The recent visit of prime minister Manmohan Singh to China covered an entire gamut of issues. Interestingly, economic ties were the centrepiece of the visit, while the contentious issues were deliberately kept aside. The two countries upheld joint efforts in bringing about a new international political, economic and energy order.

Alka Acharya (alka.acharya@gmail.com) is with the Centre for East Asian Studies, School of International Studies, Jawaharlal Nehru University, New Delhi.

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Trade Imbalance

Interestingly, economic ties have been the centrepiece of Manmohan Singh’s visit. An upward revision of annual targets has ceased to generate any surprise and inevitably, a trade target of $60 billion by 2010 was announced. The trade target of $20 billion by 2008 was reached two years ing fallout, but which could acquire disturbing dimensions if current trends were to continue, is the rising trade deficit in favour of China. Experts have pointed to a “near monopoly” of Chinese exports to India in certain “critical sectors”, leading to a virtual “dependency syndrome”, particularly in manufactured goods. The problem is that this dependency is arising, not from a competitive replacement of these exports from the trade baskets of other countries but by displacing Indian manufactures. This coupled with other fears of the Indian industry regarding the opaque pricing mechanism in China and the massive subsidies to capital “through huge nonperforming assets in their banking system” could eventually make the trade deficit unsustainable.

That a serious restructuring of India-China trade relations needs to be undertaken urgently has been clear for some years now. The Joint Declaration signed during Vajpayee’s June 2003 visit had provided for the establishment of a Joint Study Group (JSG) to “examine the potential complementarities between India and China in expanded trade and economic cooperation”. This JSG had submitted its report in March 2005 to their respective governments. It covers a range of recommendations for comprehensive trade and economic cooperation (Report of the India-China Joint Study Group on Comprehensive Trade and Economic Cooperation, External Publicity Division, Ministry of External Affairs, Government of India, New Delhi, 2005). It clearly addresses the imbalance in the current trading pattern and highlights the core competencies and areas of strength of both countries, which should be reflected in the process of restructuring. There are significant recommendations regarding trade in services, mutual investment and joint collaboration on developmental projects.

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The other dimension is the rising economic profile of China and India on the global stage against the backdrop of a shift in the economic centre of gravity to Asia. As Manmohan Singh put it, “by the mid-21st century, Asia may well account for more than 50 per cent of trade, income, saving, investment and financial transactions of the world” (Manmohan Singh, ‘India and China in the 21st Century’, Speech at the Chinese Academy of Social Sciences, Beijing, January 15, 2008). Between them, India and China have a population of 2.5 billion, three-fifths of humanity, whose “creative energies” are being unshackled and only a cooperative relationship would ensure that both could benefit from the Asian economic resurgence. It is against this background that one needs to study the speech delivered by Manmohan Singh to the huge audience attending the China-India Economic, Trade and Investment Cooperation Summit organised by the China Council for the Promotion of International Trade. It outlined a “threepronged strategy” for restructuring trade and in the process made it amply clear that sound, mutually beneficial, “win-win” bilateral economic ties must necessarily be regarded as a strategic objective.

Commerce to the Fore

Consider the road map charted out by the prime minister: One, preparing a “longterm strategic perspective”, which would factor in future challenges and opportunities, two, developing “profitable business models” keeping in mind the “complementarities and competitive strengths and the special needs” of Indian and Chinese markets, and three, embarking on a learning process of “each other’s markets, business customs and managerial styles…the regulatory regimes...”

Taken as a whole, this speech identifies the necessary framework and measures required to address the existing anomalies in what is clearly the most dynamic feature of India-China relations at present – trade and commerce and thereby ensure that they do not end up as serious obstacles to continued growth. In the process, it definitely underscores the significance of the “economic” in tandem with the “political”, as the critical twin dimensions of India’s long-term strategy vis-a-vis China.

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The prime minister exhorted Indian businessmen to think “big” and “out of the box” and stressed that economic cooperation has become the “principal driver” of “our” strategic and cooperative partnership. But it was also apparent that the Indian and Chinese approaches to some of the big issues are poles apart – the question of granting market economy status to China and the Chinese proposal for a free trade area. In fact, on both these issues the Indian business community has for the present taken a negative stance – it was clearly among the reasons, which added to the postponing of the visit, originally scheduled for the last quarter of 2007. It has been argued that granting market economy status (MES) to China at this point, before the US, EU or Japan do so, and before China would automatically get it around 2015-16, would be a more significant gesture. Further, it would have minimal impact on China’s actual trade balance (as the Sino-US trade shows). Further, granting the MES would not take away the right to file anti-dumping cases, if necessary (Anil K Gupta, ‘The Future of India-China Trade’, The Economic Times, New Delhi, January 14, 2008). The grant of MES has possibly more of a symbolic value and what the Indian political and economic elite have to assess is whether at this point it could become a useful quid pro quo. Indian businessmen are also demurring on the proposed free trade agreement as well, which has now been referred for expert feedback, and which has been strongly favoured by the Chinese. The Indian prime minister was probably reflecting a somewhat conservative stance when he spoke of a level-playing field and the need for both governments to put in place an “enabling environment”. But some “thinking out of the box” here could be the proverbial shot in the arm and possibly provide India some useful leverage.

The Contentious Border

After a considerable gap, the contentious border has taken the back seat during a high-level visit – not entirely unsurprisingly or even without reason. It is now fairly evident that the border issue is not only complex, but also very complicated. Each side is fully cognisant of the other’s stand, both have agreed to maintain peace and tranquillity in the border areas pending final resolution and the special representatives are continuing the discussions on their respective frameworks – this appears to be the point at which matters stand. Few, if any, reliable (officially confirmed) details of the discussions are in the public realm. The national sensitivities on both sides regarding this issue and their potential to vitiate relations become apparent every now and then. The developments of 2003 and particularly the Guiding Principles of 2005 had generated some optimism regarding an early settlement. But what had appeared reachable barely a year ago now seems to be receding further into the distance. The issue appears to be stuck on account of Tawang and the apparent shift on the part of the Chinese with regard to the clause concerning settled populations in the Guiding Principles and Political Parameters. The process can only be described as incremental and some comfort can be drawn from the fact that it is highly improbable that force would be used to settle this dispute. This is unlikely to convince certain sections of the strategic and defence community and perceptions here (as also at the general level to some extent) will continue to be shaped by suspicions regarding China’s relations with our neighbours and a perceived inability of India to take a strong line vis-a-vis China.

Normalising Relations

The commitment at the highest level to normalise relations has helped, even as the relationship has weathered a fair share of storms. In retrospect, it has been these high level meetings that have provided the occasion to iron out differences and remove misunderstandings – not to mention the opportunity to develop personal rapport – as was displayed between Wen Jiabao and Manmohan Singh during this visit. There must therefore be a regular exchange at the highest level, which would play its own stabilising role in the process of normalisation. Thus the Indian external affairs minister would visit China in the first half of 2008 and the Chinese foreign minister would come to India in the latter half. The Indian president is expected to visit China in 2009 and the Chinese

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premier has been invited to visit India at a suitable date. The Chinese National People’s Congress president would come to India in 2008.

Reactions to the Visit

There have been two interesting reactions in the aftermath of Manmohan Singh’s visit; one, a more direct sort from the different political parties in India, indicative of the strengthening of the consensus regarding India’s China policy and indeed generally upholding the current trends in this relationship. Following the conclusion of the visit, the Bharatiya Janata Party leader L K Advani, for instance, while addressing a meeting on “Democracy and Conflict Resolution in Asia” referred to the global dimension of India-China relations. “Fully normalised good-neighbourly relations between the two great nations of Asia can become a reliable factor of peace, stability and progress both in the region and globally”, he said. Going a step further he advocated that the Sino-Indian strategy of keeping contentious issues aside and strengthening the relationship could be usefully applied to the India-Pakistan scenario. The left parties, which in any case have always strongly been in favour of improvement of Sino-Indian ties, also came out categorically in appreciation of the visit.

Secondly, and somewhat indirectly, the projection of the visit and indeed of the direction of this relationship in the media generally has been on the whole positive. While it would be premature to declare this as a change of heart, it is certainly indicative of “incremental” change. The focus now appears to be on how to ensure that what is clearly an inescapable engagement is managed without detriment to our interests. Some more comfort can be drawn from the continuation of the India-China Defence Dialogue and the holding of the second round of Joint Military Exercises some time in 2008. Another manifestation of this reaction is the somewhat less emphasis on a perfunctory listing of the bilateral gains and losses from the visit. Mutual assurance on not constituting a threat to the other or intending to be part of any containment or encircling strategies has been obviously communicated to either side, which is reflected in some departures from the earlier formulations.

The Vision Statement

Admittedly, a closer comparison of the 2006 joint declaration with that signed during Manmohan Singh’s visit does not reveal major changes. But, there is a mention of the Security Council for the first time in the context of China’s support to India’s “aspirations to play a greater role in the United Nations” as also a more specific reference to cooperation in the civilian nuclear energy sector “which will contribute to energy security and to dealing with risks associated with climate change” (A Shared Vision for the 21st Century of the Republic of India and the People’s Republic of China, signed on the occasion of the visit of prime minister Manmohan Singh to China, January 14, 2008). The Vision Statement also saw the reiteration of the longstanding official Indian policy commitment to “one-China” – this we were told was done on the request of the Chinese, keeping in view certain sensitivities (Tibet and Taiwan) on their part at this point in time.

On balance, this is a positive document, and its significance stems from its categorical foregrounding of the regional and global dimensions of India-China relations. Appropriately therefore, it was not titled a joint statement but constitutes a vision document of sorts. It runs through the entire gamut of issues and fears on both the conventional and non-traditional threats to security, emphatically endorses the processes of regional integration and the positive view of each other’s participation in these processes and upholds joint efforts in bringing about a new international political, economic and energy order. It appears to flesh out the Strategic and Cooperative Partnership for Peace and Prosperity and thus attempts to address some of the concerns and questions regarding the substance of the Strategic Partnership arising in recent years, though at times the sheer range of themes encompassed seem overwhelming. How, given the current scenario, is the vision to be realised? It needs to be kept in mind that both India and China are also simultaneously involved in the process of diversifying their relationships, expanding their options, and taking advantage of the flexibility afforded by the post-cold war environment to have multidimensional engagements with all major powers. This inevitably generates complexities, which will need to be handled in a straightforward and open-minded manner.

Manmohan Singh’s address at the Chinese Academy of Social Sciences (CASS) covered similar ground. Titled ‘India and China in the 21st Century’, it dwelt on the same set of issues, from the global and regional to the bilateral. One could not help thinking that there could have been some more philosophy, erudition and sense of history and the future than the somewhat prosaic and predictable listing of what had and what needed to be done. The scholarly audience at CASS could possibly have done without hearing about India’s growth, planning targets, developmental priorities, foreign policy, and above all, about how the boundary is peaceful and that the Guiding Principles were in place. The visionary dimension was completely overshadowed by a set of prescriptions – albeit necessary – calling for bridging the knowledge gap, expanding cooperation and harnessing complementarities and synergies.

Need of the Hour

What seems to be the need of the hour is firm action to implement the scores of memoranda of understanding (MoUs) for cooperation in an impressive range of areas, already signed over the years, to which have been added another ten – cooperation between the planning commission of India and the Reform Commission of China, cooperation in the railways sector, housing and urban poverty alleviation, land resource management, cultural exchanges, geological surveys and geo-sciences, health and family welfare, and agricultural banks. As we survey the long list of memoranda of understanding, it is clear that if purposively activated and set in motion, they would add a new meaning and a tremendously vitalising dimension to the India-China relations. For long academics have been stressing the importance of comparative studies on the developmental experiences of the two Asian neighbours, particularly as they proceed on the uncertain road of market reforms. This comparative exercise, which has to be a learning experience as well would benefit enormously from the institutional and structural

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linkages, which would emerge from the MoUs. In addition it would provide the opportunity for the exchange of human resources, technological and other empirical data and information and above all valuable experiences in these crucial areas, leading to the enrichment and refining of each other’s developmental strategies.

If we take the above aspect along with the stress laid by both leaders on the importance of people-to-people exchanges, promotion of tourism, the necessity of cultural interaction and greater understanding of each other’s problems and challenges, then we actually have the contours of an extremely comprehensive architecture of engagement grounded in ancient civilisational and historical interlinkages at one end and sharing a vision in looking to the future, at the other, drawing on the energies and experiences of 2.5 billion people. But the present will require a degree of creativity, clarity and commitment that could prove to be the biggest challenge yet.

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