Civil Services Times

Transforming competition into cooperation

There was enough space in the world for both the nations to further their business interests; China and India are partners for cooperation and not rivals. My visit is aimed at promoting friendship, expanding cooperation, building on our past achievements and opening up new dimensions for mutual benefit and common development of the two countries.” Wen

In the 60th anniversary of the commencement of bilateral diplomatic, the Chinese Prime Minister Wen Jiabao on his second visit after 2005 has indicated that both the countries should enter into a free-trade agreement (FTA) which would enable the bilateral ties to a new high. The Chinese PM has categorically said that the current levels of trade were far below the true potential and only through a proper FTA these existing potentialities could be materialized at optimum level. In this regard the Chinese PM said “the two nations are the largest recipients of FDI, yet investment flows between the two countries have been a low $700 million”. Still, total investment by China in India is small, amounting to only $221 million in 2009, representing 0.1 percent of China’s total outward foreign direct investment stock in that year. The two nations have pursued divergent paths in their development. For India, a democracy, economic reforms began only in 1991. China, a one-party state, implemented market reforms in 1979.

China has made it clear that the bilateral relations would be based on the concept of give and take. The visiting Chinese PM has said that his country is ready to open up its market for Indian infotech and pharmaceutical firms provided India eases rules for investments and movements of Chinese workers and gives better access to Chinese power and other project exports and to its manufactures.

Indian problems with China:

1. China is seeking to target it by increasing missile forces in Tibet, and to encircle it with a string of strategic ports which it is building, running from Coco islands in Myanmar to Gwadar in Pakistan.
2. India is worried about the growing trade deficit with China. India’s deficit with China could reach $24-25 billion in 2010. The deficit rose to $16 billion in 2007-08, from $1 billion in 2001-02.
3. India fears China wants to restrict its global reach by possibly opposing its bid for a permanent U.N. Security Council seat.
4. Further, the bilateral relations have come under strain over issues like stapled visas, increased assertiveness by Beijing over Arunachal Pradesh and the boundary dispute, and accelerated investment by China in Pakistan-controlled Kashmir. India claims that China is in occupation of nearly 38,000 sq km of Indian territory in the Ladakh region of J&K. China is also in control of nearly 5,000 sq km of Shaksgam valley in PoK ceded by Islamabad to Beijing in March 1963.
5. China has spent $20 billion on developing infrastructure in Tibet, causing concern in India as it provides Beijing the capability to move troops quickly to the areas bordering India. The 3.3km Galongla Tunnel, built at an altitude of 12,300 feet, would connect Metok with China’s national highway system.
6. In the software sector, all the major Indian companies are present in China. But most of them service only European and American companies. TCS is the only company which has won a major contract from the Bank of China.
7. In addition, China’s reluctance to support India on civilian nuclear technology commerce issues, while it is now willing to further construct nuclear power plants at Chashma in Pakistan, are raising concerns.

Chinese apprehensions:
1. On the other hand China sees the presence of the Dalai Lama and Tibetan and Uighur refugees as well as India’s growing nuclear and defence ties with the US and Japan as a threat to it.
2. The growing India and US relations in terms of economic and civil nuclear cooperation.

Joint communiqué
1. The joint communique, unlike previous such bilateral announ-cements, was silent on the much-anticipated Chinese reversal of stapled visas to Kashmir residents in India. Besides that there is also no mention either of Tibet or Taiwan as parts of China for the first time. In this regard both countries, however, reiterated that “sensitivity for each other’s concerns and aspirations” should be respected. This is an indication that, during hard diplomatic bargaining, South Block had been insisting effectively on the reciprocity principle possibly for the first time.
2. Several areas were identified including enhancing bilateral trade to $100 billion over the next five years, even as China is to address the widening trade imbalance to the detriment of India (of about $20 billion this year), allowing Chinese invest-ments in Indian infrastructure projects, while Indian IT firms and pharmaceuticals are poised to enter China’s market with vigour.

Limitations of communiqué:

1. There was no forward momentum on border dispute resolution despite nearly 30 years of discussions.
2. There was no reference of China’s support to the Indian candidature for a permanent seat on the United Nations Security Council; China is the only P5 country not to have shown support for India’s candidature.
3. The joint communique avoided any mention of civil nuclear cooperation between the two, in contrast to the 2006 joint communique which mentioned such cooperation.
4. The joint communique has mentioned of cooperation in the Gulf of Aden. China has dispatched seven naval contingents so far to this region, with the latest surprisingly equipped with amphibious capabilities. Many Chinese have also argued for setting up naval bases in the region, in addition to China’s “string of pearls” at Gwadhar in Pakistan, Hambantota in Sri Lanka, Chittagong in Bangladesh and Great Coco, Hyangyi, Mergui, Khepkau in Mynamar.

Climate change: In keeping with their close camaraderie on the issue of climate change, India and China have signed anMoU on green technology that will enable them to jointly explore low-carbon technology solutions to drive their fast-growing economies. The MoU is not about sharing or transfer of technology, but would only set up a platform where the two countries can discuss and explore the technologies that can be beneficial to both of them. The statement said the two sides would continue their joint efforts towards “arriving at fair and balanced climate agreements with the aim of further enabling the full, effective and sustained implemen-tation of the UN Framework Convention on Climate Change and its Kyoto Protocol according to the mandate of Bali Roadmap”.

On Pakistan:Chinese PM said that India should contribute to the stability of Pakistan and that an unstable Pakistan was detrimental to both India and China. India reminded the Chinese side about its own commitments under UN Security Council resolutions like 1267, where it is holding up the banning of the Jaish-e-Mohammed and expressed that enough is not done by China to curb the terrorist activities in the region. During the visit to Pakistan Wen said that Pakistan has made “huge sacrifices and great contributions” in combating terrorism on the frontline, and its efforts are recognized by the world” and “and the thing that I want to say most, is that China and Pakistan are forever brothers.”

On Afghanistan:for the first time referred to their “shared interest in the stability, prosperity and security of the wider region” - a reference to the troubled reconciliation process in Afghanistan and in the backdrop of the US announcement on withdrawal of troops. According to communiqué India and China, being each other’s neighbour, have a shared interest in the stability, prosperity and security of the wider region...India and China expressed their commitment to assisting Afghanistan to become a peaceful, stable, prosperous nation. They emphasized the importance of a coherent and united international commitment to Afghan-led initiatives.

Important MoUs: 1.An memoran-dum of understanding for a $4.63-billion project financing with Reliance Power, a part of the Anil Ambani Group and $400-million facility agreement with ICICI Bank were part of 49 MoUs signed.
2. Among the agreements have been signed include a $1.2-billion facility between Bank of China and IDBI Bank and between China Development Bank and Reliance Power for $1.1 billion on Sasan power.

Six pacts: Besides the MoU on green technology, the two countries also signed anMoU each on exchange of hydrological data of common rivers, media exchanges and cultural exchanges. Two pacts were signed in the banking sector. These were anMoU each between Reserve Bank of India and Chinese Bank Regulatory Commission and EXIM Bank of India and Chinese Development Bank.
Both sides have signed significant $16 billion worth of business deals and followed this up with the resolve to double the trade turnover, from $ 60 billion-plus annually to a full hundred billion and more by the year 2015. China is now India’s largest trade partner and two-way trade reached $60 billion this year, up from $13.6 billion in 2004. Two-way trade between India and China grew 18-fold in the past 10 years - from $2.3 billion in 2001-02 to $42.4 billion in 2009-10. To put it in perspective, trade between India and the US tripled during the same period — from $12.4 billion to about $38 billion. However, trade balance is heavily tilted in favour of China, with India unable to diversify its basket of exports to China.

Future prospectus: Chinese banks had shown interest in financing infrastructure projects in India. With the Indian government envisaging a $1-trillion investment in the infrastructure sector in the 12th Five Year Plan, this offers a big business opportunity for Chinese banks. The Indian infrastructure sector, especially power is facing a serious fund shortage. Indian may be getting great benefits as the availability of cheaper Chinese finance would solve the financial shortage in this sector and help its infrastructure to grow.
In fact, Chinese companies have contributed significantly towards improving availability of power equipment in the Indian market. Power equipment supplied by Chinese vendors are 15-20 per cent cheaper compared to equipment supplied by domestic manufacturers BHEL and L&T. Chinese suppliers like Dong Fang and Shanghai Electric Corporation have contracts worth over 1.5 lakh crore in hands to supply equipment to power projects in India.
In nutshell, both the countries must realize the imperatives of 21st century economic order and both the sides should completely abandon their  political rivalries and start cooperating each other to compete with the US and European countries. It is important to refer that India and China have fought only one war in 1962 and the several countries mainly Great Britain, France, Italy, Spain and Portugal have fought numerous wars of which some of them even lasted for hundred years and and despite the fact they can form European Union to face the challenges of the new world, then why not India and China can do it  … In fact, Wen has to answer that when this will happen.