A Historic Opportunity for Modi and Xi

Cover Story

Both leaders have the mandate and the energy for a radical change in India-China ties, provided the mandarins of both countries keep pace, writes R Swaminathan

Prime Minister Narendra Modi’s visit to China comes at a time when India’s international stock is on the rise. But before deep diving into the expectations from Modi and Chinese President Xi Jinping, it will be helpful to put things in context.

By all accounts, Modi’s recent trips to Japan, Australia and the United States of America brought about a rare clarity to the rest of the world about India’s intention and readiness to play a more global role. At the same time, his visits to growing economic power Brazil, Fiji, which has a strong Indian diaspora, and neighbours Bhutan and Myanmar, both of which are of critical strategic importance to India’s long term national security, also give ample indication of the independence and autonomy of India’s foreign policy objectives. The Indian economy is also looking up, aided in some measure by stable oil prices, but also on the back of several critical macroeconomic policy interventions and monetary impulses provided by the Reserve Bank of India (RBI). The recent thrust of the Modi government to create a robust manufacturing economy with several sets of enabling policy frameworks has re-energised the outlook of world markets towards India.

In many ways, of all the Indian leaders who have visited China, Modi seems to be in the strongest position, both domestically and globally. If India is looking at some sort of an economic resurgence, China is at a point in its growth trajectory where introspection seems to be the keyword. First of all, there has been a visible slowdown in the Chinese economic growth. The signs have all been there in the last few years, and it has only gotten worse in the last one year. Five years back, the Chinese economy was routinely growing at 10 percent and above. In 2012 and 2013, the economy grew at a relatively sedate 7.7 percent, its worst performance after the 1999 world economic crisis. The main dent in the Chinese economy has come from a rapid decline in exports.

Secondly, the massive economic growth of the last three decades has created unprecedented environmental stress that the leadership can no longer ignore. The infamous Beijing smog is a case in point. This also imparts a fresh urgency to Chinese policy reforms to encourage high value and technology intensive manufacturing and services industries. Obliquely acknowledging that China cannot continue on its growth path in a business as usual, Xi Jinping said in 2014 that the country must ‘adapt to the new condition…and stay cool-minded’.

A Visit Dominated by Pragmatism

There is little doubt that Modi’s visit to China will be dominated by pragmatism and a desire to enhance and deepen substantial economic cooperation, beyond the usual talk of trade imbalance and export markets. The clearest indication of Modi’s desire and vision to move beyond the traditional boundaries that have trapped Sino-Indian relations has been the elevation of Subrahmanyam Jaishankar, a man credited with bringing common sense, cool-headedness and economic relations to the forefront during his tenure as Indian ambassador to China, as India’s new foreign secretary.

Modi and Xi inherently realise that broader economic cooperation, not just in terms of bilateral agreements on trade, but also in terms of more meshed and deeper cooperation in science and technology, is critical if both India and China have to creatively leverage their growing socio-economic and political muscle on the world stage. Till now, China and India, for various real and imagined reasons, have never worked in tandem on issues of global importance. Both Modi and Xi seem to have hit it off well during the latter’s India visit, and it is imperative that Modi seals this personal rapport, and takes it to the next level. The two leaders must develop a model of cooperation on global issues that has the potential to impact both countries. The complex and convoluted negotiations on agriculture subsidies in the various World Trade Organisation (WTO) forums and the heated global debates around the multi-stakeholder approach to managing the Internet are crucial issues that will have a big impact on the economies of both countries. India and China can decisively turn the negotiations in their favour, if they join hands.

The Chinese side, in their assessment and calculations of the possible outcomes of Modi’s visit, would keep in mind the Indian prime minister’s crucial speech in Japan where he clearly, even if subtly, referred to the growing ‘expansionism’ in Asia. There was no doubt who he was referring to, considering that China and Japan have never seen eye-to-eye and that Japan has been the first and primary outpost of the American presence in Asia. It is the first time that any Indian prime minister has taken such a clearly stated position vis-à-vis a regional issue involving China.

In his inimitable style, Modi has indicated to the Chinese establishment that while he is open and wants to cooperate proactively with China, he is also not averse to supporting other points of view. This crystal clear display of pragmatism would not be lost on the Chinese establishment, which communicates its foreign policy objectives in elaborate rituals of symbolism. Modi and his team have made it clear to the Chinese establishment that they are willing to start with a fresh slate, as long as the Chinese reciprocate in equal measure.

No Longer an Asymmetrical Power Equation

The second main outcome that Modi’s team would be hoping for would be a major Chinese push, including technology transfer and investment, into the recently unveiled ‘Make in India’ initiative. Modi is convinced, and quite rightly so, that India can hope to make its presence felt on the world stage only with a strong, robust and sustainable manufacturing base. Of particular interest to the Chinese government would be the electronics manufacturing sector. One of the main strategic focus areas of the new Chinese model of economic development is their rapidly burgeoning electronics sector.

India is currently extremely well placed to absorb financial, technology and manufacturing investments in this sector. India has a well trained workforce, a world-class pool of software engineers and an electronics components ecosystem that is strong in its own right. The rapid growth of home-grown smart phone manufacturers like Micromax and Karbonn reinforces the immense potential of the Indian market. In fact, in January this year, Micromax became the largest seller of smartphones in India, overthrowing world leader Samsung by some margin, a big, though contentious, achievement.

The Chinese establishment has been trying to get India’s attention for years now in the software sector, one of the few areas that the Indians are way ahead of the Chinese, even though their leadership may not acknowledge the same openly. The Chinese interest in the Indian automobile sector, which has carved a niche for itself in some of the world markets, has not been well documented. The Chinese are keen to understand the manner in which the Indian automobile sector has developed without resorting to questionable ‘reverse engineering’ practices, something that Chinese companies have become notorious for in recent decades. China realises that India can genuinely provide the blueprint for a global standards compliant auto industry, a sector that Chinese policy think tanks have identified as a future driver of clean technology-driven economic growth.

India, no doubt, requires Chinese investment and manufacturing muscle. It also would benefit immensely from deploying Chinese infrastructure models and construction techniques. But it is not an asymmetrical power equation; the Chinese equally desire Indian software power and the ability to develop to home-grown, sector-specific ecosystems. Modi and his team realise the unique strengths that India can offer, and one can expect business, trade and economic negotiations to be robust, detailed and implementation oriented.

Resolution of the Boundary Issue

The third concrete result that Modi and his team would be looking for would be a viable roadmap towards the resolution of the vexed boundary issue. Modi is practical enough to understand that any question of land and boundary that is intricately laced with several layers of history stretching back to the colonial period cannot be solved overnight. At the same time, he is also smart enough to understand that the contemporary realities of an increasingly integrated global economy, with its own sets of geopolitical sensitivities, multilateral institutional structures and global governance issues, requires both India and China to work together in a strategic manner where their combined might will lead to larger benefits to the network of emerging economies, including Brazil, South Africa and Russia.

The Chinese, on the other hand, especially Xi Jinping, have started to recognise that sometimes the boundary question becomes thorny simply because of the manner in which local level People’s Liberation Army (PLA) commanders conduct their routine exercises. China’s national security imperatives have led to a PLA structure that is relatively autonomous to take decisions at the commander level. This is unlike the Indian Army, which is structured in a more conventional, hierarchy-driven model derived from the British army. Most of the Chinese incursions into Indian areas of Arunachal Pradesh and areas in and around Pakistan-occupied Kashmir (PoK) have taken place as a result of commander level decisions, rather than as part of a larger strategic push or thrust from the Chinese military establishment. Xi and his team have, in their own way, tried to communicate this aspect to the Modi team. It is widely expected that discussions on the boundary question will continue on the same lines and one might see some sort of an informal coordination mechanism being established, both at the foreign office level and at the military commanders’ level, to reduce the fallout and to create a redressal system in case of such events. The larger question of clarifying the borders and areas will necessarily require a more intense level of engagement that might eventually lead to a series of foreign secretary level meetings and discussions before the conclusion of any agreement. Both India and China, however, will currently look at the boundary question as one requiring appropriate management, rather than as one necessarily needing an urgent and lasting resolution.

Narendra Modi decisively broke the mould during Xi Jinping’s India visit by receiving him personally at the airport, and that too in Ahmedabad, indicating, in no uncertain terms, that states will have a crucial role in economic development and that he, personally, wants to make a fresh start with China. It is a given that Xi Jinping will also reciprocate in equal measure during Modi’s visit. It is critical that bureaucracies of both countries inculcate the energies of the two leaders and start implementing the goodwill and personal rapport at the ground level in terms of clear outcomes and deliverables.

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