The informal summit at Wuhan between Prime Minister Narendra Modi and President Xi Jinping must be seen in the context of changing global equations. China with its trade volumes and economic clout is seeking to challenge American supremacy.
In recent years, China has undergone a period of tepid growth. The launch of its One Belt One Road (OBOR) initiative is an attempt not only to fuel growth but also influence our neighbours. It has invested or committed more than $150 billion in the economies of Bangladesh, Maldives, Myanmar, Pakistan, Nepal and Sri Lanka. This along with the Chinese project in Pakistan’s Gwadar Port showcases the real intent of the Chinese to symbolically encircle India.
On the other hand, President Donald Trump has struck a blow to globalisation with his ‘America First’ policy. On the trade front, Trump seeks to create tariff barriers to reduce China’s over $200 billion trade surplus. Trump wants access to Chinese markets and seeks to persuade NATO allies to share defence costs. His sanctions against those who deal with Russia and pulling out of the Iran nuclear deal will have implications for India and global trade.
China recognises this. The overbearing presence of the Chinese in our neighbourhood and Trump’s non-sentimental approach both to trade and diplomacy are factors that have led to Wuhan. Modi, after almost 4 years of unchartered, unguided and inconsistent policy towards China, has realised that it is time to have a quiet bilateral dialogue.
Neither the optics lapped up by captive channels when Xi was feted on the Sabarmati’s banks, nor the flexing of muscle in response to Chinese expansion at Doklam has paid dividends. Modi realised it was time to distance himself from the Dalai Lama and seek Chinese collaboration to deal with outstanding issues. Our economy requires investments in key sectors.
China has penetrated the Indian economy in telecom, power, engineering and infrastructure and has shown interest in setting up industrial parks. India’s digital payment company Paytm is 40% owned by Chinese. Chinese firms such as Harbin Electric, Dongfang Electronics, Shanghai Electric and Sifang Automation either supply equipment or manage power distribution networks in 18 cities in India. This move forward with the Chinese has come towards the end of Modi’s five-year term. Photo ops and expansive statements clearly are no substitute to hard-nosed diplomacy.
In dealing with China, we must accept a few truths.
First, the Chinese will never give up on their all-weather friend Pakistan. The Chinese will not support our candidature at the UN high table, nor will they agree for us to be a part of the Nuclear Suppliers Group. While they have access to our markets, they are loath to reciprocate and open up their markets including in the IT sector. A recent decision by the Chinese to allow some of our pharmaceutical companies to do business and export generic drugs to China is one way to deal with the imbalance of our bilateral trade that is tilted in favour of China.
We must also recognise that we need to collaborate with and not confront China because between us, we host 2.5 billion people and we are the two largest players in this part of the world. On many issues at international fora, we have to take positions consistent with our developmental needs. As a democracy, we have greater political affinity with the US, and in the context of global power equations we need to collaborate both with the US and Japan. However, our economic interests, given our developmental needs, have greater affinity with China. We must maximise our leverage considering fast-paced developments in global trade.
The Indian and Chinese statements at Wuhan show both a divergence in emphasis and a meeting of minds. While terrorism is an issue addressed elaborately in our statement, the Chinese referred to it only once. They will pay lip service in their response to terrorist activities launched across the border but will not condemn Pakistan. During the Doklam crisis only Japan issued a statement in India’s support; Trump was silent. The other difference is that while the Chinese talked about investments in India, we emphasised the importance of balanced trade.
While India sought mutual trust and ‘predictability and effectiveness in the management of border affairs’ this was missing from the Chinese statement. The Indian statement seeks an environment in which both sides can manage to control tensions and not let them spiral out of control, but the Chinese statement has been more assertive on sovereignty. China has not addressed the issue of its $71.5 billion trade surplus in 2016-17.
Much of foreign policy is dependent on a country’s economic situation. Diplomatic options are enhanced when an economy has the potential to grow at a fast pace. Any country which seeks to add muscle to its foreign policy must have the economic leverage to do so. In this context, it is difficult to match China.
Even in our bilateral relationship with the US, Americans have kept their economic interests paramount. Reduction of H1-B visas and the insistence by Trump on economic justice to Americans makes us suspect the US may not be the steadfast partner we can wholly rely upon. We need a calibrated and institutionalised policy response to China and other countries; not a personalised policy where institutional memory and positions are sidelined.
I hope Modi has realised that and the Wuhan meeting is a step in that direction.