Context

  • In the middle of India’s standoff with China, Sri Lanka, after much internal wrangling, handed over the Hambantota port, sitting astride the sea lines of communication of the Indian Ocean, to a Chinese consortium.

India-Sri Lanka relations

The changing contours of Bay of Bengal

  • Similarly, in Myanmar, despite many political anxieties about economic over-dependence on Beijing, the government is apparently close to a deal with a Chinese company for the commercial development of the Kyaukpyu island on its Bay of Bengal coast.
  • Once Yangon signs on the dotted line, the Chinese company will start building a deep seaport, special economic zone and an industrial park. The Bay of Bengal will unlikely going to be the same post that.

Comparing Doklam

  • Comparing the two port contracts in Sri Lanka and Myanmar with the intense struggle continuing for land in Bhutan seems inappropriate.
  • While contests over territory are indeed far more serious, as they tend to be confined by the costs of the military conflict and the potential loss of face for the two Asian giants from even a small military setback.
  • In contrast, the port contracts lay the foundation for China’s long-term economic influence in India’s immediate neighbourhood.

The rising influence of China in the sea

  • Chinese companies are promising that the two deep sea ports will integrate Lanka and Myanmar into the global trade and production networks.
  • The 80 per cent plus stake for the Chinese companies in the two contracts and the nature of the long-term lease 99 years for Hambantota and 50 to 75 years for Kyaukpyu are facts that speak for themselves.
  • Both the contracts have been won against popular protests in both countries suggesting how difficult it has become for the ruling elites in our neighbourhood to fend off Chinese demands for a big slice of their economic pie on very favourable terms.
  • China’s political influence, so visibly demonstrated in the negotiations with Colombo and Yangon, is expected to rise with time.

Where is India positioned?

  • India’s army is still busy settling down for a long haul in the Doklam plateau.
  • Indian diplomats in Colombo are working tirelessly to get Colombo to appreciate and address India’s concerns on Hambantota.
  • While some of India’s concerns have been addressed in Colombo, Delhi has not been a part of Myanmar’s discourse on Kyaukpyu.
  • India is building a small port at Sittwe not far from Kyaukpyu and is aware of the island’s significance.
  • Kyaukpyu is all set to become the energy gateway for petroleum imports into western China through a twin oil and gas pipeline system running from the Bay of Bengal.
  • India does not have the bandwidth to compete with China on the Kyaukpyu project worth $10 billion. Nor did other international players provide an alternative to China in Kyaukpyu.

Problems mounting for India

  • China progressing the way it is, can easily turn Kyaukpyu into a commercial hub like Singapore and Hong Kong.
  • India needs to think about what Beijing is devoting its considerable naval and military energies to securing its expanded commercial interests.
  • China’s numerous advances tend to reinforce the popular proposition in Delhi that China is embarked upon the “strategic encirclement” of India.
  • The idea of Strategic encirclement can be misleading.
  • The constriction of India’s strategic space is a second-order consequence resulting from China’s rise.
  • Beijing does not have to purposely contain India. Beijing’s exercise of its growing comprehensive national power, economic and military, will inevitably have that effect.
  • The massive surge in China’s capabilities is what India should be worried about, and not their intentions.

Factors adding to India’s problem

  • China, under Xi Jinping, has brought abundant political will to match the expanded national power resources.
  • India has done well since 1991 and has emerged as one of the largest economies in the world, but the gap with China will remain enduring for the foreseeable future.
  • China’s current GDP is five times larger than that of India and its defence spending is four times as big. Even if India grows faster than China in the coming years, the huge gap with China will remain unbridged.
  • Shallow talk of the world being large enough for China and India masked the prospect that the changing power balance in Beijing’s favour could alter the dynamic on India’s long and disputed frontier with China.
  • India also calmed itself into the belief that it had created sufficiently strong mechanisms to limit conflict on the border.
  • Peace and tranquility on the Sino-Indian border were the consequence of a different set of circumstances, then China was integrating itself with the world. They may not survive the assertive phase in China’s foreign policy.
  • India had taken its regional primacy for granted all these decades. China had never accepted the proposition that the Subcontinent is India’s exclusive sphere of influence.
  • China now has the will and resources to challenge that premise on a routine basis. That leaves India scrambling to restore its economic and strategic centrality in the region.

Gaining Consciousness

  • India is now far more conscious of the existential challenges that the power gap with Beijing generates.
  • This awareness, however, is yet to be matched by a sense of urgency across the government.
  • The longer India takes to act vigorously on its frontier region development, military modernization and regional economic integration, the greater will be its degree of difficulty in coping with China’s rise and future Doklams, Hambantotas, and Kyaukpyus.
  • India can mend its relation with Sri – Lanka and Myanmar to counter China’s rising power.
  • There is a lot of thinking and action needed on India’s part the lessen this power gap between India and China.

India – China

Background

  • India – China relations have undergone dramatic changes over the past five decades, ranging from the 1950‘s with a deep hostility in the 1960‘s and 1970‘s to a rapprochement in the 1980‘s and a readjustment since the demise of Soviet Union.
  • The modern relationship began in 1950 when India was among the first countries to end formal ties with the Republic of China and recognize the PRC as the legitimate government of Mainland China. China and India are the two most populous countries and fastest growing major economies in the world.
  • India and China are playing an increasingly important role in the world economy. A better relationship would boost trade ties, investments and employment in the two countries, and even augment global growth.

India – China Policies

  • With the independence of the Republic of India and the formation of the People’s Republic of China (PRC) in the year 1949, one of the policies for the Indian government was that of maintaining cordial relations with China
  • When China announced that it would be occupying Tibet, India sent a letter of protest proposing negotiations on the Tibet issue.
  • China was even more active in deploying troops on the Aksai Chin border than India.
  • India was so concerned about its relations with China that it did not even attend a conference for the conclusion of a peace treaty with Japan because China was not invited.
  • India even strove to become China’s representative in matters related to world since China had been isolated from many issues
  • In 1954, China and India concluded the Five Principles of Peaceful Coexistence, Panchsheel, under which, India acknowledged Chinese rule in Tibet.
  • It was at this time when former Prime Minister of India, Jawaharlal Nehru promoted the slogan “Hindi-Chini bhai-bhai”
  • In July 1954, Nehru wrote a memo directing a revision in the maps of India to show definite boundaries on all frontiers; however, Chinese maps showed some 120,000 square kilometres of Indian territory as Chinese. On being questioned, Zhou Enlai, the first Premier of People’s Republic of China, responded that there were errors in the maps
  • Top People’s Republic of China leader, Mao Zedong felt humiliated by the reception Dalai Lama obtained in India when he fled there in March 1959.
  • China’s perception of India as a threat to its rule of Tibet became one of the most prominent reasons for the Sino-Indian War
  • In October 1959, India realized that it was not ready for war after a clash between the two armies at Kongka Pass, in which nine Indian policemen were killed; the country assumed responsibility for the border and pulled back patrols from disputed areas
  • Various conflicts and military incidents between India and China flared up throughout the summer of 1962
  • On July 10, 1962, around 350 Chinese troops surrounded.

Commercial relations

  • Trade volume between the two countries in the beginning of the century, year 2000, stood at US$ 3 billion.
  • In 2008, bilateral trade reached US$ 51.8 billion with China replacing the United States as India’s largest “Goods trading partner.”
  • In 2011 bilateral trade reached an all-time high of US$ 73.9 billion.
  • In 2016, India’s top exports to China included diamonds, cotton yarn, iron ore, copper and organic chemicals.
  • In 2016, China exports of electrical machinery and equipment saw an increase of 26.83%to US$ 16.98 billion.
  • India was the largest export destination of Fertilizers exports from China.
  • There are three border trade points between India and China viz. Nathu La Pass (Sikkim), Shipki La Pass (Himachal Pradesh) and Lipulekh Pass (Uttarakhand).

Investments

  • According to data released by China’s Ministry of Commerce, the Chinese investment in India in Jan-Mar 2017 were to the tune of US$ 73 million.
  • Cumulative Investment in India till March 2017 stood at US$ 4.91 billion.
  • According to data released by China’s Ministry of Commerce, the cumulative Indian investment in China till March 2017 reached US$705 million.

Economic Relations

  • India-China economic relations constitute an important element of the strategic and cooperative partnership between the two countries.
  • Several institutional mechanisms have been established for enhancing and strengthening economic cooperation between the two countries.
  • In accordance with the MoU signed during Chinese Premier Wen Jiabao’s visit to India in April 2005, the two sides have since successfully held eight Financial Dialogues in April 2006, December 2007, January 2009, September 2010,November 2011, September 2013, December 2014 and August 2016 respectively.

 

Recent developments

  • Two developments could lead to even greater momentum for Sino-Indian economic integration.
  • Larger companies in both countries are increasingly acquiring third-country companies that already have a presence in China and India.
  • The present standoff between Indian and Chinese troops in Doklam (located at the tri-junction of India, China and Bhutan) has highlighted India’s very special relationship with Bhutan, including military responsibilities.
  • China hopes for better ties with India in 2017 by resolving differences over India’s admission into elite Nuclear Suppliers Group and listing of JeM chief Masood Azhar as terrorist by the UN as the two nations signed off their most engaging year bogged down by the twin issues.
  • The year 2017 has seen a steady development of China-India relations, with the two countries marching towards the goal of building a more closely-knit partnership for development.
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