Talking trade

Beijing Review, the influential and official weekly news magazine, has become the latest vehicle for public diplomacy between China and India. Just this attempt to talk about trade on a public platform is a very welcome step.

In an article titled, "Stumbling Blocks for China-India Trade", on 17 Sept 2009, excerpts from a report on bilateral economic relations by Economic Information Daily was published. Below is the response of the Indian embassy in Beijing, published on 1 Nov 2009.

While China India trade has grown rapidly, in the past seven years to over $ 51 billion in 2008, this is less than 2% of China's total foreign trade volume, and less than 6% of India's total. An article in the influential and official news weekly, Beijing Review, on Sept 17, 2009, outlines some of the problems on the economic and political front that it believes affecting relationship between the two neighbours. Statistics from China's Ministry of Commerce show that, in the past seven years, Chinese-Indian trade volume has enjoyed an average annual increase of 45 percent. Among all of China's main trade partners, India retains the highest growth rate in trade volume with China.

• - Indian exports to China, it has been noted, are mainly primary products, with minerals and agricultural products representing more than half the total. By contrast, Indian imports are largely machinery products, chemical products, metal products, fibers and textiles from China.
• - Indians export to China are resource-intensive, or labor-intensive products, while what they import from China are manufactured goods with high added value. This trade structure, in turn, leads to a limited market share of Indian goods in China and a great risk of trade deficit.
• - When it comes to trade protectionism, India is a forerunner around the world. Except an average duty of nearly 30 percent on manufactured goods, India keeps a series of extra charges, coupled with complicated non-tariff measures.
• - India's domestic investment atmosphere features onerous administrative interventions, excess formalities and low efficiency—factors that could hinder the further development of Chinese-Indian economic and trade relations.
• - Anti-dumping investigations covered a wide range of goods, including industrial salt, iron and steel, auto parts, coal products, porcelain, textiles and rubber products, which led to a total loss of $1.5 billion for Chinese merchants.
• - India imposed a ban on Chinese toys, and has also imposed safeguard tariffs on Chinese goods, such as aluminum shields.
• - The sea route between the two countries is long and costly. While the land route, through Myanmar and Nathu La, are being reopened, the conditions are very poor.
• - Bilateral understandings between Beijing and New Delhi are far from sufficient due to their limited exchanges, mutual trust is superficial and, in ways, fragile.
• - Indian fear of China's rapid development, along with an aversion to Chinese products, has diminished the Chinese market in India.
• - Some Indians are wary that China's cooperation with Pakistan, might be a threat, thus prompting them to hold a defensive posture.

On Oct 29, 2009, the Indian Embassy in Beijing, responded to the above article in "Striving for win-win solutions"

• - The two countries should realize that each "has a vested interest in the success of the other" before they can jointly create a bright future.
• - When it comes to political trust, few can dispute that the two countries have come a long way in the last two decades. The frequency of contacts at the leadership level is unprecedented.
• - During Chinese President Hu Jintao's visit to India in November 2006, the two countries set themselves a bilateral trade target of $40 billion by 2010. This was reached two years in advance, in 2008.
• - Trade imbalance between China and India is indisputable. Indian exports to China are mainly primary products while Chinese exports are largely manufactured goods with high added value.
• - India manufacture value-added goods like electrical products, machinery, plastics, organic chemicals, chemical products and iron and steel, but it actually has penetrated the Chinese market in a very limited way in each of these categories. Restricted market access and tariff/non-tariff barriers have limited the scope for growth.
• - Local content stipulations have also constrained India's ability to compete in the Chinese market.
• - Sharp increases on import duties of completed equipment have obviously had their intended impact.
• - On October 11, India decided to terminate safeguard investigations against the import of passenger car tires from China.
• - Despite a memorandum of understanding on the application of phytosanitary measures concluded in 2002, China has provided India with market access to only three out of 17 varieties of fruits and vegetables that had been sought.
• - The real limitation is the old mindset that views bilateral relations as a zero-sum game, rather than striving to create win-win solutions. It is when each country realizes that it has a vested interest in the success of the other that we can be truly confident of our joint future.

India: Learning To Live With China

The 60th anniversary of Communism in China, has coincided with a lot of items in Indian and other international media, looking at various flash points in the relationship between the two of the largest countries in the world. Here is the latest by an Indian journalist.

Indrani Bagchi, the diplomatic editor at the Times of India, has written a detailed analysis in the Crest, the weekend paper, titled "CHINESE CHECKERS: Learning To Live With China". She quotes some of the strategic experts as follows:

• "With neighbours, China has been trying to prevent clashes, but that seems to have changed with India recently.” (Susan Shirk, China specialist).

• “The steady emergence of India as a powerful player is not looked upon favorably by China. China’s strategic culture is to distrust strong, powerful neighbors and prefer small, weak, subordinate or client buffer states. A theme dominant in all Chinese commentaries over the last few years is that India’s growing power — backed by the US — would bring about a shift in the Asian balance of power detrimental to China.” (Mohan Malik, professor Asian security at the Asia-Pacific Centre for Security Studies, Honolulu).

• "China has generally been muted with the countries on its periphery. Except India. China’s response has been atypical." (Ashley Tellis, Influential American strategic analyst).

• "India’s 1962 burden stems from the fact that the defeat of Sela-Bomdilla was papered over and the nation never had the chance of a catharsis." (K Subrahmanyam, Strategic affairs expert, former National Security Advisor, India).
  

Following is an excerpt from the article.

There was a surprise in store this week for those who chose to brave Arunachal Pradesh’s damp cold and the three-hour rough ride from Tawang up to Bum La Pass, on the border with Tibet. They were greeted by “happy” arches erected by Chinese soldiers on the other side, to commemorate the 60th anniversary of the Chinese Communist Party in power. The Chinese were preparing to receive Indian soldiers for a celebratory lunch — and some unfinished business on border management.

Most of this bonhomie is likely to evaporate in just over a month’s time when the Dalai Lama reaches the 400-year-old Tawang gompa (monastery) to offer prayers. Historically, this region has had a close relationship with the Tibetan people. The sixth Dalai Lama, Tsangyang Gyatso, for example, was born in Tawang. So, it’s not unnatural for the current Dalai Lama (the 14th) to want to pay obeisance at the Tawang gompa. Still, anything that’s seen to accommodate the breakaway Tibetans gets Beijing’s hackles up, especially when it’s on land claimed by the Chinese.

And so it alternates — blow hot, blow cold — in the uncertain relations between India and China: one day, it’s jaw-jaw, another day it’s claw-claw. The inscrutable Chinese and the argumentative Indian find each other equally indecipherable. It’s not surprising, therefore, that India’s China policy rides a trough-peak roller coaster.

New Delhi has been playing down media reports of Chinese “incursions” in an apparent bid not to ruffle feathers in Beijing. Almost simultaneously, the ministry of external affairs was lashing out at China for stapling not stamping visas to the passports of Kashmiri Indians, a signal that J&K was disputed.

The rise and rise of China represents one of contemporary history’s tectonic shifts. For an India that fancies itself as an emerging superpower, learning to live with an assertive China is one of its greatest foreign policy challenges, especially as its ambitions are sometimes aligned with the Chinese and sometimes at odds. A People’s Daily commentary (Sept 15) points out, “India is still a lesser power than China in terms of its economic and military might, both conventional and non-conventional.”

How can New Delhi and Beijing achieve a steady state of equilibrium that gives both sides the comfort of predictability, and a resultant confidence in each other? That’s a question nagging not just India’s foreign policy mandarins, but students and practitioners of diplomacy worldwide. As one of the architects of India’s China policy (who will be unnamed as will be many interviewed for this story) says: “For India, coping with the rise of China is not a luxury; they’re right next door.”

Indian policy makers find China’s approach to India quite mystifying. On the border, China has vastly superior military machinery. Its economic muscle is much bigger. And yet it appears keen to avoid any confrontation along the 4,056-km undemarcated border. But on many issues of bilateral import, China takes a far more belligerent stand — like seeking to nix India’s bid for a place at the UN Security Council; mounting a last-minute scramble to stop the nuclear deal in Vienna; trying to keep India out of an Asian economic community; blocking ADB from giving Arunachal money for a water project; and denying Arunachal residents Chinese visas.

Please read the full article here.

Time for India to play hardball with China

Jude Blanchette, of Atlas Economic Research Foundation, USA, sent the following note:

A new piece appearing in Foreign Policy magazine by Indian journalist Kapil Komireddi argues that India must begin playing "hardball" with China. Komireddi only hints at what this entails (something about the Dalai Lama).

"Indian democracy vexes Beijing. If India can guarantee fundamental rights to its diverse citizens while managing a growth rate not far from China's, why, someone is bound to ask, can China not do the same? For many in the West, China's economic prosperity is a precursor to political freedom for its people. But this theory, as China scholar Minxin Pei has argued, ignores the important fact that an authoritarian state is less likely to loosen its hold on a wealthy country than it would be to forego the control of an impoverished one. This accounts for China's censorship at home and the promotion of secessionism abroad. But it also means that it is China, and not India, that is more fragile and insecure. The Dalai Lama is India's trump card. All India has to do is play hardball."

Read the complete article, "Time for India to play hardball with China" by Kapil Komireddi in Foreign Policy magazine, 2 Oct 2009.

China Review comments on the India media

China Review looks at the current hot topic of China-India relation. This was shared by Chaoliang, a Chinese friend, who also summarised the article in English. The original Chinese article can be found here.

The governments of both sides hopes to enjoy peace around the boarder. Especially, although there have appeared storms of propaganda about Chinese aggressiveness inn Indian media, the prime minister, the national security advisor, and the foreign minister in India have all dismissed the alarmism. These were aroused by the helicopter event, paint event, or .shooting event, which have been denied by Indian department of defence.

Despite the efforts made by government and military authority to clarify the rumours, media seem to become more anxious to create an air of panic with too many negative reports about China, covering the 1962 war between China and India, the cooperation between China and Pakistan, Chiinese opposition to Indian possessing nuclear weapons and its permanent member state of UN security councile, trade gap, and competition over energy, etc.

BBC once gave an surprising reason for the deluge of bad news against China, that is, so doing would promote the media’s market share.

Meantime, the situation also has something to do with the political conflits in India. The opposition parties, such as the People’s Party and the Socialist Party would like to take the unwarranted Chinese threat as an excuse to blame the ruling party.

And somebody embracing revengeful mind over the failure in 1962 war would of course like to see the bubble blown huge about the Chinese brute hostility.

And the factors helping making the matter. Worse also include Dalai Lama’s purposeful words and some irresponsible experts' agitating remarks.

In conclusion, the so-called tension highlighted so far actually derives from an arbitrary conspiracy among media, individual politicians, and other interest groups.

These reports I hope will provide a glimpse of the thinking in China, and the undercurrents, particularly, in the official circles.