PM's Visit to China

The challenge facing India is the degree to which it should separate economic and security issues. China has huge financial resources and sectoral expertise that could be mobilised for India’s development. The CII has identified 18 sectors in which Chinese companies could invest and 5 areas in which we seek more openings for Indian products in the Chinese market. As against this, it should be noted that we have been discussing the opening of these 5 sectors with China for 10 years without success. We will not get a level playing field in China for our companies because of of the role of the State Owned Enterprises (SOEs). China, besides, has appetite for projects, not investments. Most of the so-called investments announced during President Xi’s visit to Pakistan relate to projects ($38 billion). China uses methods for project implementation (Chinese labour etc) that will not work in India. The SEZ model, that has been successful in China, will not work in India either. The proposed Chinese investments in Industrial Parks in India is unlikely to materialise as expected. The Chinese Law Minister has spoken of studying the legal framework in India, no doubt with the SOEs in mind. The Chinese premier, just before PM’s visit to China has spoken of preferential policies and investment facilitation for its businesses, which suggests that he is looking for special and not competitive conditions.

India has to take a position on the One Belt One Road (OBOR) initiative of China as this will be raised during PM’s visit. In this context it should be noted that China has announced this initiative unilaterally and talked of partnership later. It has already established oil and gas connectivity with Kazakhstan, Turkmenistan and Russia, besides the Eurasian transport corridor linking Shanghai with Lisbon. Even the China-Pakistan Economic Corridor (CPEC) has been discussed between the two countries before the OBOR was unveiled. The OBOR is a cover of what they have been already doing, the principal objective of which is to use their excess capacity in the infrastructure sectors to generate external demand. The argument that if India did not join OBOR it will be isolated has no merit. Pakistan has not allowed SAARC to develop its true potential and resists connectivity between India and Afghanistan and onto Central Asia India does bot need the OBOR for economic cooperation either with Pakistan, Afghanistan or the Gulf. In any case, the One Belt excludes India and the One Road includes Kolkata only.

The 1993, 1996, 2005, 2011 and 2013 border agreements are in the nature of CBMs and not settlement of the border issue. India has accommodated itself to the Chinese strategy of focusing on border management and not border settlement, As a defensive argument, some in India argue that we may not actually be politically and institutionally ready for a border settlement through a compromise as it will entail some territorial give and take, which will require a constitutional amendment. India also abandoned the LAC clarification process, abruptly ended by China, in favour of the Special Representatives (SR) mechanism, which after 18 rounds has not produced any notable result either. The lack of progress on the border issue is the root cause of the deep distrust of China’s intentions, aggravated by Chinese policies in our neighbourhood, especially Pakistan. China will have no interest in settling the border till the Dalai Lama is alive. We should also address the possibility that during PM’s visit or soon thereafter China could create an incident. China is also fomenting Tibetan sub-nationalism as an instrument for use against India on the border issue.

The Chinese economy is in trouble, with slower growth, excess capacity and huge internal debt, with possible consequences for political stability. China seeks openings in the India which at present is the fastest growing economy. We should not get into a psychological situation where we see Chinese investments in India as a favour. Our approach to China should not be that of a “loser”. We should, where it suits our interest, move forward with economic cooperation, but within strict parameters. For example, in the Railways sector we can cooperate but not in signalling and routing equipment. On the whole, our strategy should be not to strengthen the Chinese economy when it is in trouble. We have also to keep in mind that more market openings for China could destroy parts of our industry, as has already happened. Unlike in the case of China, there are no strategic costs in economic cooperation with Japan, US, Korea or Europe. This is not to say that increased economic cooperation with China should not be pursued as an option. Our approach should be calibrated, win-win, with security considerations in mind, and not pushed by commercial lobbies in india and other interests which have been assiduously cultivated by China, an opportunity that is not available to us in China because of its state-controlled system, linguistic barriers and the opaque nature of power in China. The example of the massive US-China and Japan-China economic ties despite security issues does not apply in the India-China case because the disparity of power that exists in the US-China relationship and Japan’s capacity to defend itself and its alliance relationship with the US, the kind of security nets that do not exist in India’s case where the need for China to be cautious is much less than in the other two cases.

We have to decide the extent to which we should separate security issues from economic ones. We should seek a quid pro quo from China for opening our market to them, but this should not be in the economic domain only. It should be also in the political and security domains. It has to be conveyed to China that border incidents, increasingly assertive claims on Arunachal and stridently worded protests work against a stronger economic relationship. In a democracy, economic issues cannot be delinked from the security atmosphere. Till such time as the border issue is settled, China should refrain from pronouncing aggressively on the border issue and avoid incremental nibbling away in areas where perceptions over the LAC differ.

We should press for the LAC clarification process, as already publicly proposed by PM during President Xi’s visit. We should not be advocating “out of the box solutions”, as such suggestions will be used against us. The Chinese will expect India to think out of the box, while they adhere to their long held “principled” position.

PM could state publicly during his visit to China where we want the India-China relationship to go. On the border issue, he may affirm our position in public. He may express concern that LAC clarification/ border settlement discussions are proceeding too slowly. Because the Chinese leadership in India does not hesitate to talk in public in India about the border issue in dilatory terms, unmindful of Indian concerns, it would be appropriate for PM to express Indian impatience at Chinese procrastination. It would also signal that the expansion of ties in general, including economic, are linked in our mind to a constructive and honest Chinese approach to the border issue and not a bullying one. The occasion to do this might be the public speech planned at Shanghai.

The CPEC has to traverse POK. We should convey our serious concern to China on this. In this connection it may be recalled that both Pakistan and China accepted in their 1963 Sino-Pakistan Agreement that the territory was not legally Pakistan’s. This Agreement throughout refers to China’s Sinkiang and “the contiguous areas the defence of which is under the actual control of Pakistan”. Article 6 of the Agreement states that “The two parties have agreed that after the settlement of the Kashmir dispute between Pakistan and India, the sovereign authority concerned will reopen negotiations with the Government of the People's Republic of China on the boundary as described in Article Two of the present agreement, so as to sign a formal boundary treaty to replace the present agreement, provided that in the event of the sovereign authority being Pakistan, the provisions of the present agreement and of the aforesaid protocol shall be maintained in the formal boundary treaty to be signed between the People’s Republic of China and the Islamic Republic of Pakistan”. China would still go ahead with the project but we would have obtained a pressure point on China which we could use in our border negotiations.

The CPEC gives us good ground to distance ourselves from the OBOR initiative which is a geo-strategic one to extend Chinese power in Asia and the Indian Ocean. China’s strategic goal is to push back US power in the western Pacific and in Central and Southwest Asia. Gwadar will allow extension of China’s economic and political and eventually security influence in Afghanistan, Central Asia and the Gulf at the cost of the US. We can reasonably say that we need more information and more studies on how India fits in. We can take the position that we can effectively deal with connectivity issues bilaterally with countries of interest to us, including with China. We can proceed with the Chabahar link to Afghanistan and Central Asia as well as the North-South corridor through Iran to Russia and Central Asia outside the OBOR. In fact these projects predate the OBOR by many years.

India should not proceed with the BCIM corridor as this will expose our inadequately integrated northeast to greater Chinese influence. Allowing this part of India to enter into the Chinese economic orbit will lead to increased Chinese political influence in the region and will aggravate our problems. We should work on northeast connectivity to Myanmar and Thailand and then on to Southeast Asia. We should favour Japan’s involvement in developing our northeast.

So long as China gives stapled visas to Kashmiris and Arunachalis, we should not extend the e-visa facility to the Chinese. There should be a clear bargain on this point. The arguments being given by our side that e-visas are being offered on a non-reciprocal basis and the aim is to encourage Chinese tourism to India misses the point that we have a serious territorial issue with China that we do not have with other countries and that well over 90% of Chinese tourists, as per Chinese statistics, go to developed countries and not developing countries like India which may have great historical and cultural sites to offer. The other argument that there is no clear cut Chinese policy on stapled visas and that this is done “conveniently”, largely in the case of officials and sportspeople etc, seems an artificial plea in China’s favour in order to justify a controversial step.

We had ceased including statements about the Tibetan Autonomous Region (TAR) being part of the PRC because of China’s aggressive statements on Arunachal Pradesh during the tenure of the previous government. In the joint statement issued during Xi’s visit to India we had thanked the government of TAR of the PRC for permitting an alternative route to Mansarovar, thus reversing our position. This has been followed up by China now asserting aggressively its sovereignty over Arunachal Pradesh on the occasion of PMs recent visit to Arunachal Pradesh. Consequently, we should revert to our earlier position and exclude any mention of TAR in the joint statement.

We should during the visit seek a better understanding on China’s plans for Afghanistan during PM’s visit. China is now pursuing a connected Pakistan-Afghanistan policy, which Afghan President Ghani too seems to favour, and this has implications for our security.

We do not have enough scholarship and understanding of China. We should send more students to China and encourage more Chinese language studies in India.

On the positive side, we would no doubt highlight points of convergence during PM’s visit on BRICS issues, the BRICS Development bank, AIIB, the reform of international financial and political institutions, G20 issues, energy and climate change issues.