India China Relations: PM Modi - Xi Jinping Mamallapuram Summit At the invitation of the Prime Minister, the President of the People’s Republic of China Xi Jinping is visiting Chennai, India from October 11-12, 2019 for the 2nd Informal Summit. The two leaders had their first inaugural informal summit in Wuhan, China on 27-28 April 2018.

Aim of the summit: Better understanding:

  • This summit is on the lines of the Wuhan Summit. It is to work out the terms of the peaceful co-existence of the two Asian giants.
  • It is through such informal summits where the two leaderships get to know each other and get a better understanding of their motives and policies.
  • Ahead of Xi’s India visit, China said the Kashmir issue should be resolved between New Delhi and Islamabad. It marked a significant shift in what China has been saying on Kashmir in recent weeks in the aftermath of India's move to revoke Article 370 of the Constitution removing the special status to Kashmir.

Wuhan Summit: The Modi-Xi summit in Wuhan, China was helpful in exchanging views on overarching issues of bilateral and global importance.

Key outcomes of Wuhan Summit:

  • Lines of “strategic communications”: An important outcome is their decision to provide “strategic guidance” to their respective militaries to keep peace along the Sino-Indian border.
  • “2 plus 1” mechanism: It has been currently proposed by China to deal with Nepal. It can possibly be extended to other international engagements too. This would enable Beijing and New Delhi to engage with any third country jointly and thereby eliminate any likely abrasive competition between them.
2+1 trilateral mechanism ·         The two-plus one formulation is different from a trilateral mechanism. Under the Chinese proposal, China and India can jointly conduct a dialogue with a third regional country. ·         Thus the Chinese initiative is not Nepal-specific but flexible and can be applied to any other country in South Asia.
  • Afghanistan cooperation: The India-China plus one cooperation has been extended to Afghanistan. The Afghan diplomats are being given joint training by both India and China, and both sides are further contemplating future projects.
  • Terrorism: It was noted that the two sides also recognize the common threat posed by terrorism and the need to oppose it in all its forms.

Evolution of India- China Relations: The two countries had a poor understanding of each other before the 1940s. India-China relations confined to little trade, pilgrimage, etc. Interactions began after India’s independence (1947) and the Communist revolution in China (1949).

1950 China invades and occupies Tibet, the two countries started sharing a common border. For centuries, Tibet acted as a buffer keeping India and China geographically apart and at peace. Tibetan regarded India where Buddhism originated as their holy land. It was a concern for China.
1 April 1950 India became the first non-socialist bloc country to establish diplomatic relations with the People’s Republic of China. China objected to McMohan Line (the borderline between India & China). It said that the 1914 Shimla Convention signed between the British and the Tibetan representatives was imposed by the Britishers.
29 April 1954 Nehru and Zhou sign the Panchsheel treaty. Hindi-Chini Bhai-Bhai slogan was given. India acknowledged Chinese rule in Tibet Mutual respect for each other's territorial 5 Panchsheel factors: 1.      Integrity and sovereignty; 2.      Mutual non-aggression; 3.      Mutual non-interference; 4.      Equality and mutual benefit; 5.      Peaceful co-existence.
1959 China unleashes crackdown in Tibet on Buddhist protesters, India gives asylum to the Dalai Lama.
1962 China invades India in Ladakh, and across the McMahon Line in the then North-East Frontier Agency. After the conflict, relations are badly hit.
1988 Prime Minister Rajiv Gandhi’s landmark visit begins a new phase in bilateral relations. India-China relations normalized.
1993 The signing of an Agreement on the Maintenance of Peace and Tranquility along the Line of Actual Control on the India-China Border Areas
2003 India and China signed the Declaration on Principles for Relations and Comprehensive Cooperation and also mutually decided to appoint Special Representatives (SRs) to explore the framework of a boundary settlement. Following the establishment of the mechanism of Special Representatives (SR) on the India-China Boundary Question in 2003, 21 rounds of talks have been held.  
2005 The Sino-Indian Agreement on Political Parameters and Guiding Principles for the settlement of the Boundary Question. The two sides agreed to safeguard due interests of their settled populations in the border areas.” The term “settled populations” excluded Tawang.
2012 An Agreement on the Establishment of a Working Mechanism for Consultation and Coordination on India-China Border Affairs (WMCC) was signed during the 15th Round of SR talks in New Delhi on January 2012.
2013   New Delhi and Beijing sign the border defense cooperation agreement which aims at maintaining peace along the Line of Actual Control.
2014 The two sides forge a Closer Developmental Partnership that forms the core of our bilateral relationship. The two sides also signed an MoU to open the Nathu La route for Kailash Mansarovar Yatra.  
2015 The two countries further agreed to “carry out annual visits and exchanges between the two Military Headquarters and neighboring military commands, endeavor to operationalize the hotline between the two Military Headquarters. Many of these suggested measures have not yet been implemented, most notably, the hotline between the two military headquarters.
2016 President Xi visited India in October 2016 to participate in the BRICS Summit in Goa.
2017 At the historic summit in Astana, India and Pakistan officially joined SCO as full-fledged members
August 2017 China and India in an intense militarized standoff in Doklam, a disputed area at the tri-junction of Bhutanese, Chinese, and Indian territories.
2018 PM Modi attended the SCO Summit in Qingdao. Two agreements, relating to the provision of hydrological information of the Brahmaputra river, and on phytosanitary requirements for rice exports, were signed.
2018 The 21st round of talks between Mr. Ajit Doval, National Security Advisor, and Mr. Wang Yi. The seventh edition of the bilateral joint military exercise, Hand-in-Hand, was held on December 2018 in Chengdu.
April 2018 Wuhan Summit
October 2019 Chinese President Xi Jinping visits India for a second informal summit with Prime Minister Narendra Modi.

Commercial and Economic Relations

  • In 2008, China replaced the United States as India’s largest trading partner in goods. In 2018, bilateral trade reached an all-time high of US$ 95.54 billion.
  • India was the 7th largest export destination for Chinese products and the 27th largest exporter to China.
  • India’s major export items included cotton, copper, and diamonds/ natural gems. Major Chinese exports include machinery, telecom and power-related equipment, organic chemicals, and fertilizers.

Strategic relations:

  • India and China have had a strategic partnership—specifically, a strategic and cooperative partnership for peace and prosperity—since 2005.
  • The bilateral focus has largely been on the settlement of the boundary question, followed by the strengthening of economic and trade ties.
  • India recently hosted the 6th India-China Strategic Economic Dialogue that focused on collaboration between two countries on areas of infrastructure, energy, high-tech, resource conservation, pharmaceuticals
  • Both India and China have held the maritime security dialogue which needs to be expanded by incorporating multilateral cooperation with other nations.

Banking and Investment

  • Chinese investment in Indian start-ups has grown over the years. Cumulative Indian investment in China until September 2017 was US$ 851.91 million.
  • More than 100 Chinese companies have established offices/operations in India.
  • India remains the top borrower from the China-led and China-created multilateral development bank AIIB.

Dialogue Mechanisms The India-China Economic and Commercial Relations are shaped through various dialogue mechanism such as

  • Joint Economic Group (JEG) led by the Commerce Ministers of both sides,
  • Strategic Economic Dialogue (SED) led by the Vice-Chairman of NITI Aayog and the Chairman of the National Development and Reform Commission (NDRC) of China,
  • the NITI Aayog - Development Research Center (DRC) Dialogue and the Financial Dialogue

Cultural Relations

  • India-China cultural exchanges date back to many centuries. Ancient Indian monk-scholars such as Kumarajiva, Bodhidharma, and Dharmakshema contributed to the spread of Buddhism in China. Similarly, Chinese pilgrims Fa Xian and Xuan Zang also undertook journeys to India.
  • India constructed a Buddhist temple in Luoyang, Henan Province, inside the White Horse Temple complex which was said to have been built in honor of the Indian monks Kashyapa Matanga and Dharmaratna.
  • India and China have entered into an agreement on the co-production of movies.
  • Yoga is becoming increasingly popular in China. China was one of the co-sponsors to the UN resolution designating June 21 as the International Day of Yoga.

Education Relations

  • India and China signed the Education Exchange Programme (EEP) in 2006.
  • Under this agreement, government scholarships are awarded to 25 students, by both sides, in recognized institutions of higher learning in each other’s country.

Indian Diaspora in China Currently, the strength of the Indian community in China is at around 30,000, a major portion of which comprises of students. A number of Indians and PIOs are also working as professionals with various multinational and Indian companies. Cooperation in international organizations:

  • The institutionalization of Sino-India relations was first of all marked by the establishment of BRIC in 2008 (expanded into BRICS by absorbing South Africa in 2010) that, as an international platform of the emerging market countries.
  • The joining of India in the Shanghai Cooperation Organisation (SCO) marked an even greater step forward.
  • In the New Development Bank (NDB) based in Shanghai, both India and China are active members.
  • In the Asia Infrastructure Investment Bank (AIIB) based in Beijing, India even ranks as the second-largest shareholder and, meanwhile, has benefited most from the project grants approved by the AIIB so far.
  • India, Russia, China are uniting on rising protectionism, WTO reforms.

What is the Significance of the India- China relationship? The balance between West and non-West: In many ways, the rise of China is good for India. It has changed the balance between the West and non-West. The USA focuses a lot on China, on China’s trade practices, on China’s technology practices, on China’s intellectual property rights practices. India and China should not allow themselves to be played off each other. Economic significance: China is India’s largest trading partner. It is imperative for both of them to be allies so as to support each other and continue their bid for the strongest power. China is P5 nation: India acknowledges China’s power as one of the P-5 powerful nations. According to one Indian news report, India agreed not to raise objections to BRI in return for China dropping its hold on adding Azhar to a UN terrorism-based sanctions list. Afghanistan factor: If China and India can cooperate in Afghanistan, they can certainly do so in other parts of the neighborhood. Global cooperation:

  • A rising India has gained more importance in Chinese diplomacy.
  • China mentions ‘multilateralism’ in the post-Cold War period relating to the delinking of the world economy from the perceived clutches of the US-led global West.
  • China’s provocative behavior in the South China Sea and increasing economic and naval presence in the Indo-Pacific are among the reasons the United States’ Pivot Asia Policy.
  • China needs India on its sides to counter it. Recently, China gaining India’s vote for FATF for the post of Vice-Chairman of FATF.

 What are the challenges in the Sino-Indian relationship? Border dispute Aksai Chin & Arunachal Pradesh issue: Both nations claim both regions although China controls the former and India the latter. Deadlock in border talks:

  • Recently, India tried to persuade the Chinese leadership to restart discussions on the clarification of the Line of Actual Control (LAC) through the exchange of maps.
  • LAC clarification would help ease border tensions. Instead, China asked for a comprehensive ‘code of conduct’ for the forces deployed along the border. This mismatch in desired outcomes was the main obstacle in the recent border talks.

Why India is reluctant to consider a ‘code of conduct’? The Chinese proposal is aimed at limiting India’s military and infrastructure modernization and thereby enabling China to preserve its military advantage in Tibet. Dalai Lama successor issue:

  • Tawang’s prominence in the border dispute may take on special importance should the Dalai Lama die, setting up a succession crisis between a Beijing-anointed successor and a legitimate successor outside Tibet.

India’s biggest trade deficit:

  • In 2018, the widening trade deficit reached US $57.86 billion.
  • The issue of trade imbalance and greater market access for Indian pharmaceuticals, IT services, engineering, and agricultural products including rice, sugar, various fruits and vegetables, oil-based meals, meat products as well as cotton yarn and fabric has been taken up by India.

Reasons for the deficit:

  • China imports raw material from India e.g. iron ore and exports the finished goods as it has got core competency in the manufacturing sector and provides huge energy subsidies.
  • Importing finished goods obviously cost more. India also imports power equipment, consumer electronics and telecommunications gear from china. China is dumping manufactured products in India.
  • On the other hand, India does not have a large access to the Chinese market and with Indian rupee declining while renminbi gaining center stage the trade deficit is becoming huge.
  • The Five Year Development Program for Economic and Trade Cooperation between India and China was adopted during the visit of President Xi to India in September 2014 to address this serious issue and facilitate market access for more Indian products in China.

One Belt, One Road initiative: India refused to participate, maintaining opposition to China's investment in the China-Pakistan Economic Corridor, or CPEC, which passes through Pakistan-occupied Kashmir.

China's One Belt One Road initiative, or OBOR, hopes to link more than 65 countries, encompassing up to 40 percent of global GDP. Xi's signature foreign paradigm – linking China to Asia, Europe, and Africa via an ambitious network of ports, roads, rail and other infrastructure projects. Beginning in China's Fujian province, the projected Maritime Silk Route passes through the Malacca Strait to the Indian Ocean, moving along the Red Sea and the Mediterranean, ending in Venice.

Pros and cons of India not Joining OBOR

Benefits Losses
Rejecting the String of Pearls: India has snubbed organizers of China's OBOR for trying to encircle us with ports surveillance posts and naval bases. Mega Infrastructure Project: OBOR is a mega infrastructure project offering benefits like instant connectivity, fast movement, and skilled workers. Economic growth will expand as a result of those countries which align with OBOR. India is not one of them.  
A Question of Sovereignty   The honor of the nation and sovereignty are equally important through boycotting OBOR.   Record Unemployment   India needs far more investment to create more jobs so that young working-class individuals have the ability to be gainfully employed and not drift into antisocial or counterproductive activities.  
Opposing Illegal Corridor Gives India Credibility   It passes through Pakistan-occupied Kashmir (PoK) on its way to Xinjiang in northwest China. PoK is not only illegally occupied by Pakistan; its people live under a virtual dictatorship. India has the benefit of credibility in opposing OBOR.   Industrial Production Loses Out   India cannot catch up with China unless it benefits from opportunities like OBOR.
War on Terror   China is selling OBOR as a $500 billion global project (with an initial corpus of $124 billion) that will transform the economies of the countries in Asia, Europe, and Africa. The growing threat of terrorism from ISIS in Balochistan and PoK will be exacerbated by OBOR.   Losing Out on Optimized Linkages   The notion of linking the Silk Road Economic Belt and oceanic Maritime Silk Road to optimize connections between Europe, Asia, Oceania, and East Africa bridge the infrastructure gap and accelerate economic growth through the Asia Pacific and Eastern Europe is visionary.   India will lose out on the infrastructure boost that would have come from joining OBOR.  
No Transparency   There are not clear economic gains for OBOR countries, but losses such as huge debts, have occurred. Attempts to influence that country’s foreign policy, as seen in Sri Lanka. Manufacturing Sector Could Have Benefited   Manufacturing capacity with other countries as a result of OBOR will improve their communication, foster P2P exchanges, G2G contacts, enhanced investment and greater trade and technology.  

What is India’s plan to counter China’s BRI?

  • Project Mausam: It is inspired by India’s historical role as the focal point for trade in the Indian Ocean. In pre-modern times, sailors used seasonal monsoons to swiftly journey across the Indian Ocean.
  • Project Mausam would allow India to reestablish its ties with its ancient trade partners and re-establish an “Indian Ocean world” along the littoral of the Indian Ocean.
  • The “quad” of – the US, India, Japan, and Australia – emerging as a potential maritime alliance that shares concerns about maritime security and terrorism. It is the joint initiative launched by the US, Japan, and Australia to fund infrastructure projects in the Indo-Pacific region that aims to fund projects to ‘build infrastructure, address development challenges, increase connectivity and promote economic growth’.
  • India’s engagement with Japan in South Asia as well as via the Asia-Africa Growth Corridor (AAGC) is also the preferred model.
  • Extension of Government of India (GoI) Lines of Credit (LOCs) on concessional terms have been extended to 63 countries of Asia, Africa, Latin America, Caribbean, Oceania and Commonwealth of India.

Domination of the Indian Ocean: Four specific corridors that constitute major components of the BRI and run through India’s South Asian neighborhood: the CPEC, the BCIM Economic Corridor, the Trans-Himalayan Economic Corridor, and the MSR.

  • These four corridors and the infrastructure projects associated with them have a direct bearing on India’s strategic interests.
  • They run close to India’s continental and maritime borders and are affecting its security interests and strategic environment.
  • India is not opposed to infrastructure development in the region, but it is concerned about the strategic implications of certain Chinese-led initiatives.
  • One notable example is the strategically located port of Hambantota, which the Sri Lankan government was forced to lease to China for ninety-nine years in 2017. The port was built using Chinese loans but, due to the high-interest rates, Sri Lanka was unable to repay and incurred a burgeoning debt burden.

South China Sea (SCS) issue and India: India has been expanding its influence by implementing its Look East Policy (LEP). This has not been taken well by China.

  • China opposes India’s oil exploration in the SCS (which was undertaken at Vietnam’s request) by calling the area of exploration a ‘disputed’ area and asserting ‘Chinese sovereignty’ over the SCS in the ‘historical’ context.
  • The SCS is located in a region of great strategic interest for India. Geographically, it connects the Indian Ocean and the East China Sea via the Malacca Straits, which is one of the busiest sea lanes in the world.
  • With half of its maritime trade passing through the Malacca Straits, any instability in the SCS would adversely affect the shipping lanes and India’s economy.
  • In addition, the Association of Southeast Asian Nations (ASEAN) constitutes one of India’s largest trade partners.
  • The potential energy deposits in the SCS have thus drawn New Delhi’s attention.
  • The United Nations Convention on the Law of the Sea (UNCLOS) ruling: On the South China Sea Arbitration ruling in 2016, India, which had not taken sides in the dispute, urged all parties to respect and uphold the verdict of the UNCLOS-based tribunal.

India-China Relations - Disputed claims in the south chine sea

China’s Reluctance to Support India’s membership of international bodies:

  • India’s chance of being admitted into the NSG is always slim because of China’s opposition.
  • China wants NSG entry to be norm-based — in other words, whatever rules govern Indian entry should apply to others like Pakistan too.
  • China also does not support India in getting the United Nations Security Council Permanent membership.
  • Most recently, in the case of Masood Azhar, China's initial stance was to block the UN resolution to designate him as a global terrorist.

String of Pearls

  • Beijing has been reaching out to India’s neighbors on the premise of development and trade, allegedly recreating the Silk Route. From Nepal in the southeast to Myanmar, Bangladesh to Sri Lanka in the south and Pakistan in the west, China plans to choke India diplomatically.
  • The ‘string of pearls’ or its ‘reverse’ is foreign policy theories aimed largely at one agenda – influence in the Indian Ocean, the choke point for India and China’s energy supplies.
  • The Malacca Straits, which transports nearly 80% of China’s oil and gas from the Middle East and African producers, has been China’s Achilles’ heel for decades. China wants to secure this route.

India’s China Challenge in Africa:

  • Chinese investments in Africa have been growing for more than a decade.
  • The Indian Ocean region along with the littoral states carry two-thirds of the global oil cargo, one-third of the bulk cargo, and half of all container traffic.
  • In 2014, the China-Africa bilateral trade was around $220 billion. In comparison, India-Africa bilateral trade in March 2016-17 was $52 billion. Indian PM’s recent visit to Rwanda and Uganda was an attempt to bring about new dynamism in the India-Africa relationship.
  • Xi has signed several agreements furthering China’s Belt and Road Initiative (BRI), many components of which have been objected to by India.
  • In response, India is now trying to step up its cooperation with a number of countries including Seychelles and Mauritius.
  • But at the same time, India’s long neglect and the inadequate economic capacity are serious disadvantages in the face of China’s strategic push and the economic muscle.

Asian geopolitics:

  • China’s unique and strategic relationship with countries in South Asia, specifically with India’s neighbors such as Nepal, Myanmar, Sri Lanka, and Pakistan are worrying.
  • Nepal Factor:
    • China has been quite active in providing economic and infrastructural support, arms supplies and intelligence exchange.
    • This is a cause of concern for India, as Nepal has become another gateway for Belt and Road Initiative (BRI) expansion into the Indian neighborhood.
  • Myanmar:
    • China has been consistent in promoting defense cooperation between both countries which includes training of troops and technical exchanges along their shared border, this adds up to India’s anxiety as it also shares its border with Myanmar.
    • Recently, Myanmar has signed agreements with India for assistance in the development of Rakhine state while asking China to scale down its presence in a mega-dam project in the state which has seen armed clashes between government forces and Rohingya insurgents since October 2016.
    • The twin moves were aimed at balancing ties with the country’s two big neighbors.
  • Sri Lanka: China’s transnational infrastructural developments in Sri Lanka, particularly the Hambantota Port, which has been handed over to China on a 99-year lease, has heightened India’s fears as it is a probable sign of creation of a Chinese naval outpost in the neighborhood.
  • Pakistan:
    • Beijing has been facilitating Islamabad to develop its short-range and medium-range ballistic missiles.
    • It is indicative of China’s future support to Pakistan over the contested status of Jammu and Kashmir.
    • China’s support for Pakistan’s position on Kashmir at the United Nations Security Council (UNSC): The UNSC held closed-door informal consultations in response to Pakistan’s letter on the situation in Jammu and Kashmir (J&K), which was supported by China.
    • India’s stand on Article 370 move: There was no implication for either the external boundaries of India or the Line of Actual Control (LAC) with China. India was not raising any additional territorial claims. The Chinese concerns in this regard were therefore misplaced.
  • In the Maldives, after elections in September, the strongman president Abdulla Yameen, known for his pro-China stance got a shock defeat.

Current India’s policy: Soft Balancing and Limited Hard Balancing:

  • China is way ahead of India in military capabilities so all-out ‘hard balancing will not be correct. Also, India cannot join any military block like NATO to counter China as it will hurt India’s sovereignty.
  • India is currently augmenting its nuclear capabilities and placing them on different platforms to create a triad, while also strengthening its conventional capabilities.
  • These capabilities could form a powerful asymmetrical deterrent and defense capability, though they wouldn’t constitute a force equal to China’s in an all-out conflict.

US- India cooperation

  • The recently concluded US.-India “two-plus-two” meeting of foreign and defense ministers and secretaries suggests that the path toward a limited hard-balancing coalition may be opening.
  • Both New Delhi and Washington should work toward instead is pursuing as much cooperation and coordination as possible.
  • They should seek to promote soft balancing and institutional mechanisms to restrain China’s expansionism in the Indo-Pacific.

Way forward The bigger challenge for New Delhi is to maintain a stable relationship with Beijing as China is predicted to be the next superpower.

Assisting weaker states: The Wuhan talks had laid a framework for ‘India-China plus one’. In October 2018, India and China launched a program to train Afghan diplomats as an initial step in a long-term effort towards trilateral cooperation (India-China-Afghanistan).

Coordinating geoeconomic plans: Short of finance capital and industrial resources, India cannot undertake the sole burden of lifting South Asia from underdevelopment and low interdependence. China is one of the key players that need to be engaged more strategically by India.

Maritime cooperation: In recent years, India has recognized China’s ‘Malacca dilemma’, the long and insecure lines of communication that China relies upon for its international trade, and its interest in improving the security of its trade routes in the northern Indian Ocean. China too needs to reassure India about its port projects. Competitive co-existence in a common neighborhood: As a recent study observed, smaller South Asian countries “largely still see India as the dominant power in South Asia, suggesting that Chinese economic activity, while welcome, will not necessarily translate into the major military or strategic gains”.

Infrastructure development: With China reportedly planning to set up a permanent military base in Pakistan for CPEC, India should be prepared for greater Chinese meddling on this matter. India should ramp internal connectivity. India has neglected its inherited trans-border connectivities since Independence. India-Japan cooperation: India should work with countries like Japan and multilateral institutions to develop regional connectivity in the Indian Subcontinent and beyond.