Rekindling Indo-China spark
The Wuhan Summit creates a new template for economic engagement – India can benefit from Chinese economic muscle.
A perpetual border settlement between India and China is untenable. Then, why not use economic engagement to soothe the existing relations. Against the backdrop of the US trade war against China, Prime Minister Modi's reciprocation to Beijing's urge for an amelioration of ties is a timely step for his Act East Policy, which has been shadowed by China's BRI (Belt and Road Initiative). India has declined to be party to BRI.
The informal Wuhan Summit has helped morph the Doklam tension into a softer face of China, multiplied by its yearning for India's support to accentuate its role in the Asia Pacific region. A progressive economic engagement must be the outcome of the summit. Given the fact that both countries are the twin propellers for global growth, the interdependence between India and China is imperative. China needs India for a bigger market and India needs China for enlarging its foreign investment.
China fears a massive loss of its export market after USA's double whammy to its exports – by raising tariffs on imports from China and culling China's exports to the world by re-joining the Trans-Pacific Partnership (TPP). China is sceptical about the success of its BRI, whose main aim is to step-up exports by utilising the idle capacity if the trade war intensifies.
China is an export-based economy. Trade accounts for 37 per cent of its GDP. India is emerging as an important global market, driven by a high GDP growth and a massive middle-class and non-ageing population pool. India can be a potential offset for China's loss of exports in the longer run.
Although the Doklam stand-off dumped India-China relations in a damp squib, the relation witnessed chances for resurrection after the Ninth BRICS Summit in China during September 2017. There was a series of diplomatic exchanges between India and China. On December 11, Chinese Foreign Minister Wang Yi visited India. This was followed by the visits of Yang Jiechi, the State Councilor and Special Representative of China on Boundary Questions. Reciprocating to the Chinese desire for better relations, new Foreign Secretary Vijay Gokhle – who was the mastermind behind putting the lid on the Doklam issue as Ambassador to China – visited Beijing for talks with Yang Jiechi. On April 13, India's National Security Adviser Ajit Dovel visited Shanghai. On April 21, Foreign Minister Sushma Swaraj visited China to take part in a ministerial meeting of the Shanghai Cooperation Organisation (SCO). Around that time, Defence Minister Nirmala Sitharaman also attended the SCO defence ministers' meeting.
These frequent diplomatic exchanges culminated in the ultimate Modi-Xi Jinping informal summit, according to Global Times, a leading national daily in China. Such intense series of high-level diplomatic exchanges have rarely unfolded earlier, signalling the aspirations of both countries in improving the existing relations, the daily said. "Friction can be handled with deft diplomacy. With the return of frequent and attentive diplomatic exchanges, the two sides can quickly work out their issues," it added.
What has driven China to make a somersault on its anti-India protest? Is it a fear from its own people, who are doing conducive business in India or, is it to find a major alternative market after the trade war was intensified by the US – China's biggest export destination?
Modi was not averse to economic engagement with China. He established his relation with China well before he became Prime Minister. As Chief Minister of Gujarat, he had visited China on four occasions.
Unlike his predecessor, Modi tried to woo Chinese investment, despite the prevailing security concerns. Instead of resorting to a trade war to cut the trade deficit, the Modi administration took viable economic steps by enlarging Chinese investment
Chinese companies too benefitted from this improved economic engagement. Starting 2015, Chinese investment in India surged eight times and China became the eighth-biggest foreign investor in India from the 26th position. Six top brand Chinese smartphone makers, viz, Xiaomi, Oppo, OnePlus, Gionee, Vivo, Huawei, have set up their manufacturing operations in India. During 2016, Chinese companies had proposed USD 2.3 billion worth of investment in the country.
As a result, India emerged as the engine for the global presence of Chinese mobile manufacturing companies. India accounts for 60 to 70 per cent of the global sales of these Chinese companies. For Xiaomi's smartphones, India accounts for 67 per cent of its global sales. For Vivo, it is 73 per cent and Oppo 48 per cent; for Gionee it is one-fourth.
India's potency sparked after China lost its vigour as a low-cost global workshop. According to FDI Intelligence, an outfit of Financial Times, UK, India replaced China as a recipient of FDI in greenfield projects in 2015. FDI in greenfield in India increased by 37 per cent in 2015 and surged further by 18 per cent in 2016, bringing in a cumulative growth of over 50 per cent.
The interest for economic engagement between the two countries accelerated further after the successful launching of AIIB (Asia Infrastructure Investment Bank) in 2014. It was China's initiative, which led to the setting up of an alternative Asian mega financial institution on the lines of ADB. China is the biggest stakeholder in AIIB and India is the second biggest. It entrusts more power to India in the disbursement of loans than ADB.
Summing up, Modi's strategy for economic partnership with China, despite the political differences, is a timely attempt to benefit from the raging Chinese economic power.
(The views expressed are strictly personal)