Modi's Opportunity in China

Prime Minister Narendra Modi has the political capital needed to push for a settlement of the boundary dispute with China. This could open up avenues to strengthen economic ties with China and also give India political space on multilateral stages like the World Trade Organization and the climate change negotiations.

When Prime Minister Narendra Modi heads to Beijing in a few weeks, he will find the Chinese leadership basking in the warmth of a diplomatic coup. The Asian Infrastructure Investment Bank (AIIB) promoted by China has drawn the support of many more countries than Beijing could have envisaged, including key American allies. The United States (US) had been pressing its friends and allies to stay out of the AIIB, ostensibly on the ground that it would dilute international standards of lending for development. In fact, the American opposition stemmed from its concern that the Chinese initiative would compete with the World Bank and the Asian Development Bank (where Japan is a prime mover), so challenging the US’s hold over international financial institutions (IFIs). The United Kingdom (UK) was the first close ally to break ranks with Washington in applying to join the AIIB. Soon, Australia and Israel followed suit.

The Obama administration’s inept handling of the issue—including rare public criticism of close allies like the UK—has handed Beijing a significant and unanticipated political victory. Indeed, not since the late 19th century has infrastructure been so prominent an issue in great power relations. Owing to the manner in which America ended up with egg on its face, the AIIB episode has been ­portrayed as a marker of the inexorable rise of China. Kishore Mahbubani, to take but one respected commentator, presents it as an “epochal event”—one that heralds “the end of the American century and the arrival of the Asian century” (2015).

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