The question is one of normalizing, and not transforming, our relationship with China.
Given its hegemonic global tendencies and the national security threats to India, the path to forging ties with China is fraught with complexities and uncertain outcomes. The asymmetrical military and economic balance between the two countries limits the available options and necessitates that India develop a long-term strategy for the Sino-Indian relationship. This strategy must be crafted within the global context of how other nations are addressing the varied challenges presented by the Dragon-nation.
It is no longer adequate to defer the resolution of basic differences or compartmentalize border, geopolitical, and military disputes as India has done for several decades. Although a comprehensive framework for India’s settlement has not yet been determined, due care must be taken to align immediate and short-term adjustments and measures with the trajectory of the long-term plan. Such a strategic and patient approach to state policy mirrors the Chinese method of handling matters of significance.
China continues to harbour differences and disputes of varying intensities with many countries, extending beyond its immediate neighbours. The latest to experience tensions are the so-called ASEAN Six, comprising Indonesia, Thailand, Malaysia, the Philippines, Singapore, and Vietnam. According to a research report by DBS Bank of Singapore, these nations have attracted more foreign direct investment as a proportion of world inflows than China for two consecutive years. Until recently, this group was considered to be in China’s sphere of influence. A significant point of contention is the right of passage in the South China Sea, where the Philippines secured a favourable ruling from the International Tribunal for the Law of the Sea. However, China has dismissed the verdict and continues to assert control over the Sea disrupting traffic along a crucial maritime route. These actions also infringe upon the economic zones of these countries. As a result, they are now collectively developing a code of conduct for the South China Sea to establish a common navigation protocol and to present a unified front against Chinese manoeuvring. With the support of the USA, the waters near the Philippines could become a flashpoint for superpower confrontation. Despite this, China shows no inclination towards accommodation with them or Japan, with whom it has a territorial dispute over the barren Senkaku Islands, as well as trade-related tensions. The dispute with South Korea is twofold, encompassing both trade issues and concerns over North Korea, whom China has armed to the teeth.
Outside Asia, in the USA, China faces an opponent it cannot easily match. Since 1972, when President Nixon initiated their engagement, until 2017, when Donald Trump took office, the détente borne from the build-up of economic cooperation had endured. However, with Xi Jinping’s assumption of office in late 2012, the Dragon began to display more closed and autocratic tendencies. He cracked down on political liberalization while attempting to preserve market openness, as Reuters noted in a report filed early January. Many of his measures were in violation of the terms of China’s accession to the WTO, which the USA facilitated in 2002. Despite such multi-dimensional support, US efforts could not effectuate any fundamental changes in China’s political system, economy, or foreign policy. In recent years, Xi has shifted toward increasing the role of state-owned enterprises and tightening controls on private firms. He describes it as “a new model for great-power relations” that stresses an equal partnership.
Discussing China’s duplicity in managing its foreign affairs, Professor Joseph Nye of Harvard University, a former senior State Department official during the Carter and Clinton Administration, who had coined the term “soft power”, recently said that while Xi Jinping sought economic cooperation with the US, he had simultaneously instructed top commanders of the PLA to prepare for conflict, citing the West’s likely refusal to accept China’s ascent. Pronounced Chinese belligerence is currently being witnessed in the form of large-scale cyber theft of intellectual property and aggressive actions in the South China Sea, where China has exceeded legal boundaries by creating artificial islands. In 2015, Xi reportedly assured President Barack Obama that he would not militarize these islands, only to proceed with their fortification.
China’s behaviour echoes that of a burgeoning superpower, yet its actions often elicit strong global responses, especially from America, where the loss of jobs to Chinese imports has fuelled embitterment. In many ways, it was this sentiment that contributed to the rise of Trump’s populism and protectionism. US-China relations are now strained, marred by a trade war and a host of other issues, including the origin of Covid-19. Tensions continue over self-governing Taiwan, which China considers a renegade province destined for reunification. Unsurprisingly, the Americans view China as both an economic and a national security menace. In response, Washington has imposed additional tariffs on Chinese goods and restricted the export of certain technologies, such as advanced semiconductors.
Similarly, China’s ties with EU nations, its largest export market, have also nosedived.
Beyond the Ukraine conflict, where China has overtly aligned with Russia, economic disparities, much like those with the USA, are becoming a primary concern. The EU’s imposition of a carbon levy on materials like steel, of which China is the world’s top producer and exporter, has become a contentious issue. Following suit, the UK has introduced a similar carbon tax. The USA and Japan may also adopt comparable measures to help curb emissions. These initiatives signal potential further disruptions in trade flows and a deepening rift between China and Western nations, spurred by such “green protectionism.” At the core lies an enduring concern over the relocation of manufacturing bases, previously affected by low-cost competitors like China that rely on dirtier energy sources such as coal.
With the wealthier and larger countries increasingly distancing themselves from China, and their numbers growing, India is not alone in attempting to figure out a strategic response. As this process gains momentum, an essential element will be to catalyse collective action and forge coalitions. A promising start has been seen with the revitalization of the Quad, the formation of AUKUS (Australia, UK, USA), and the launch of the Indo-Pacific Economic Framework (IPEF) initiated by the USA. Other international bodies, including multilateral agencies, are also expected to contribute, considering their stakeholder-composition and decision-making structures. India’s endeavours to engage South Asian nations, particularly its neighbours, and to strengthen BIMSTEC, SAARC, and SAFTA have become imperative. Equally important is consolidating its position as the leader of the Global South.
In view of the anticipated economic slowdown, China’s financial leverage to draw developing countries onto its bandwagon is likely to wane. Already, a number of “Belt and Road Initiative” beneficiaries have grown wary, re-evaluating their involvement, with countries like Italy opting out of the scheme, designed to further China’s geopolitical ambitions. The inflow of foreign investment into China, which brings modern technology and up-to-date know-how, has notably diminished, and is expected to reduce China’s capacity to exert influence correspondingly. With domestic consumption further suppressed and reliance on exports remaining a key driver of growth, coordinated measures by affected nations—such as the carbon tax—could potentially diminish the aggregate imports from China. Additionally, as the state’s ability to manipulate the renminbi exchange rate tightens, this could become another factor limiting its imports.
Such eventualities at the global level could be advantageous for India, helping it navigate the immediate term until more coalitions are formed and become effective and its economy continues to gain sufficient resilience. With the kind and volume of imports India receives from China, it could then acquire a degree of leverage as China struggles to boost its exports. With the Indian economy growing and as its domestic market expands, this advantage could intensify, even influencing technology imports. However, caution is necessary to ensure that no undue restrictions, especially steep increases in duties, except for security considerations, are imposed on trade and investment transactions with China until India develops the capacity to be self-reliant. Overly restrictive measures can be counterproductive. Maintaining such working rules is crucial, considering that China, with a GDP five times that of India’s and growing annually at a modest 4%, remains well-positioned. The technology gap with China is also significant. It will take time for India to develop these technologies indigenously or to access them from other sources. All countries are reluctant to share their know-how and have established layers of protective measures. This is not to advocate indiscriminately for Chinese technology, which often does not conform to global standards and can pose challenges in maintenance and replacement of equipment using it. However, as indicated, several necessary technologies are likely to become accessible only alongside investment inflows.
In the long run, India has little choice but to significantly and consistently accelerate its economic growth beyond what it has achieved in any decade so far. It’s worth recalling that in the three decades since 1990, China’s GDP grew at an average of 10% compared to India’s 5%. Undoubtedly, maintaining such a high pace of growth is challenging in a democracy and a diverse country like India. Yet, it’s important to remember that ultimately international status and standing are contingent on economic progress. Even the much-needed military capability to counter a country like China, known for its long history of seeking dominance, can only stem from a nation’s internal strength.
Dr Ajay Dua, a development economist, is a former Union Secretary, Ministry of Commerce and Industry.