A Perspective on Premier Wen’s Visit: No Material Change in Sino-Indian Equation

Behind the usual bonhomie exhibited after the issue of joint communiqué by India and China post Prime Minister Wen Jia Bao's visit basic issue that needs to be addressed is what are the major take aways? Were the concerns of the two countries addressed adequately particularly if the objective of the visit as spelt out by the Indian spokesman was to maintain continuity in the relationship and prevent any accident in mutual relations to derail them? Chinese initiative was to keep the relationship going and build up mutual confidence and strive to impart a wide degree of impetus to all bilateral issues that were impacting the relationship between the two countries.

Seen in that broad context, the visit did provide an opportunity to the two sides to air their view points on contentious issues and to that extent provide a better understanding of each other’s sensibilities and sensitivities.

Taken in that context both the bonhomie and body language of the two leaders and the slew of agreements signed do indicate laying down of somewhat stronger foundation and greater understanding between the two nations. The visit can be looked upon from two differing perspectives. Geo strategic and bilateral being one and trade and economic relations are the other.

Unfortunately despite free and frank discussions if the official briefings are to be believed there was little progress on key Indian concerns and Chinese stock response remained of recourse to mutual consultations and ‘give time’ to resolve intricate issues like the boundary dispute. Important issues like that of stapled visas which impinged on Indian sovereignty while being acknowledged, Chinese clearly were in no mood to make any concessions and relegated it for the officials to sort out. Clearly China continued to join issues with India on the future of J&K in Pakistan’s favour and showed little respect for Indian sensitivities. Chinese were clearly not interested in expending any political capital on this account.

Similarly on the issue of terrorism and particularly cross-border terrorism Chinese were very clear that this is a bilateral issue between India and Pakistan and they had no role to play. In fact if reports are to be believed Chinese appear to have told Washington that Pakistan is to China what Israel is to the US. Going by this logic it is arguable that New Delhi’s overall equation vis a vis China will be determined by China's dynamic ties with Pakistan an euphuism for improvement in bilateral Indo – Pak relations to the satisfaction of China. Perception of China reigning in cross-border terrorism or pressurising Pakistan thus appear to be misplaced, India needs to stop expending political capital on this issue.

But the joint communiqué did underline their unequivocal opposition to terrorism in all its forms and manifestations and stressed that there is no justification for any act of terrorism anywhere. Both sides also recognized the need to implement all relevant UN resolutions, in particular UNSC resolution 1267, 1373, 1540 and 1624. It needs to be noted that UNSC resolution 1267 has declared Jamat Ud Dawa, Lashkar-e-Taiba and Jaish-e- Mohammed as terrorist organisations and has stressed the need to bring them to justice. It also includes the name of Hafiz Saeed the leader of Jamat Ud Dawa. However, Premier Wen was careful not to name these terror groups operating from Pakistan against India and elsewhere.

It should be apparent to Indian policymakers that Pakistan is and will continue to be a leverage which China would use against India in its bilateral relations. In fact it would not be out of place to imagine that in some sense the relationship is being utilised by China as a hedge against growing Indo-US relations ship and emerging quadrilateral comprising India, countries in South-East Asia (countries alluded by Chinese commentators included Singapore, Vietnam and Philippines), South Korea and Japan along the Eastern rim of Asia as part of US led Chinese containment policy. The point that is being underscored is that China has sought to put trilateral India – China – Pakistan relationship as a function of larger geostrategic balance of power than at purely bilateral levels.

Even Chinese analysts have opined that China-India relationship would never be independent of third party. However, for the record the two sides ‘reaffirmed their support for the multilateral cooperation mechanisms in Asia and their positive view on each other’s participation in the cross-regional, regional and sub-regional cooperation processes in Asia’

On the Tibet issue India appears to have shown some degree of self confidence and firmness by insisting on not including the normal reiteration of one China policy in the joint communiqué. Possibly, in the backroom bargaining owing to Chinese lack of flexibility on the stapled Visa issue Indian interlocutors appear to have dug in their heels regarding endorsement of one China policy. But that does not mean that India has resiled from its erstwhile adherence to one China principle as the joint communiqué reaffirmed India’s commitment to previous agreements like Declaration of Principles for Relations and Comprehensive Cooperation between India and China in 2003, the Joint Statement of India and China in 2005, the India-China Joint Declaration of 2006 and ‘A Shared Vision for the 21st Century of India and China of 2008’. All these agreements include a reference to India’s endorsement of ‘one China’ policy. Thus, departure if any is more in form rather than in substance.

One of the positives of the visit was that both China and India agreed on cooperating for the first time on the maritime security issues which would enhance bilateral understanding. It was earlier in this year that Minister of State for Defence Mr. Palm Raju had alluded to mutual cooperation for securing sea lanes of communications. Pallam Raju had said that India was happy to assist China to keep vital sea lanes open between the Middle East and Asia in order to guard against piracy or conflict. Further, he had observed that New Delhi understands that China needed to protect its oil interests.

If the Chinese Premier’s visit was a success it was in the economic domain; here too unfortunately large benefits have accrued to the Chinese side. Signing off nearly $ 18 billion worth of economic agreements and the desire of two countries to take the bilateral trade to new high of USD 100 billion by 2015 indicates the pragmatism in remaining economically engaged and China uses that as the basis of building future relationship. The six agreements signed covered the whole range of issues from media and cultural exchanges to green technologies clearly indicate the growing diversity of the relationship.

While the economic engagement is fine what is disturbing are its dynamics. It is important to note that while the bilateral trade is likely to jump to $ 60 billion by the end of year 2010 the trade imbalance is likely to jump to $ 19.2 billion in Chinese favour. Chinese officials have promised to address the problems faced by Indian businessmen in pharmaceuticals, IT and agro products. In case non-tariff barriers are on Indian goods and services are removed or diluted by China target of USD 100billion would be achieved in an earlier time frame.

Second there is little incentive being shown by the Chinese companies to invest in India against Indian investments of $879 million in China the corresponding Chinese investment in India are mere $79 million. Given Chinese excess manufacturing capacities, growing trade imbalance and internal demand tapering off their main concerns are selling Chinese goods and services and undertaking infrastructural contracts in Indian USD 1 trillion potential infrastructural market.

China is becoming lead equipment provider and project manager in India. Given the low costs and apparent price advantage India Inc is busy signing agreements with little recourse to growing trade imbalance and its larger strategic or security implications.

Important agreements signed include $4.63 by Reliance Power for project financing, $1.1 billion for the Sasan Ultra Mega Power Project. In addition China Development Bank signed a $2-billion agreement with the Reliance Communications, $3.63-billion agreement with the Adani Group for supply of power equipment. The other include between Dofang Electric and Abhijeet Projects for supply of power equipment worth $2.5 billion; between the Bank of China and the IDBI Bank for a $1.2-billion facility; between the Industrial and Commercial Bank of China and the ICICI Bank for a $1-billion finance facility; between Shandong and the Tamil Nadu Power Corporation for supply of $800 million worth of equipment; and between China Aluminium and Vedanta for metal imports worth $330 million.

In addition both Huwei and other Chinese telecom companies are planning massive improvement and growth in their operations e.g. Huwei plans to expand its operation from current USD1 billion to USD 2 billion over the next few years corresponding with rolling out of 3G Spectrum. In addition companies like ZWZ Group is aiming to expand its footprints into Indian USD 2 billion Indian bearings market, by establishing a network of long-term channel partners across the country with strong presence in select metro cities.

The importance of highlighting growing Chinese economic inroads is the fact that with growing industrial dependence on China, over time India will become a lucrative Chinese market not for cheap goods but manufacturing and infrastructural sector. This has serious economic implications and will curb India’s strategic flexibility. To quote Singapore’s patriarch Lee Kuwan Yee; given the SE Asian countries trade and manufacturing dependence on China these countries can hardly overlook this aspect in their strategic decision making.

It should be obvious from the visit that China while paying homilies to Indian concerns and alluding to growing Indian role in the region and in forum like G20, is not willing to address any of Indian security concerns if at all it has been able to develop unidimensional economic relationship. It is now India’s call how it wants to shape its relations in the second decade of 21st century. As someone said ball is firmly in India’s court.

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Published Date : December 20, 2010