Japan, on the close heels of Abe's visit to China, showcases a new pattern of trilateral relationship between the three Asian leaders.
Nevertheless, whether the rebuilt relationship between Japan and China will sustain or not is hard to say in the wake of the ongoing dispute on the Senkaku Islands, which erupted like a volcano. The main agenda of the Japan-China summit was to end the development aid to China and jointly work towards development in third countries, especially the countries embraced by BRI.
Modi's visit to Japan, even though it was for the 13th annual India-Japan summit, attaches special significance, given the fact that the summit was after the visit of Abe to China — the formal visit of a Japanese leader after seven years and its aim was to rebuild political trust with China. The Chinese official media, Global Times, ushering the visit, said that 'China-Japan economic ties should lead to political trust'.
India and Japan have several commonalities in their relations with China. Both have a long history of political enmity with the latter. Notwithstanding that, China is the biggest trading partner of India and Japan. In both summits – India and Japan, and, China and Japan – Japan asserted to take forward the relations in a new direction in the economic realm, by proposing joint partnerships for the development of projects in third countries in Asia. With India, it pledged for joint partnership in India's neighbours and with China, it proposed a joint partnership in ASEAN countries.
To synergise Modi's Act Asia policy, India and Japan entered into a Memorandum of Cooperation for the development of LNG-related infrastructures in Sri Lanka, development of housing, education and electrification projects in Myanmar, and enhancing connectivity with Bangladesh by the way of constructing a four-lane road and reconstructing bridges.
Parallel to it, Japan proposed 50 private sector infrastructure projects jointly with China in Asia during the summit. A high-speed railway and a smart city project in Thailand will be the first gainers of the Sino-Japan joint partnership ventures in Asia.
Tension soared and speculations grew about the impact of Japan's volte-face in re-energising relations with China, despite their historical political enmity. Nevertheless, the Indian foreign secretary was quick to rule out any collateral damage to India's relation with Japan. Instead, he was hopeful of a positive impact of the Sino-Japan deal, believing that this would play an important role in the India-Japan strategic partnership to sustain peace and tranquillity in India-Pacific.
He asserted that the core point of Modi's visit to Japan was to establish a close strategic partnership with Japan, to deepen security and defence cooperation and play a prime role in maintaining peace in the Indo-Pacific region. The aim will further be spearheaded by the normalisation of Japan-China relations.
Japan's joint partnership with China for the development of infrastructure and joint cooperation in the private sector in third countries in Asia will curtail the scope for under-cutting competition in Asia and will establish a fair ground for the development of infrastructure. Indonesia was a case in point. Japan lost the high-speed railway project in Indonesia against stiff completion from China, despite providing better technology and after half a decade of hard negotiations with the Indonesian government.
The thaw in Sino-Japan relation will bring ADB (Asian Development Bank) and AIIB (Asian Infrastructure Investment Bank), the two big Asian multilateral financial institutions, closer to each other. Both are to fund the development of infrastructure in Asia. ADB is dominated by Japan and AIIB is dominated by China. India is the second-biggest stakeholder in AIIB. Both ADB and AIIB are competing against each other.
According to ADB, Asia requires USD 8 trillion to meet its vast infrastructure fund by the end of this decade. Of these, India's requirement is the biggest, amounting to USD 1 trillion. The funding requirements are beyond the capacity of the World Bank, IMF and ADB. This led India to join AIIB and become the second-biggest stakeholder in it. But, a proxy war triggered by Japan and China made the borrowing countries face headwinds. The thaw in Sino-Japan relations will likely pitch for a smoother road for India to avail funds from ADB, in addition to the AIIB fund.
As a matter of fact, after the trade war intensified, China dwarfed its aggression against India. It is tending to emerge as a new important export destination for India. For example, China will open a big market for India's soybean meal after Beijing restricted its imports from the US as a retaliatory measure by imposing 25 per cent tariff. China is the biggest importer of soybean in the world and US has the biggest stake in the Chinese soybean import market. The high tariff on US soybean will make space for new entrants in the Chinese market. To this end, India stands a bigger chance of cutting a big pie of the Chinese soybean market, with the tariff expected to slip to zero from 3 per cent. Recently, it dropped a ban on the import of rapeseed meal from India. The ban was imposed in 2011 due to quality concerns.
China planned for a bigger role in infrastructure investment in India. Last year, China's Sany Heavy Industry planned an investment of USD 9.8 billion in India while Pacific Construction, China Fortune Land Development and Dalian Wanda planned Investments of more than USD 5 billion each.
Narendra Modi was never averse to Chinese investment. His yearn for foreign investment did not pitch China as a foe. His desire for Chinese investment surged when he was the chief minister of Gujarat. During his prime ministership, India signed MoUs for setting up four industrial parks with Chinese investment. China too seemed to be comfortable to work with Modi.
Given the new silver line approaches between India and China, which was further spearheaded by US protectionism, Japan's volte-face to China will act as a boon to India.
(The views expressed are strictly personal)