The Economsit
May 25, 2013
Flowery rhetoric fails to hide difficulties in the bilateral relationship
“A few clouds in the sky cannot shut out the brilliant rays of our friendship”: on his first foreign trip as China’s prime minister, Li Keqiang was determined to make his visit to Delhi, India’s capital, a success. On May 21st, bouncing with energy and quick to flash a smile, Mr Li enthused over his “candid and friendly” meetings with India’s political and business leaders, notably with Manmohan Singh, the prime minister (pictured with Mr Li, above). Mr Li spoke further of “strategic” and “maturing” relations, of mutual trust, and of shared regional interests. And with some tact he responded to Indian concerns about disputes along the 4,000km (2,500-mile) border, a ballooning bilateral trade imbalance in China’s favour, and cross-border rivers.
Yet the smiles were chiefly for show. Mr Li’s trip, after all, comes only weeks after satellites and drones showed a Chinese military force camped 19km inside the Indian side of the line of control, high up in Ladakh, in the Himalayas.
Brief incursions by both armies are routine, but this one, exceptionally, lasted for three weeks. Indians say Chinese diplomats appeared to be caught unawares, suggesting they had been kept deliberately in the dark about the incursion. Indians triggered a diplomatic mechanism supposed to deal with on-the-spot flare-ups along the border, to disappointing effect.
India, said one official in Delhi on the eve of Mr Li’s visit, has to be “absolutely clear-eyed” about Chinese intentions. For all Mr Li’s sweet talk of “handshakes over the Himalayas”, Indian policymakers see the People’s Liberation Army asserting itself. Not only did the incursion come on the eve of Mr Li’s visit; it also followed a call by the new president, Xi Jinping, to fix the border “as soon as possible”.
Perhaps China was raising tensions as a prelude to possible negotiations—an old Chinese ploy. And yet differences over Indian policy, as over much else, seem to run deep inside the Chinese establishment. Many Chinese strategists want a tranquil western flank, especially with growing security priorities in the South China Sea and East China Sea. But, says a Chinese diplomat, internal scrapping over policy is, at times, “very, very hot”. Some Indian observers believe that an assertive Chinese army is trying to force diplomats’ hands when it comes to the border question.
As for ordinary Indians, they continue to be unenamoured of their neighbour. An opinion poll conducted last year but only just published suggests that more than four-fifths of Indians consider China to be a security threat. Three-quarters want closer ties with America.
The economic relationship, though fast-growing, appears not to help. Bilateral trade has soared from just $340m two decades ago, to nearly $70 billion. The two prime ministers say they are aiming for $100 billion by 2015.
That is welcome. But China’s economy is nearly five times larger than India’s. The value of India’s exports of ore, chemicals, cotton, plastics and fish to China is outweighed, three-to-one, by Chinese exports back of electronic goods, machinery, mineral fuels and silk. A Chinese academic judges that the shortfall with China accounts for half of India’s growing trade deficit, when imports of oil are not counted. In India it is becoming a political issue.
Mr Li spoke this week of India getting better access to the Chinese market. Yet much of the problem is India’s: its manufacturers are too weak to export much. Still, lifting some barriers will help. Indians hope to sell more pharmaceuticals and foodstuffs (buffalo meat, anyone?). In particular, IT and outsourcing firms want to expand in China. On his India trip Mr Li visited an especially successful one, Tata Consultancy Services, in Mumbai.
Yet exasperation abounds. In April India’s embassy in Beijing reported on growing numbers of its firms targeted in trade disputes in China. Chinese observers of India retort with anecdotes of Indian political meddling against their country’s firms. Partly as a result, of proposed Chinese investment worth $66 billion in India, only $500m has actually been realised, a Chinese academic estimates. A similarly piddling sum of Indian capital is in China.
Elsewhere, one tiny drop of comfort came from Mr Li’s visit. India worries about ambitious Chinese plans to tap Tibetan rivers for power generation. A Chinese water expert from Nanjing, for instance, suggests that Tibet offers a potential 200,000MW from hydropower, while just 500MW has been harnessed.
Downstream in India, environmentalists and security hawks fear that even run-of-the-river hydropower dams, which do not use large reservoirs, could disrupt the timing of water flow. To improve trust, short of a full river treaty, Mr Li agreed to share data on river flows, notably on the mighty Brahmaputra, for five more years, and pass on warnings of floods for some months of the year. That is welcome, even if it merely means renewing existing practices. Much as can be said about the rest of Mr Li’s trip.
