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Business over border for India-China
July 10, 2013, 5:06 am

Indian Defence Minister A K Antony’s visit to Beijing – part of series of high level exchanges between India and China – ended with the positive proclamation that there had been a “real movement forward” on the Border Defence Cooperation Agreement (BDCA). Antony’s was the first visit by an Indian defence minister to China in eight years and was meant to reciprocate the visit of his counterpart General Liang Guanglie to India in September last  year.

The progress on the BDCA does not mean that the border dispute between the two countries is anywhere near a settlement. It only means that the two sides have reached some understanding on preventing incursions by their respective armies – such as the one in this April in the Depsang Valley in Ladakh – in areas perceived by the other to be its territory. The boundary between India and China – for the most part a dotted Line of Actual Control on the map is perceived differently by the two countries. The boundary is yet to be demarcated on the ground and delineated on maps.

However, even a movement forward on the BDCA is progress in the context of the long running border dispute which flares up periodically even as the economic relations between the two countries keep strengthening – the two countries are targeting a trade turnover of  $100 billion by 2015 from the $66 billion it was in 2012.


“The progress on the BDCA does not mean that the border dispute between the two countries is anywhere near a settlement” [AP]

Hours before Antony’s visit , a serving Peoples Liberation Army (PLA) Commander, Major General Luo Yuan, deputy director general of the world military research department at the PLA academy, had warned India against stirring up “new trouble” on the border. This was taken by observers in New Delhi to mean that the Chinese were pointing to India’s decision to raise a full-fledged Mountain Strike Corp in the Eastern Sector, where China lays claim to the entire Indian state of Arunachal Pradesh, calling it “Southern Tibet”.

India is also planning to upgrade the infrastructure along the 4,000 km boundary with China in the Eastern Sector besides raising two independent infantry and armoured brigades each to counter Chinese offensive capabilities. The unusual warning by the PLA General meant that the Chinese had clearly taken note and were not happy. Although Chinese officials were quick in pointing out that Yuan’s view did not represent the official view.

The overall exchange of high level visits between India and China is linked to the clear view among Indian foreign policy makers – particularly, the Prime Minister’s Office and the Ministry of External Affairs, that India must strengthen its relationship with China. However, in the light of the recent tensions in Ladakh, it had become even more important to build peace and tranquillity on the border with China.

It will take a long time for India to develop military capabilities to prevent China from the occasional show of strength on the border. Therefore, the Indian understanding is that engaging China seriously on maintaining peace along the border would help constrain it from committing periodic transgressions pending a mutually acceptable settlement.

Beijing took the initiative and came up with a draft of the BDCA which was not acceptable to New Delhi. India’s objective in reaching such an agreement would be twofold:  preventing China from disrupting the status quo on the border; and not having a text that would prevent it from building defensive infrastructure along the border – such as creating mountain division, setting up advanced landing strips for aircraft and road and other infrastructure.

Confidence building- Trade and investment

However, India’s attempt to strengthen ties with China is not merely tactical. It is linked to New Delhi’s reading of the emerging situation in China and the region. The Indian foreign policy establishment does not disbelieve Chinese Prime Minister Li Keqiang when he talks of improving Sino-Indian relations. His style and his manner of speaking, during his visit to India in May this year, seems to have convinced Indian leaders that they must not dismiss his statements cynically.

China’s strategic challenge in dealing not only with the US but also with its neighbours like Japan, Vietnam and Philippines, is perhaps pushing it towards adopting a soft stance towards India. This is evident in Beijing’s attempts to moderate its policies towards New Delhi and even offer a dialogue on Afghanistan, its concerns about terrorism and recognising that the growth of Islamist terror is linked to stability in Pakistan. It suits India to seize the opportunity to deepen its bilateral ties when the going is good.

The relationship is on an upward trajectory also because on many international issues – climate change, WTO, and the reform of international financial institutions – India and China reinforce each other’s position. The two countries have developed specific platforms to boost their strategic autonomy – e.g. the Russia-China-India dialogue and even more importantly, BRICS.

A new emerging dimension in Sino-Indian ties is the Indian corporate sector.  Earlier, it was just one Indian company, Infosys, which was supportive of better ties. Now it has been joined by formidable Indian business houses like the Tatas and the Ambanis (Reliance Industries Limited). The Chinese with their huge financial capacity are also helping the house of Ruias (Essar Oil) in an unusual debt financing deal which is a trilateral “funding for fuel” agreement between China Development Bank, Essar Oil and PetroChina.

It is the Indian corporates now who are lobbying for better Sino-Indian ties. The presence of Chinese companies in India’s telecom and infrastructure sector is also a significant factor in stabilising the relationship.


US Secretary of State John Kerry (right) on a recent trip to India [AP]

In the times of an American pivot to Asia

Finally, there is growing scepticism in India about the US “pivot to Asia” strategy which implied a rebalancing of US interests from Europe and the Middle East towards East Asia. It has been widely perceived to be based on its concerns about the rise of China. Former Defence Secretary Leon Panetta, during his visit to India in June 2012, had talked of defence cooperation with India being the “lynchpin” in the new US strategy for Asia.

More moderate language was used by US Secretary of State John Kerry when he came to India in June this year. He limited himself to mentioning only convergence of interests and valuing “India’s role in our mutual efforts to ensure a stable and prosperous Asia.” The much publicised “lynchpin” argument was missing. Secretary Kerry had openly questioned the wisdom.

In any case, the Indian establishment does not believe that there is much substance to the American “pivot” and rebalancing argument in Asia. The argument is that the US-China relationship is so inter-twined and interlinked that Washington cannot risk a strategy that would cause tensions with Beijing. Also, the Chinese economy, its growth and the size of its financial surpluses are such an integral part of the global market that any economic crisis in China will set back the global economy, including that of the US. There is also a recognition that given its declining defence budgets, the US would also not be in a position to strengthen its military deployment in Asia that a real rebalancing would demand.

Indian foreign policymakers therefore are probably wary of getting roped into a strategy about which the US itself is uncertain and create complications for bilateral ties with China. Therefore, the so-called US rebalancing towards Asia is unlikely to impact the trajectory of Sino-Indian ties.

The views expressed in this article are the author's own and do not necessarily reflect the publisher's editorial policy.