April 07, 2005

Waiting for Wen: Avoid High Expectations

SAAG Paper 1326, 07.04.2005

The annual edition of The Economist The World in 2005 contained a term that will become extremely popular in political circles in the near future. It referred to a “Chindia” taking shape- an economic and political juxtaposition of the world’s two most populous nations. Even as bilateral trade rocketed by 79% to $14bn at the end of 2004, the sailing may not be so smooth when it comes to resolving the political issues between India and China. But this time it seems that both countries are realising more opportunities in each other than threats, and better relations seem inevitable.

The long standing border dispute is likely to be the major obstacle to giving a decisive positive thrust to Sino-Indian relations when Chinese Premier Wen Jiabao visits his Indian counterpart in Delhi next week. On his ‘most important visit of the calendar’, Mr. Jiabao would definitely like to return to Beijing with concrete treaties or at least a definite roadmap, economic and/or political, in his pocket. Last year at an ASEAN summit in Bangkok, he told Manmohan Singh, “When we shake hands, the whole world will be watching.” He need not be reminded that the world will not stop gazing merely after the handshake- its eyes will be fixed on what goodies exchanged hands. An empty palm would pour cold water over all the hype that is surrounding his visit. Yet he need not be overtly worried either, for the possibility of him returning empty handed to Hu Jintao are next to none.

First, it is of significance that Mr. Jiabao is landing in Bangalore, and not Delhi. He is scheduled to hold meetings with CEOs of Indian software and information technology firms such as Infosys and Wipro, and these will undoubtedly be to offer them incentives to increase their already growing presence in China.

Second, and more importantly, last week China’s envoy to Delhi Sun Yuxi declared that China was in favour of a free trade area between India and itself. If successful, this accord would realise the ‘ASEAN plus three’ image. He also indicated that this is way past the conceptual stage by insisting that he had ‘received support from all relevant departments’. So, the ball is in India’s court.

Third, China’s (and increasingly India’s too) attitude towards the boundary issue would be to shelve it in favour of trade. A few major clarifications were made by the Chinese ambassador in his recent announcement regarding the status of the dispute. He mentioned that Tibet is no longer an ‘issue’ between India and China. This fitted in very well with India’s declaration in 2003, recognising Tibet to be an integral part of the People’s Republic. On Sikkim, he said, “It’s completely solved”. However, he did mention that Arunachal was still a stumbling block, but also indicated that the status of northern Kashmir (which China currently holds) will also be on the table. Curiously, nothing was mentioned about the Tibet-Xinjiang highway, which cuts through Indian territory near Aksai Chin. India must be careful that this issue is not sidestepped, since Aksai Chin is strategically very important.

But this time petty politics will not affect strategic vision and economic rationale. Wen Jiabao and Manmohan Singh would probably agree on a ‘guiding principle’ to solve the border dispute, setting out a firm commitment to a peaceful resolution. The details will be left to Shyam Saran and Tang Jiaxun to sort out in the China-India Joint Work Group.

Put simply China is looking for five things from this visit-

1. India’s support for the recent anti-secession law against Taiwan.
2. Sidelining of the border disputes in Kashmir and Aksai Chin but trying to change the Indian position over Arunachal
3. A FTA with India which would greatly boost its manufacturing exports.
4. Preventing India from going over to the US camp and joining any future Asian NATO.
5. Attracting considerable investment from Indian MNCs.

India, in its turn would hope to try and change the current Chinese position on UN reform and getting some sort of a positive vibe from Beijing about the inclusion of India into the UN Security Council as a veto holding member. It would try to be non-committal on the Taiwan issue, and make sure that it does not lose ground over Arunachal Pradesh and Aksai Chin in the border talks. On the economic front, India would like to sign an accord which would gradually phase out duties and other tariffs over a period of time rather than instantaneously. This is because Chinese manufactured goods are sure to hurt Indian industry. However, if given lead time, they can be prepared for Chinese competition in a few years.

There is a constant buzz in the global media about Premier Wen’s visit being a second new era in Sino-Indian relationships, the first being the 2003 visit to Beijing by Prime Minister Vajpayee. And a historic event it may well turn out to be. However, the issues on the table have a nuance of complexity about them- both countries will attempt to play a very delicate balancing and bargaining game. The dynamics of the India-China story are intrinsically complicating, and this is just the start. But for both countries, one common ground has been found at least. Both are in favour of giving a massive boost to bilateral trade which is predicted to grow by leaps and bounds in the coming years. It will open up new horizons for companies on both sides of the border, and it will change the lives of a considerable number of the 2.4 billion people these two countries encompass.


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