New significance to resumed India-China Strategic and Economic Dialogue

Will the upcoming Modi-Xi summit address at least some of the key geopolitical and economic differences between the two countries?

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In the run up to Indian PM Narendra Modi’s visit to China on 26-27 April for a one-on-one summit with Chinese President Xi Jinping, Future Directions International has released an interesting analysis of the Indo-China relationship as it stands today, and what it has the potential to be after Modi’s visit.

The fifth India-China Strategic and Economic Dialogue, held in Beijing on 14 April, is the first after the Doklam standoff in 2017. It took place just days after the Boao Forum, at which President Xi Jinping (now leader for life) articulated his vision for a myriad of important, but complex issues, such as globalisation and geopolitics, especially the Belt and Road Initiative.

The insular economic policies of US President Donald Trump, and his intransigence on issues pertaining to climate change especially, are creating space for India and China to co-operate.

Analysis

At this year’s dialogue, India was represented by Rajiv Kumar, Vice Chairman Niti (National Institution for Transforming India) Aayog, while China was represented by He Lifeng, the Chairman of the National Development and Reform Commission (NDRC).

On the trade dispute between Beijing and Washington DC India was unequivocal and maintained that it would remain neutral in the dispute. India did suggest to China, however, that it should consider importing soya and sugar from India; China’s annual imports of US agricultural commodities are valued at US$20 billion ($26.4 billion).

On possible Chinese investments in India

The issue came up again at this year’s Dialogue, with the Indian delegation stating that it sees great scope for China to establish special clusters in such sectors as textiles, food processing, electronic componentry and pharmaceuticals. However, several Memoranda of Understanding to facilitate the creation of special Industrial Parks were signed in June 2014 between the governments of Maharashtra, Gujarat and Haryana states and various Chinese agencies. So far, though, all have achieved very little.

On infrastructure

In the area of infrastructure, closer co-operation was sought for increasing the speed of the Chennai-Bangalore railway corridor and the upgrading of the Agra-Jhansi railway stations. India also invited China to invest in Prime Minister Modi’s ‘Housing for All by 2022’ programme.

On the Belt and Road Initiative

Unfortunately, differences persist on this issue. In particular, no progress was made in terms of addressing certain Indian misgivings surrounding the China-Pakistan Economic Corridor (CPEC). China continued to pay little attention to the concern of India that the CPEC passes through disputed territory, an aspect that New Delhi views as a major sovereignty issue.

After the Chinese President’s speech at the Boao Forum, some in India had believed that China may be more sensitive to addressing India’s concerns over the BRI. Commenting on the BRI, President Xi told the Boao Forum that ‘China has no geopolitical calculations, seeks no exclusionary blocs and imposes no business deals on others.’

While China observed that the Bangladesh-China-India-Myanmar (BCIM) Corridor is one of the most important components of the BRI, New Delhi disagreed, saying that the BCIM project predated the idea of the BRI by some time. India also stated that it is currently more focused on projects such as the ASEAN Trilateral highway project linking India, Myanmar and Thailand, as that would give a significant boost to its “Act East” policy.

Interestingly, China did take note of India’s “Act East” Policy and the infrastructural projects and upgrades that are being undertaken in India’s north-eastern region.

On promoting culture

India suggested that an additional group be established to promote culture, thanks to the runaway success of Indian movies in China, the latest success being Hindi Medium, with box office collections nearing 200-crore rupees ($3.9 million). Earlier movies, like Secret Superstar (Rs. 450 crore/$8.7 million) and Bajrangi Bhaijaan (Rs. 300 crore/$5.8 million) had even bigger takings.

Indian film star Aamir Khan, also one of the producers of both Dangal and Secret Superstar, has a large number of fans on Sina Weibo and has also expressed interest in working with Chinese actors. The strained ties between the two governments clearly have not been an obstacle to the success of Hindi movies in China. In fact, the success of Bollywood movies in China receives extensive coverage in the Chinese media.

Challenges for both sides

For any meaningful progress to be made, some important steps need to be taken.

First, China needs to genuinely address Indian concerns on the Belt and Road Initiative. Indian Ambassador to China, Gautam Bambawale, said in an interview with the South China Morning Post stated that: If a project meets those norms, we will be happy to take part in it. One of the norms is the project should not violate the sovereignty and territorial integrity of a country. Unfortunately, there is this thing called CPEC, which is called a flagship project of BRI which violates India’s sovereignty and territory integrity. Therefore, we oppose it.

At the same time, New Delhi should also take a more pragmatic vision towards the Belt and Road Initiative. While New Delhi should not give up its stance on the “sovereignty issue”, synergies should not be ruled out. New Delhi should be open, for instance, to the BCIM Corridor, which seeks to connect Kunming to Kolkata.

While New Delhi is working jointly with Japan on projects like the (Africa-Asia Growth Corridor) and other countries in the Indo-Pacific have spoken in terms of strengthening connectivity projects, New Delhi should look at all options. If Japan and China are willing to work jointly on connectivity projects, (during a meeting between the Foreign Ministers of both countries in Tokyo, this issue was discussed), there is no reason why New Delhi should be totally closed to the BRI. Considering the fact that China is planning to extend the CPEC through to Afghanistan, New Delhi cannot afford to take an excessively rigid attitude towards participating in the project.

Second, in such areas as investments, infrastructure and agriculture, it is important to get the Indian state governments and Chinese provinces on board by rotation. The fourth Strategic Dialogue in October 2016 witnessed the participation of India’s coastal states and presentations by representatives of them on possible investment opportunities. It was decided that greater co-operation between both sides was possible in the field of in manufacturing. The Minutes of the Dialogue note that:

… representatives of different States, viz., Gujarat, Telangana, Karnataka, Andhra Pradesh and CEO, Delhi Mumbai Industrial Corridor Development Corporation Ltd., made presentations in the Working Group …. The State Government representatives gave presentations on the opportunities in the above sector in the coastal regions of India …. Mr Li Xuedong (Deputy Director General NDRC) stressed that the Statement of principles on Manufacturing and Industrial Capacity between NDRC, China and NITI Aayog, India to be signed on 7 October by two Chairmen of the 4th India China SED, would mark the good beginning of manufacturing and industrial capacity co-operation between the two sides, with active participation of Chinese local governments and Indian states ….

In recent years, a number of states and provinces which were not previously pro-active in that sense have now begun to play a greater role in the bilateral relationship. Of late, for instance, China has shown an interest in eastern India (especially West Bengal), due to the BCIM project. On the Chinese side, provinces such as Jiangsu, which have done well in agriculture, and Indian states like Punjab have sought to build linkages with them. Although the India-China Forum of State and Provincial Leaders has failed to elevate the participation of the Indian states and the Chinese provinces in the bilateral relationship to the greatest degree possible, it is something that the Strategic and Economic Dialogue could – and should – work towards achieving.

Third, while China needs to address India’s concerns and cannot afford to be dismissive of India’s apprehensions, New Delhi needs to move beyond a “security mindset”. Building a constructive economic relationship will be tough without some degree of flexibility from both countries. If both sides are not genuinely flexible, the bilateral relationship will not move beyond platitudes and MoUs.

Fourth, basic issues like a more realistic (if not relaxed) visa regime, increased connectivity, and more direct flights between both countries are essential for progress in all spheres.

The current geopolitical and economic scenario is highly interesting – albeit challenging and complex – and India cannot restrict itself to anyone camp. It should try to harness all opportunities, as and when they arise. Most important of all is the need to distinguish between short-term goals and a long-term vision, which needs to be futuristic and holistic. Taking all of the above into account, it remains to be seen whether the Modi-Xi summit will contribute to addressing at least some of the key geopolitical and economic differences between the two countries.

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