India-China Relations

I. Introduction:

1. Rise of India and China Changing Global Balance:

According to Singapore's Minister Mentor Lee Kuan Yew, the rise of India and China was changing the global balance. India and China together account for 40 per cent of the world's working age population and 19 per cent of the global economy in PPP (Purchasing Power Parity) terms, according to Mr. Lee. In the next 20 years their collective share of the global economy could match their percentage of the global population.

2. Asian Renaissance will Depend on How India and China Work Together:

Mr. Lee stressed that Asia's place in the world would depend on how both India and China work together as they rise and actively set out to avoid ending up in opposing camps.

3. Need for India and China to Understand Each Other:

It was vital that India and China understand where they stand vis-a-vis each other, according to Mr. Lee. He opined that the two countries must not be paranoid and suspicious of each other. Instead they can cooperate and compete economically, and each improves its performance by using the other's progress as benchmarks.

4. Major Shift in China's Assessment of India:

 According to Chinese experts on international relations, there is a major shift in China's assessment of India. The assessment is based on the following:

• China Looks at India as a Comprehensive National Power: India rapid economic growth combined with its growing importance in international affairs has led to China looking at India as a "comprehensive national power."
  
• Highest Priority to Relations with India: China accords highest priority for relations with India, according to Chinese experts. It is pointed out that India falls into each of the four major categories of countries that is in China's foreign policy objective to focus diplomatic energies on. The four categories are: developing countries, neighbouring countries, rising powers, and influential players in the international arena.
  
• Realisation that Relations with India will be the Key to Stability in Asia: Chinese foreign experts point out that China has realised that relations with India will be the key to stability in Asia. Given the troubled history of the relationship, it is realised that the relationship requires personal care at the highest level.

5. Sino-Indian Ties Poised to Enter a Vibrant and Dynamic Phase:

India's Prime Minister Manmohan Singh said that bilateral relations between India and China were poised to enter a vibrant and dynamic phase, based on a common recognition that the growth and development of both India and China would make positive and long-term contributions to regional and global peace, security and stability.

6. India and China in the Process of Giving Substantive Content to Their Bilateral Relations:

 On the eve of his maiden visit to China, Dr. Singh stated that both India and China were in the process of giving substantive content to their bilateral relations through a comprehensive economic engagement and developing mutually beneficial cooperation. Issues relating to the boundary and cooperation in trans-boundary rivers would be discussed with the Chinese leadership.

 

7. China the Focal Point of India's "Look East" Policy:

The Prime Minister pointed out that China was the focal point of India's "Look East" policy. India and China had established a Strategic and Cooperative Partnership for Peace and Prosperity during the Chinese Premier Wen Jiabao's visit to India in 2005. During the Chinese President Hu Jintao's visit to India in 2006 a 10-point strategy to qualitatively upgrade the bilateral relations was put in place.

8. Economic Ties:

 

A. Large Increase in Bilateral Trade:

Sino-Indian bilateral trade for 2007 was worth $38.6 billion, a large increase from $25 billion in 2006.

B. India's Concern's - Widening Trade Deficit and Composition of Exports:

India's trade deficit increased from $4.12 billion in 2006 to $10 billion in 2007. India is also concerned over the composition of its exports to China, which mainly comprise of low value primary products. Experts feel that India's trade deficit was likely to continue unless the Indians make a much more concerted effort to sell in the Chinese market.

C. India Asked China to Correct the Trade Imbalance:

India's then Commerce Minister Kamal Nath proposed to the Chinese side to look into lifting non-trade barriers and technical barriers to trade against India, as a matter of priority. Specifically, he asked that Indian vegetables and fruits be given access to Chinese markets.

D. Negotiations for a Regional Trade Agreement (RTA):

Chinese experts have suggested an early negotiation of a Regional Trade Agreement (RTA) as a possible solution to overcome India's trade deficit with China. A Joint Task Force was set up by India and China to study the feasibility of an RTA.

E. Indian Industry Opposed to RTA with China:
Indian industry is strongly opposed to a RTA with China, according to the President of the Confederation of Indian Industry, Sunil Bharti Mittal.

• Indian industry has urged the Government to use utmost restraint when negotiating the matter with China.
  
• More time is needed to ascertain that a RTA would not be used to swamp Indian markets with cheap Chinese goods. India is already an instigator of anti-dumping investigations against China.
  
• An RTA could involve the recognition of China as a market economy, which India is reluctant to grant due to continued suspicions regarding the transparency of pricing and accounting systems in China.

F. Granting Market Economy Status (MES) to China Could Lead to Fears of Large-Scale Dumping of Chinese Products:

India is reluctant to grant Market Economy Status (MES) to China, which would be the first step towards negotiations of an RTA. If India grants an MES to China, it would mean that India has accepted the pricing figures supplied by China. This could lead to fears of large-scale dumping of Chinese Products. Although 80 countries have granted the MES to China, none of the large economies like the US, the EU and Japan have done so.

G. Chinese Investments Subject to Special Security Clearances:

India has blocked China's investment in certain sectors like telecommunications, port development and cargo carriers on the grounds that certain Chinese companies pose a security threat. Subjecting Chinese investments to special security clearances could cast a question mark on the future bilateral economic ties of the two countries, according to analysts.

H. Balancing the Economic Ties with Security Issues:

The challenge before India and China is to be able to manage the contradictory nature of economic ties with security issues. Balancing both the aspects will have a profound influence on the emerging strategic and security architecture of Asia and the World, according to analysts.

I. Managing Bilateral Economic Relations by Minimising Potential Friction and Maximising Mutual Self-Interest:

China is all set to emerge as the largest trading partner of India. However, India's exports to China formed only 1.46 per cent of Chinese Imports. India is also the 15th largest exporter to China. Analysts suggest that the best way to manage bilateral economic relations is to minimise potential friction and maximise mutual self-interest.

9. India's Strategic Concerns Vis-a-Vis China:

• Sino-Pakistan relations and the help provided by China to Pakistan's nuclear programme.
  
• China's refusal to recognise Arunachal Pradesh as a part of India.
  
  
• Construction of Chinese naval facility on the Coco islands in Myanmar.

10. Boundary Dispute - The Friction over Arunachal Pradesh:

• Since 1993 India and China have Agreed to Maintain Peace and Tranquillity along the LAC, in the India-China border areas, without prejudice to their respective positions on the alignment of the LAC as well as on the boundary question, External Affairs Minister Pranab Mukherjee told the Lok Sabha in February 2008.
  
• The two sides have agreed to clarify the LAC and to take up perceived violations through established mechanisms, including the Joint Working Group, the Expert Group, border personnel meetings, flag meetings and diplomatic channels, according to Mr. Mukherjee.
  
• China illegally claims approximately 90,000 square kilometres of Indian territory, including Tawang in Arunachal Pradesh, External Affairs Minister Pranab Mukherjee informed the Lok Sabha.
  
• Prime Minister's First Visit to Arunachal Pradesh: Prime Minister Manmohan Singh visited Arunachal Pradesh on January 31, 2008. This was his first visit to the State as Prime Minister. Describing Arunachal Pradesh as the 'India's land of rising sun', Dr. Singh stressed that his Government accorded the highest priority to the development of Arunachal Pradesh and expressed that confidence that the State would emerge as one of the best regions of the country. He also announced the launching of several schemes.
  
• China registered its protest against the Prime Minister's visit to Arunachal Pradesh. Chinese officials felt that it was not appropriate for India's Prime Minister to visit a State, major parts of which are claimed by China as its territory.
  
• India rejected China's protest against the Prime Minister's visit to Arunachal Pradesh. External Affairs Minister Pranab Mukherjee stressing that Arunachal Pradesh was an integral part of India and the Prime Minister could visit any part of the country.

11. Trust Deficit Remains between the Two Countries:

Despite the establishment of a strategic partnership between India and China in 2005, a serious trust deficit remains between the two countries, according to analysts. It requires courage and political vision on both sides to work at balancing the complex set of factors to strengthen Sino-Indian bilateral relations, according to analysts.

 

II. Background:

1. 1949- Diplomatic Recognition:

India accorded diplomatic recognition to the peoples Republic of China on December 30, 1949. The Peoples Liberation Army (PLA) made China independent through a revolution in 1949.

2. 1954- Accords Signed:

The relations between India and China in the 1950s were very cordial and peaceful. In 1954, the Chinese Premier, Mr. Zou, En Lai visited India which led to the signing of two Accords as follows:

a. First Accord:

India recognised Tibet as an integral part of China and considered it to be an autonomous region of China.

b. Second Accord:

 

The declaration of Panchsheel in the Joint Communiqué. The Panchsheel enshrines the five principles of co-existence as follows:
i) Respect for Sovereignty and Territorial Integrity of all States.
ii) Non-aggression.
iii) Non-interference in Territorial affairs.
iv) Equality and Mutuality.
v) Peaceful Co-existence.

3. 1962- War:

In the late 1950?s China, occupied small portions of territory along the Indo-Tibet Frontier. In 1962, India and China fought a war which resulted in China occupying sizeable portions of the India territory in the West (Ladakh) and in the East (Arunachal Pradesh).

4. 1962 Parliamentary Resolution on Recovery of Indian Territory from China: The Indian Parliament passed a resolution in 1962, pledging to wage an unending struggle till the complete recovery of Indian territory from China and it also forbade cessation of any occupied territory to China as part of any border settlement.

5. Normalisation of Relations - 1988 - Path-Breaking Visit by Rajiv Gandhi to China:

In the 1980?s more efforts were made to normalise the relations. The real break-through in the relations between the two countries came during the path-breaking visit undertaken by Mr. Rajiv Gandhi in 1988.

6. 1990 - Detente:

The 1990?s saw the beginning of the „detente? in the context of changing equations in the global scenario. China?s President, Mr. Jiang Zemin visited India in November 1997. This was the first ever visit by a Chinese Head of State to India. Four agreements were signed during the visit.

7. Deterioration in Relations After India Conducted the Nuclear Tests in 1998: There had been deterioration in Sino-Indian relations after the conduction of nuclear tests by India. China adopted a brazenly partisan attitude by terming India?s nuclear tests as “outrageous” but describing Pakistan?s nuclear tests as only “regrettable”. Senior officials in the government of India articulated the “China threat”.

8. 1999 - Normalisation of Relations:

 In April 1999, China restarted an official dialogue with India. The Joint Working Group (JWG) was convened in Beijing after 11 months delay because of China?s refusal to set dates. The visit by the External Affairs Minister of India, Mr. Jaswant Singh, to China in June 1999, followed by the President, Mr. Narayanan?s visit in early 2000, helped in the normalisation of bilateral relations.

9. 2000 - Indian President’s Visit to China:

The Indian President Mr. K. R. Narayanan visited China from May 28- June 3, 2000. Mr. Narayanan had visited China in 1994 as the Vice-President of India. The Indian President held talks with his Chinese counterpart Mr. Jiang Zemin and other political leaders of China.

10. Irritants in Sino-Indian Relations:

• Sino-Pak Defence Relationship: The overt and covert military assistance provided by China to Pakistan is the biggest impediment in improving Sino-Indian relations. The Sino-Pakistan collusion in the nuclear field is seen as China?s long term strategy in gaining supremacy in Asia.
  
• Boundary Disputes: The non-resolution of Aksai Chin and other boundary disputes. China has laid claim to 90,000 square kms of Arunachal Pradesh. Analysts feel that by not resolving the boundary disputes China wants to keep India under strategic pressure.
  
  
• Military Bases in Tibet and Myanmar: China has built military bases in Tibet and Myanmar which are seen by India as a threat to its national security.

II. Current State of Relations:
1. Defence Ministry’s Annual Report 2008-09:

• Strategic and cooperative partnership with China progressed during the past one year.
  
• Report took note of the White Paper on China’s National Defence, 2008.
  
• Double digit growth in Chinese defence expenditure over the previous 20 years leading to significant modernisation of its defence forces, both in terms of quality and quantity.
  
• China’s defence modernisation needs to be monitored carefully in the foreseeable future for the implications that it can have on the security and defence of India.
  
• China’s military cooperation with Pakistan and other countries in India’s neighbourhood, as well as the possibility of enhancing connectivity with Pakistan through the territory of Jammu and Kashmir “illegally occupied by China and Pakistan” and with other countries would also have direct military implications for India.
  
• India would engage China to seek greater openness in its defence policy and posture while taking measures to protect its national security and territorial integrity.
  
• Partnership with China progressed further during high-level visits in 2008-09 and the two countries are seeking to build a relationship of friendship and trust, based on equality, which was sensitive to the concerns and aspirations of the other.
  
• India and China are engaged in negotiations on the boundary question and have agreed to maintain peace and tranquillity in the border areas through implementation of mutually agreed confidence building measures, pending the final settlement of the boundary issue.

2. Economic Ties:

A. India Imposed a Number of Anti-Dumping Duties and Import Restrictions on Some Chinese Products to Protect Domestic Industries:

• In June 2009 India imposed a number of anti-dumping duties and import restrictions on a range of Chinese products including toys, textiles, chemicals and mobile phones to protect domestic industries affected by the current financial climate.
  
• In June 2009, the Government of India announced a two-year 30 per cent safeguard duty on import of aluminium products from China.
  
• In June 2009 a five-year duty on the import of Vitamin-C from China was announced.

B. China Voices Concern over Import Restrictions by India:

• Following a number of anti-dumping measures initiated by the Indian Government against Chinese products, China has voiced concern that resorting to trade protectionism would undermine the interests of the Indian people.
  
• China called for a greater dialogue between the two countries to ensure that the anti-dumping dispute did not derail the rapidly growing trade relationship.
  
• Bilateral trade between the two countries grew by 34 per cent in 2008 reaching $51.8 billion.
  
• China is currently India’s largest trading partner.

3. Meeting of the Foreign Ministers of India and China (Phuket, Thailand, July 22, 2009):

The External Affairs Minister of India S.M. Krishna met his Chinese counterpart Yang Jiechi met on the sidelines of a conference of Foreign Ministers in Phuket, Thailand on July 22, 2009.

India and China resolved to further deepen relations, especially in bilateral trade which has been set a target of $60 billion by the end of 2010.

At the first meeting with his Chinese counterpart , Mr. Krishna agreed to be in touch with him on major issues such as climate change, the Doha round of trade talks and the global financial crisis.

India and China had similar outlook on a number of issues, especially their approach to the global financial crisis, according to Mr. Krishna.

There was enough space for both China and India to grow without competing with each other, according to Mr. Krishna.

India’s desire to support mechanisms that would ensure lasting peace in the region was conveyed to China.

China was looking forward to the visit by India’s President Pratibha Patil.

4. Fourfold Purpose of the Foreign Ministers Meeting:

• To get acquainted with each other
  
• Deepening the interaction
  
• Reviewing the growth of economic ties
  
• Coordinating their action in this sphere on the global scale

III. Conclusion:

1. Growing Economic Ties have their Implications for Enlarging Bilateral Political Relations:
The bilateral trade between India and China has been expanding at a fast pace. China has become the largest trading partner of India. Bilateral trade between the two countries has reached $51.8 billion. Analysts point out that the growing economic ties have their implications for enlarging bilateral political relations.

2. Border Dispute a Test of Sino-Indian Relations:
China's protests over Prime Minister Manmohan Singh's visit to Arunachal Pradesh in January 2008 could harm the improving Sino-Indian Bilateral Ties. Analysts term China's protests as unwarranted as both sides are currently engaged in a dialogue on the border dispute and have pledged to resolve the dispute in a fair, reasonable and mutually acceptable way. Thus, settlement of the border dispute would be a test of Sino-Indian Relations.

3. India and China Need to Evolve a Mature Relationship:
Analysts suggest that India and China need to work closely to avoid potential points of conflict. India needs to clearly state that good neighbourly relations depend on negotiations done in true spirit of give and take. That would form the basis of forging a mature relationship between two of the world's major players of the future.

4. India and China Need to Play a More Proactive Role for Resolution of Conflicts Across Asia and the World:
Analysts feel that for the harmonious resolution of conflicts across Asia and the world, India and China need to play a more proactive and better coordinated role. China's President Hu Jintao advocated the development of a multilateral cooperation for creating a multi-polar world as one of the strategies India and China need to follow to enhance their strategic partnership.

Published date : 15 Oct 2009 08:25PM