Dragon breathes fire and business

Any dramatic breakthrough in India’s ties with China was not on the cards when Chinese President Xi Jinping recently visited India, but the seeming rapport that the Chinese leader and Prime Minister Narendra Modi established was in itself deemed to be significant. There was a degree of frankness and candidness in their discussions, which apparently augured well for the future of the relationship.

The Chinese are cold and calculative when it comes to furthering their national interest in bilateral relationships and so it was with India. At this point, it suits both to work towards greater trade and commercial exchanges and to that extent, the talks between the two countries took a fair course.

The Indians are wholly aware that Pakistan enjoys a strategic relationship with China, just as we do with Japan. Just as much as Islamabad sees China as a bulwark against India, New Delhi sees Japan as a counterpoise against the Chinese. As long as there is a balancing of strategic interests, there is room for economic relations to be treated on a different footing.

True to Chinese style, there was the typical Chinese gambit of incursion by some troops into Indian territory on the eve of Xi Jinping’s India visit. Such a behaviour has been exhibited with regularity on the eve of all recent political visits. Before the Indian Vice President’s visit to China, a controversial map was released by China, apart from transgression by PLA troops in Pangong Lake.

Last year, before Chinese Prime Minister Li Keqiang’s visit to New Delhi, there was the Depsang Valley intrusion. In fact, it is difficult to recall any visit where, the time before bilateral talks has been free of negative incident. Largely, the perception is that such incidents are deliberately planned, to put Indian decision-makers on the back foot and in order to test their resolve.

What is however baffling is Xi Jinping’s call to his military cadres to be prepared for a ‘regional war.’ Apparently, he was referring to a limited war with India to re-emphasise China’s claims to some territory that forms part of India. Was this a deliberate escalation in view of Prime Minister Modi’s impending visit to the US, with an eye to browbeating the Indians? It goes without saying that such a pattern must be given up and there should be greater maturity in dealing with each other.

That this time when Xi’s visit was underway, Prime Minister Modi put out a tough message to China, is a sign of the changing times. The incursion failed to carry any justification. If anything, it detracted from the real value of Xi’s visit, which stood out like a sore thumb in an otherwise smooth bilateral.

Since Modi had just returned from a visit to Japan, there was a natural tendency on the part of political commentators to compare the two bilateral exchanges and it was the Japan visit that walked away with the cake in terms of perception in India.

Xi’s visit came in for some criticism over the lowering of investment figures promised, from $100 billion reportedly estimated by a Chinese consular official, to the mere $20 billion announced by the leader, particularly as it compared unflatteringly to the Japanese commitment of $35 billion earlier this month.

As things stand, if the commitments made during the two bilateral exchanges were to fructify, India would be a major gainer, with a very substantial inflow of investment into India’s infrastructure, which could give a fillip to this country’s growth.

While the Japanese have committed US$35 billion over the next five years as investment into India, the Chinese commitment is US$20 billion. One would have expected China to be one up on the Japanese.

Besides, the relationship with Japan has a strategic content too, which is not so in the case of the Sino-Indian relationship. The Indo-Japanese relationship has a military dimension to it too, which is not true of Sino-Indian relations.

 But there is acute realisation in China of India’s huge market for goods and services. This may well be the time when India’s massive negative trade balance with China may be addressed, at least partially, with greater Indian exports being funnelled into China.

China has been increasingly resorting to measures such as dumping – it sells its products in the Indian market at very cheap prices. The result is that it has the potential to cause injury to the domestic producers. India’s infrastructure does not permit it as yet to observe huge economies of scale like those of China. Having this competitive advantage, the Chinese industry is bolstering itself by diverting its products to India. But in the process, it is causing irreparable damage to the Indian domestic market and producers.

China’s increasing dumping activities here are evident from a look at sectors such as rubber, steel, auto parts, and aluminium. Its tyres sold in India are 30 per cent cheaper than the cost of our Indian made ones. About 80-85 per cent of the demand for tyres is met with Chinese imports.

As such, the share of domestic producers in the market is a meager 15 per cent to 20 per cent. Moreover, even those producers are not able to fully utilise their production capacity due to the rising share of China in the market. China is allegedly using the traditional Indo-Nepal trade route to dump its low cost and less durable consumer goods in India.

Chinese products have a huge demand in the Indian market. They are very popular with people who wish to buy fake versions of their favorite brands at throwaway prices. From electronic products like iPods and DVD players to warm clothes, porous borders like Soloni have become the hub for cheap Chinese goods.

Smugglers take advantage of the easily accessible Indian-Nepal border to smuggle Chinese goods and products to India. They even use the improper routes leading to India in order to avoid the custom duty officers located at the borders.

Hawk Eye

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