fbpx

SAARTHI IAS

Instagram Telegram Whatsapp Phone-square-alt Facebook Youtube
Saarthi IAS logo
  1. Home
  2. General Studies – 2
International Relations

INDIA – CHINA

December 10, 2024

INDIA – CHINA

Current Relations

  1. Economic
    • Bilateral Trade: $125 Billion
    • Trade Relations:
      • India has a trade deficit of $69 Billion
      • India imports 18% of its total imports from China
      • Indian exports to China account for 5% of total Indian exports
    • FDI: Chinese FDI in India (Cumulative) $26 Billion
    • Top Exports to China: Electrical Machinery, Mineral Oils
    • Top Imports from China: Electrical machinery, heavy machinery, and critical pharma ingredients
    • Bilateral Economic Presence:
      • Chinese Companies in India: More than 100
      • Indian Companies in China: 54
  2. Strategic
    • Boundary Disputes:
      • Border Dispute in Arunachal: China claims the whole of Arunachal Pradesh.
      • Eastern Sector: Dispute over Aksai Chin and areas in Ladakh.
      • Chumbi Valley: Frequent standoff at the India-Bhutan-China tri-junction.
    • Border Agreements:
      • Agreement on the Maintenance of Peace and Tranquillity 1993: To peacefully resolve all border disputes in the area between both nations.
      • Agreement on Confidence-Building Measures 1996: Avoids any use of force and encourages cooperation and mutual respect.
      • Guiding Principles for the Settlement of the Boundary Question, 2005: Boundary differences must not be allowed to affect bilateral ties.
      • Consultation and Coordination on India-China Border Affairs 2012: Timely communication of information on the border situation and handling of incidents.
      • Border Defence Cooperation, 2018: Focuses on information sharing, military exercises, and curbing illegal border trade.
    • Chinese Strategic Expansion: Establishing foreign bases in Djibouti, presence in Gwadar, Hambantota, and OBOR.
    • Multilateral: India and China both take part in the RATS for counter-terrorism under the SCO.
    • Undermining Sovereignty: China-Pakistan Economic Corridor over Pakistan-occupied Kashmir violates Indian territorial sovereignty.
    • Chinese Support to Pakistan: China’s support to Pakistan has raised concerns for India, particularly in Kashmir and beyond.
    • May 2020 Clash: Illegally encroaching Indian territory and resulting in clashes, killing 20 Indian soldiers.
    • Riparian Issues: China building dams on the Brahmaputra, which affects North East India’s water security.
  3. Cultural/People to People
  • Education Exchange Programme 2006: Exchange students and Indian scholarships for Chinese.
  • Tourism:
    • Chinese are among the top 10 spenders in India.
    • Indian tourists surged by 70% in China.
    • Top 10 destinations for Indians (2019).
  • Diaspora:
    • 5000-7000 multigenerational Chinese in India since the British era.
    • 15,000 Indians in China.
  • Bollywood: China is an emerging market for Indian films.
  • Inter-Cultural Institutes:
    • 10,000 Yoga schools in China.
    • Confucius Institutes: 3 in India for studying Chinese language and culture.

 

  1. Security/Energy & Others
  • Cooperation in the Oil and Gas Sector: Both countries depend on energy imports.
  • ONGC and CNPC: Agreements to explore energy sources in third countries.
  • Energy Competition: China’s pipeline in Myanmar and involvement in Chabahar and Gwadar.
  • Defence: Annual Defence Dialogues.
  • Piracy Agreement: India, China, and Japan share naval assets in the Gulf of Aden.
  1. Multilateral Forums
  • Shanghai Cooperation Organisation (SCO)
  • G20
  • BRICS
  • China as an observer at SAARC
  • G5
  • Asian Infrastructure and Investment Bank
  • China-Russia-India (RIC) Forum

 

Bilateral Economic and Commercial Dialogue Mechanisms

  • High-Level Mechanism on Trade and Economic Cooperation at Wuhan
  • Joint Group on Economic Relations, Science and Technology
  • Strategic Economic Dialogue (SED) (2010)
  • NITI Aayog – Development Research Centre of China (DRC) Dialogue (2015)
  • India-China Financial Dialogue (2019)
  • Cooperation in Railway Sector: MoU on cooperation in the railway sector was signed in September 2014.

 

Importance/Benefits of India-China

  1. Economic Importance
    • Goods Swaps: Goods swap for 500 products according to the Confederation of Indian Traders, which can lower the trade deficit in India’s favor.
    • Employment: Chinese companies establishing factories can create jobs for Indians.
    • Technology Transfers: Technology transfer from China can help reduce dependence on imported parts and boost “Make in India.”
    • US-China Rivalry: India can benefit from the US-China trade war and export to fill in gaps created in the two economies.
    • IT Exports: China is a good destination for Indian IT and software exports.
      • Example: India has launched three IT corridors in China that will facilitate partnerships between Indian and Chinese companies.
    • Chinese FDI: Important for Indian start-ups and companies, especially during the early stages.
  2. Strategic Importance
    • Pakistan: China can be a good buffer to keep Pakistan in line.
    • Piracy Operations: Both navies can cooperate against common threats and counter piracy in the Indian Ocean.
    • Africa: Cooperation in infrastructure development through combined efforts can benefit all stakeholders.

 

  • Post US Withdrawal from Afghanistan: India and China have trained Afghan diplomats and soldiers, creating a mutual interest.
  • 2+1 Dialogue: Trilateral talks to engage with Nepal and other nations, enhancing bilateral roles and ensuring cooperation.
  • Peaceful Borders: Cooperation and peace on the Indian border allow for a focus on development rather than defense.
  • Countering Western Narratives: Indo-China cooperation can enable a new world order and replace the West-led narrative.

 

  1. Cultural Importance
    • Historical Ties: Both nations have had historical links, from Buddhism to the Nehru-Enlai talks.
    • Cultural Exchanges: Bollywood’s outreach and India’s soft power exports can bridge the cultural gap between the two nations.
    • Geographical Proximity: Can enable more transportation and cultural exchanges between the two nations.
  2. Multilateral Importance
    • Globalization: Both nations support each other’s stance on WTO issues, protectionism, and open trade conditions.
    • Climate: Both agree on climate talks and recognize the need to curb fossil fuel emissions.
    • AIIB: India, as a founding member, views it as an alternative to the World Bank.
    • BRICS: An alternative forum to the UN that addresses emerging economic issues and includes the New Development Bank.
    • International Institutions: Both nations have advocated for democracy within the IMF and World Bank.
    • SCO: India is a full member of the SCO, which serves as a platform to deliberate on regional and bilateral issues.

Concerns/Issues with Indo-China Relations

  1. Economic Issues
  • Dumping: Cheap Chinese products are flooding Indian markets and damaging the viability of domestic products.
  • OBOR: China’s economic predation through this project has the potential to disrupt India’s trade relations, especially with neighbors who have joined OBOR.
  • Contesting in Africa: China is taking over mines and natural resources in Africa and other parts.
    • Example: Top FDI source in Africa at 16 percent of total FDI into Africa.
  • High Import Dependence: Excessive imports have made India dependent on China for critical electrical machinery and pharmaceutical ingredients.
  • Trade Deficit: India has a high trade deficit with China, undermining economic sovereignty.
  • Pharmaceuticals: 70% of API is imported from China, making the Indian drug industry heavily dependent on China.
    • Example: China suspended cargo flights carrying essentials during the COVID surge.
  • India’s Market Access: IT and pharmaceutical sectors in China are not accessible by Indian companies.
  • Agriculture Market Restrictions: China allows very low imports of Indian agricultural products.
    • Example: APEDA reported a 22% decline in cereal exports to China since 2014.
  1. Strategic Issues
  • Border Infrastructure: China has been upgrading its border infrastructure for military navigability.
    • Example: Construction of a new road by China through the Chumbi Valley in Doklam, close to the Siliguri Corridor.
  • Land Grabbing: China has been violating the LAC in Ladakh and grabbing territories on the Indian side.
  • Overseas Presence: China has been increasing its “String of Pearls” theory, strategically encircling India.
    • Example: Military base in Djibouti, development of Sri Lankan ports.
  • Support to Pakistan: Excessive support and engagement with Pakistan, including defending them on terrorism accusations.

 

  • Claims over Arunachal: China has been stepping up its presence across the Arunachal border, even renaming districts to reflect its claims over the state.
  • Barrier to India’s Multilateralism: China has been blocking India’s attempts at multilateral forums (NSG, UNSC).
  • Lack of Stance on Terrorism: China has shown support to extremists in Kashmir and Pakistan-based outfits.
  • Neighborhood Influence: China contests India in Nepal, Sri Lanka, and Bangladesh through cheap economic loans and development assistance.
    • Example: China overtook India as the biggest FDI source for Nepal in 2014.
  • Bio-Terrorism Doubts: China has been under scrutiny regarding the origin of the coronavirus and whether it was a manmade pathogen.
  • Cyber Attacks: China has a strong cyberattack unit capable of debilitating India’s digital infrastructure.
    • Example: India was one of the most cyber-targeted countries globally in 2019, with over 50,000 cyber-attacks from China alone.

 

Quotes by Analysts (For use in Introductions and Conclusions)

  • S. Jaishankar (EAM): “Leading voices” of the world must “respect international law and recognize the legitimate interests of partners.”
  • “The strong do what they can and the weak suffer what they must.” China’s territorial aggression is the result of its military and economic strength. (Source – Indian Express)
  • Manoj Joshi: “India’s relations with China involve the four C’s — conflict, competition, cooperation, and containment.”
  • Samir Saran (ORF): “New Delhi must, and can, stand up to China when its national interests are at stake and cleverly deployed political muscle will succeed in some instances.”

In today’s world, China cannot be ignored due to its trade importance; however, at the same time, India must find ways towards “Atmanirbharta” and must stand its ground like it always has on the military front.

 

INDIA – CHINA CURRENT ISSUES

Recent Developments

  1. New Border Laws: China’s new land border law came into force in the new year (2022). The law stipulates, among other things, that China abides by land border treaties made with or jointly acceded to by foreign countries.
  2. Ban on Chinese Apps: Recently, the Ministry of Home Affairs recommended a ban on 54 Chinese mobile applications, including the popular game Garena Free Fire, over concerns related to privacy and national security.
  3. Increasing Trade: In 2021, India’s trade with China crossed USD 125 billion, with imports from China nearing a new record of USD 100 billion, indicating continued demand for a wide range of Chinese goods, particularly machinery. This occurred even as relations reached a new low due to the prolonged military standoff in eastern Ladakh.
  4. Military Standoff in Eastern Ladakh: Began in May 2020 following a violent clash in the Pangong Lake areas. On January 12, 2022, both sides met for the 14th round of Corps Commander-level talks to end the deadlock in the remaining areas, and they agreed to meet again shortly.
  5. Renaming of Places in Arunachal Pradesh: China has recently renamed several places in Arunachal Pradesh as part of its claim to the Indian state.
    • On a global scale, India condemned the move and responded with a clear statement that assigning invented names would be futile and would not change the reality that these places are part of Arunachal Pradesh.
  6. Bridge across Pangong Lake: It was recently found that China is constructing a new bridge on Pangong Tso, which will provide an additional axis for faster deployment of troops between the north and south banks of the lake, closer to the LAC (Line of Actual Control). The bridge is located on Chinese territory, and the Indian Army must account for this in its operational plans.
  7. Setback for CPEC: Pakistan’s new government has initiated a process to abolish the China-Pakistan Economic Corridor Authority, with the planning minister stating it was a “redundant organisation” that wasted resources and thwarted the speedy implementation of the ambitious regional connectivity program.

 

Border Areas under Dispute

  1. Share of Border: India shares 3,488 km of the border with China, running along the states of Arunachal Pradesh, Sikkim, Uttarakhand, Himachal Pradesh, and Jammu & Kashmir.
  2. LAC is Divided into Three Sectors:
    • Western: The boundary dispute in the Western Sector pertains to the Johnson Line proposed by the British in the 1860s that extended up to the Kunlun Mountains and placed Aksai Chin in the then princely state of Jammu and Kashmir.
      • Galwan Valley Issue: The valley is strategically located between Ladakh in the west and Aksai Chin in the east (currently controlled by China).
    • Middle: In the Middle Sector, the dispute is a minor one. It is the only area where India and China have exchanged maps on which they broadly agree.
    • Eastern: The disputed boundary in the Eastern Sector of the India-China border is over the MacMahon Line.
  3. China’s Claim over Tawang: China claims Tawang in Arunachal Pradesh as part of South Tibet.

 

Reasons for Unresolved Border Dispute

  • Shimla Agreement of 1914: To demarcate the boundary between Tibet and North East India, a convention was held at Shimla in 1914 with representatives from Tibet, China, and British India. The agreement was signed by British India and Tibet but not by Chinese officials. Therefore, China rejects the Shimla Agreement and the McMahon Line, claiming that Tibet was not a sovereign state and thus lacked the authority to conclude treaties.
  • Chinese Tactics: China has intentionally left its territorial claims ambiguous in several disputes. They have not stuck to previously agreed positions, using border skirmishes along the LAC as a tool to pressure India on other issues.
  • Undemarcated Borders: There is no official map in the public domain depicting the LAC. The current understanding reflects territories under each side’s control, pending resolution of the boundary dispute.
  • Lack of Mutual Trust: The agreements between the countries were not built on a foundation of equality and mutual trust.
  • Chinese Visa Policy: China provides stapled visas to residents of Arunachal Pradesh and Jammu & Kashmir (POK), which angers India.
  • Growing Power Imbalance with China: China’s military is better funded and equipped, and China, with an economy five times the size of India’s, is investing heavily in the region to counter Indian influence.
  • Resourceful/Strategic Sections: Ladakh is valuable to India as it supplies freshwater and connects the Chinese Xinjiang province with western Tibet. This area is also significant to China.

 

Possible Impact of Unresolved Border Dispute on India

  • Possibility of War: An aggressive boundary dispute between India and China, along with China’s collusion with Pakistan, might lead to a full-blown war between three nuclear-armed states.
  • Impacting Trade: Frequent disputes between the two countries adversely impact economic trade and business, which is unhealthy for the development of both nations.
  • Economic Constraints: Building military capability requires a serious debate, especially given India’s economic situation, which may not allow a significant increase in the defense budget in the foreseeable future.
  • Strengthening China’s Alliance with Pakistan: This situation creates the reality of a two-front conflict with hostile nuclear-armed neighbors.
  • Negative Perceptions: Indian public sentiment toward China has soured further due to the pandemic, leading to calls to boycott Chinese products, partners, and sponsors.
  • Hampering India’s Capability as a Regional Leader: Failure to resolve its own disputes hampers India’s credibility and capability as a mediator.
  • Mobilization of Forces: Mobilization of forces due to constant skirmishes and small clashes has messed up the force mobilization scenario.

Bilateral Trade and Trade Dispute

  1. Bilateral Trade
    • Growth: The year-on-year growth in bilateral trade with India was among the highest among China’s major trading partners, at 43 percent.
  2. China’s Trade Deficit
    • Deficit: In 2021, India’s trade deficit with China rose to USD 69.38 billion.
    • Market Access: For more than a decade, India has expressed concerns about China’s expanding trade deficit and has urged China to open its markets to Indian IT and pharmaceutical products.

 

Steps Taken to Reduce Dependence on China

  • Scrutiny: Increasing scrutiny of Chinese investments in various sectors and excluding Chinese companies from 5G trials.
  • Prior Approval of Foreign Investment: To prevent “opportunistic takeovers” of domestic firms, the government now requires prior approval for foreign investments from nations that share a land border with India, limiting FDI from China.
  • Ban on Chinese Applications.
  • Domestic Production of API: To reduce reliance on China for APIs (Active Pharmaceutical Ingredients), the government approved in March 2020 a package of four schemes totaling Rs. 13,760 crore to boost domestic production of bulk drugs and medical devices.
  • Identification of Sectors to Reduce Imports: The Ministry of Commerce and Industry identified 12 sectors in 2020 to help India become a global supplier and reduce imports.

 

Way Forward

  1. For Border Dispute
    • Pressure Points: India could leverage the sensitivity of China to the one-China policy and vulnerabilities like Tibet and Hong Kong protests to influence a change in China’s attitude.
    • Shifting Focus: To counter China, India must look for options beyond the LAC. The South China Sea/Indian Ocean Region offers favorable geopolitical options.
    • Going Global: India should adopt a global stance to defend against China. India’s response to Chinese power in the Himalayas should involve assuming a global role.
    • Building Alliances: India must build power-balancing alliances. Many countries are pushing back against Chinese influence, particularly in Southeast Asia.
    • Use Informal Summits: Both sides should take guidance from the Wuhan and Mahabalipuram summits to develop India-China relations without letting differences escalate.
    • Continuing Communications: Through the Special Representatives mechanism and meetings of the Working Mechanism for Consultation and Coordination on border affairs.
  2. To Reduce Trade Deficit
    • Formulate Roadmap: Based on the economic complexity model, the Indian government can develop proper roadmaps through compartmentalizing sectors by technology and innovation.
    • FTAs with Other Countries: India has negotiated Free Trade Agreements (FTAs) with the UAE and Australia. Further, the government is in the process of negotiating with the EU and the UK.
    • Atmanirbhar Bharat: Moving towards self-reliance and Atmanirbhar Bharat.
    • Setting up Big Manufacturing Units or Clusters: India is working to develop a semiconductor chip industry to reduce dependence on China.
    • Improve Anti-Dumping Duties: China is known for dumping goods in other countries. India has imposed anti-dumping duties on five Chinese products—such as aluminum goods and chemicals.
    • Tighter FDI Policy: A tighter FDI rule where the central government’s approval is required for any FDI in India from neighboring countries. This will help prevent a takeover by Chinese companies while reviving the economy.

 

INDIA - CHINA

Leave a Comment

Related Posts