Economic Highlights

New Delhi, 19 September 2014

Chinese Investments

INDIA MUST WIN TRADE TERRITORIES

By Shivaji Sarkar

It was no veni vidi vici for Chinese president Xi Jinping. He wants to conquer Indian land but not hearts. His $20 billion investment promise is more a show off to suggest he can conquer even the Indian economy that rides on a $40 billion trade deficit with China.

Xi doesn’t really reciprocate the warm welcome extended to a Chinese dignitary after 60 years of Premier Zhou en Lai’s visit by Prime Minister Narendra Modi at Ahmedabad. The Gujarati hospitality was expected to bring warmth in the relationship and a cooler border. The belligerency at the Ladakh border increasing with Jinping’s visit causes more unease.

Would the promised investment happen? Should India accept or allow those investments? These are the burning questions. Modi’s retort on the border issue, something an Indian premier least loves to do to a guest, was appropriate. Indians are more seized of it than being charmed by the visiting dignitary. China certainly has lost a great opportunity of winning a friend.

China has a disconnect between its civilian administration and the People’s Liberation Army (PLA). But Jinping is considered PLA’s own man and he is part of its two crucial committees. So he cannot feign ignorance as the Chinese foreign minister had done on similar stealthy incursions. The PLA incursions had coincided with premier Li Keqiang’s visit to New Delhi last year. It appears to be a well-thought of design to pressurise India to accept Chinese terms.

The visit has raised the stature of Modi. Even the opposition Congress finds merit in Modi’s dealing with Jinping. Yes, China needs a tough handling despite whatever Indian effort to engage it in international affairs like BRICS or its development bank at Shanghai. Modi has hinted that India is capable of it.

Modi’s summits with three of the world’s powerful leaders Japanese prime minister Shinzo Abe in Tokyo, Jinping in New Delhi and President Barack Obama in Washington, DC this month marks a new chapter in Indian diplomacy in the post-Manmohan Singh decade.

Modi's main focus is on how and how quickly he can uplift the economy to achieving a growth rate of 8 per cent every year. At the moment, his political instincts, interests and needs converge with the country's hunger for higher economic growth. Modi will move ahead with whatever makes the economy and -- eventually him -- stronger.

For his economic plan to succeed, he needs investment and technology from China, the United States, Japan, Germany and South Korea amongst many countries. He wants to boost infrastructure through the Foreign Direct Investment route. He wants manufacturing in India to go up from 16 per cent to 25 per cent in less than a decade.

In the process, Modi wants more and more joint collaborations of items and weapons India imports traditionally. He had expected China to help India and itself by creating the greatest synergies of the largest populated countries. Jinping certainly has, if not belied, dampened the spirits.

There are strange mismatch. Only short while before Jinping’s visit Chinese Consul General in Mumbai said that the investments would be to the tune of $100 billion. Is it a short shrift by China? Possibly so. Having come from a visit to Sri Lanka and Maldives, Jinping’s focus was certainly not India. He wants to keep India engaged but his prime aim is to encircle India either through the sea silk route or the Karakoram silk route, already in Chinese-Pakistani occupation.

Those who say that China could be kept tied down by its large investments in India have to think. China knows that even without investing its dollars, it has not only been able to capture Indian markets but also erode its manufacturing base through silly exports of toys, mobiles, electronic goods and photo frames. China has no illusion. It has least interest in “making” in India. Howsoever, India might like to do so.

Its investments are restricted to Gujarat and Maharashtra, the western gateways and one high-speed rail corridor. African countries have seen that Chinese investments opened up floodgate of jobs for Chinese nationals. Africans have not benefited much.

There are also talks of some television and bollywood joint ventures. But we have seen in the past that such ventures even with culturally more compatible Bangladesh had limited success.

China promises India greater market access, something not difficult to do but not easy to ensure. Indian marketing is not aggressive unlike that of China, which would certainly not like that India intrudes into their profits. Hopes remain, but trade imbalance is likely to continue unless India gets WTO tariff pattern amended and takes strong action against Chinese dumping.

Jinping visit has proved that China remains a tough bargainer, more hawkish on its territorial aspirations be it in Tibet, South-East Asia, South China Sea, Vietnam or Japan and of course India.

It has almost thrown spanners on ONGC explorations in the Vietnamese waters. It has bagged Maldives airport contracts that had been earlier awarded to an Indian firm. In Sri Lanka, it is going beyond building the Hambantota port.  Sri Lankan markets that thrived on Indian exports have more Chinese goods, textiles and fruits. He put off his visit to Pakistan but soon after leaving India went to Tajikistan.

China is unseating India at all possible places in its neighbourhood itself. It has been nudging south-east Asian countries also to play cool to India and supports Pakistan, despite its export of terrorism to Uzbekistan.

India has to be circumspect. China has not come off its 1954 Zhou en Lai visit mindset much though India wants to move ahead. The Chinese border provocations cannot be overlooked for investments in Maharashtra and Gujarat.

Had the Jinping visit been a success and increased Indian confidence, it would have helped Modi in his next talks with Obama. India has to still depend on the Japanese and the US more for a long-term relationship.

China should be kept engaged but India has to reach out to its neighbourhood more, something Modi is trying to do, to outwit China in its international trade and strategic manoeuvres. The border incursions are part of Chinese strategy to keep India look inwards. India has to capture Chinese trade territories and also formulate a strategy to counter China’s aggressive deterrence. -- INFA

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