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China-India Relations: New Starting Point and New Framework

CIIS Time: Aug 10, 2011 Writer: Rong Ying Editor: 姜志达

Rong Ying

Senior Research Fellow and Vice President of CIIS


The year 2010 marked the 60th anniversary of the establishment of China-India diplomatic relations. The two countries held a host of grand celebrations to mark the occasion. The past year saw generally steady progress in the bilateral relations, frequent high-level interactions, more pragmatic business cooperation and enhanced cultural and people-to-people exchanges. However, the complexity of the relationship was highlighted. Against the backdrop of major changes in international landscape and profound adjustment of the international system, China-India relations are at a new historical starting point. The maintenance and enhancement of the mutually-beneficial, reciprocal and cooperative relations between China and India, two great ancient civilizations, two emerging powers and close neighbors sharing the same rivers and mountains, will be of great significance to their own development as well as to the regional stability and world peace, development and cooperation.


I. Overview of China-India Relations in 2010


The year 2010 saw new progress in China-India exchanges and cooperation across the board. Thanks to the joint efforts, the two governments worked to comprehensively implement the strategic agreement between their leaders, enrich the strategic partnership, and promote bilateral relations.


1. Close Bilateral Interactions


To mark the 60th anniversary of the establishment of diplomatic ties between the two countries, the two governments decided to concurrently hold the “China Festival” and the “India Festival”. In March 2010, Vice Premier Hui Liangyu visited India, launching the prelude of celebration activities. In April, Minister of External Affairs S.M.Krishna visited China and attended the opening ceremony of the India Festival. In May, Indian President Pratibha Patil paid an official visit to China, which was the first visit by an Indian head of state in ten years. The Chinese side attached great importance to the visit. Apart from her meetings with President Hu Jintao and other Chinese leaders, Vice President Xi Jinping attended the reception hosted by the Indian Embassy in China. Cultural and people-to-people exchanges and cooperation featured prominently in President Patils visit to China. During her visit, President Patil attended the inauguration of an Indian-style Buddhist temple in the White Horse Temple in Luoyang and unveiled the bronze bust of Indian Poet Rabindranath Tagore in Shanghai.

In December 2010, Premier Wen Jiabao visited India, which was a major event in the bilateral exchanges. During the visit, the two countries issued a joint communiqué and decided to set up the regular meeting mechanism between heads of state/government and the regular meeting mechanism between foreign ministers, and open the hotline between the two prime ministers. Leaders of the two countries proposed the goal of increasing the bilateral trade to US$100 billion by 2015 and designated the year 2011 the “Year of China-India Exchange. Business communities of the two countries signed over 40 agreements involving more than US$16 billion. During his visit, Premier Wen reached out to people of all walks of life in India and delivered important policy speeches. Premier Wen stressed that the China attached great importance to Indias role in international affairs as a developing country, and understood and supported Indias desire to play a bigger role in the UN including its role at the Security Council. On top of the bilateral visits, leaders of the two countries maintained the close interactions on multilateral occasions during the year. President Hu and Premier Wen held several meetings with Prime Minister Singh on such international fora as the G20 summits, the BRIC Leaders Meeting and the East Asia Summit, when they exchanged views on bilateral relations and major regional and international issues.


2. Renewed Dynamism in Bilateral Business Ties


The frequent high-level interactions injected strong impetus to the steady growth of bilateral ties, resulting in an expanded economic cooperation and trade and closer cultural and people-to-people contact. In 2010, bilateral trade between China and India totaled at US$61.7 billion, up by 43% year on year. The goal of US$60-billion trade volume was realized, which showed that business cooperation between the two countries overcame the impact of the international financial crisis and once again demonstrated strong vigor and vitality. China-India cooperation was expanded to more areas and conducted in more forms. In September 2010, the Shanghai Electric Group signed with Reliance ADA a power equipment sale contract, under which the Shanghai Electric was to sell 36 660MW supercritical thermal units to the Reliance ADA and the total contractual amount of US$8.29 billion would be financed by the EXIM Bank of China and several Chinese commercial banks. Reliance ADA Chairman Anil Ambani said that this transaction was the biggest in the history of the power sector and the largest single transaction between India and China.

Bilateral investment between China and India also saw substantial increase. Over 100 Indian companies were operating in Chinas Information technology, software outsourcing and financial markets. Over 60 Chinese enterprises were engaging in R&D, telecom and power project contracting in India. Thanks to the joint efforts, the visa issue, a long-standing problem plaguing Chinese businessmens normal commercial activities in India was basically resolved. In December 2010, the Indian government announced that the policy of issuing project visa for senior technicians going to India for power and metallurgical projects and skilled workers. This pragmatic policy measure, to a certain extent, eased the visa pressure on the relevant Chinese companies and helped facilitate normal business activities between the two countries.

Mutually beneficial business cooperation was also expanded to the sub-national level. Chinas western regions including Yunnan and Sichuan and southeast coastal regions like Guangdong, Jiangsu and Shanghai all regarded India as a huge potential market. In October, the Hong Kong Special Administrative Region and the Guangdong Provincial Peoples Government held in New Delhi the 2010 Guangdong-Hong Kong-India Economic, Technological & Trade Fair. Over 1,800 business representatives from Hong Kong, Guangdong and India attended the fair and discussed about business cooperation between the two countries and the three sides. Chinese and Indian companies singed 25 investment and trade agreements during the meeting, totaling at nearly US$1 billion covering such areas as telecommunications, automobile, environmental protection and home products.


3. Unprecedented Cultural and People-to-People Exchanges


The year 2010 saw new breakthroughs in China-India cultural and people-to-people exchanges. There were over 500,000 two-way visits during the year. The Indian government attached great importance to the Shanghai World Expo and sent a high-caliber delegation to showcase its most advanced industrial technology and best cultural products to China and the world. During the expo, India also sent an artist delegation including Bollywood artists. New progress was made in exchanges between the political parties. In November 2010, Zhou Yongkang, Member of the Standing Committee of the Political Bureau of the Central Committee of the Communist Party of China (CPC) and Secretary of the Political and Legislative Affairs Committee of the CPC Central Committee, led a CPC delegation to India and delivered an important speech at the second Seminar on China-India Relations co-sponsored by the CPC and the National Congress Party of India. In January 2011, Chairman Nitin Gadkari of Indias Janata Party (BJP) paid a 5-day visit to China. During the visit, the Chinese side expressed desire to strengthen bilateral cooperation with all the states led by the BJP, especially in the area of manufacturing, IT, pharmaceuticals and agro-products. It was the first visit to China by the top leader of the BJP as an opposition party.


4. Enhanced Cooperation on Multilateral Fora


China and India continued with close coordination and cooperation in the global affairs in 2010.Especially at the Climate Change Conference held in Cancun, Mexico, Chinese and Indian delegations engaged in full coordination and communication with the other two BASIC countries and contributed to the success of the conference and jointly protected the rights of developing countries. Climate cooperation has become a shining example of the pragmatic and mutually beneficial cooperation on major global issues between the two countries.


II. Reasons for the Overall Advancement of China-India Relations


It should be noted that the trend of overall positive growth of China-India relations has not changed and the will of the two countries to enrich and deepen strategic cooperation has not wavered.


1. Chinese and Indian Leaders Attach Great Importance to the Bilateral Relations


Both China and India stand for a multi-polar world and insist on comprehensively improving and developing relations with major powers in an effort to create a sound international environment for their economic development. This is one of the most important reasons for the constant progress of the bilateral relations during the first decade of the 21st century. Chinese and Indian leaders have drawn a clear road map for the improvement and development of the bilateral relations. In June 2003, Indian Prime Minister Atal Bihari Vajpayee visited China and the two countries signed the Declaration on Principles for Relations and Comprehensive Cooperation between the Peoples Republic of China and the Republic of India. In April 2005, Premier Wen Jiabao visited India and the two sides decided to build a strategic partnership for peace and prosperity. In November 2006, the two sides designated ten priority areas for enriched strategic partnership. In January 2008, the two prime ministers issued a Shared Vision during Prime Minister Singhs visit to China. All these documents, charting the course for China-India relations, have withstood the test of changes in Indias ruling party and political situation, and constituted the political foundation for the steady growth of bilateral ties.


2. Pragmatic Cooperation in Economy and Trade Has Become the Stabilizer for China-India Relations


Bilateral trade between China and India soared from about US$3 billion at the beginning of the 21st century to US$61.7 billion in 2010, an over 20-fold increase in ten years. Now, China is Indias largest trading partner and India is Chinas biggest trading partner in South Asia and the biggest overseas project contracting destination. Chinese project contractors focus on the power sector in India, and therefore are crucial to Indias rapid economic growth. During Premier Wens visit, China and India reached common ground on further exploring new cooperation areas and approaches.


III. Problems in the China-India Relations and Their Causes


Undoubtedly, the development of the China-India relations in 2010 encountered a host of problems. Some were political, some were economic, some were cultural and some had something to do with the public opinion.


1. Strategic Mutual Trust Needs to Be Further Enhanced


Despite the enormous efforts by the leaders and governments of the two countries, there were no changes in the negative view on China-India relations by the media and the public opinion. Due to repeated exaggeration by the Indian media, the border issue remained a hot issue and the visa issue became a new problem, undermining the sound atmosphere of the bilateral ties and causing obstacles to the China-India defense dialogue and setbacks in the healthy momentum of military exchanges and cooperation. Sensitive issues in China-India relations were thrown into sharp relief. Some India media institutions even put forward extreme suggestions that India should play the Taiwan card, triggering worries among the Chinese media and public opinion about a backslide in Indias one China policy. At the same time, the Chinese media expressed a lot of concerns over Indias increasingly enhanced security and defense cooperation with the US, Japan and Australia in recent years. They closely followed Indias military modernization program and large procurement of advanced fighters and military vessels. They also voiced concern over Indias constant intensification of the military deployment in the China-India border areas, believing that Indias intention was to increase strategic pressure on China. To some extent, the changes in the views of Chinese and Indian media and public opinion show the necessity to step up political mutual trust between the two countries, and put forward a new task for the two governments as to how to properly handle cooperation and competition in order to promote healthy and steady development of the bilateral ties.

Research shows that the pending factors in China-India relations are the specific reflection of the accumulation and overlapping of multiple challenges in the course of simultaneous rise of China and India against the backdrop of major changes in the international paradigm and profound adjustment of the international system. Given different political cultures, China and India differ in security and strategic thinking. Although both countries stand for a multi-polar world, the two countries are in quite different situations. China is the beneficiary of the current international system, while India calls for fundamental changes in the current international system and paradigm.


2. Bilateral Relations Need Stronger Popular Support


Changes in the views on China-India relations held by the Chinese and Indian media and the general public pose a new challenge for the two governments in terms of bilateral relations. Indian scholars believe that there are at least three forces inside India that are instigating ill will towards China, namely, people including quite a few high-ranking officials in the diplomatic and security policy-making circles who hope to develop closer ties with the West, interest groups such as retired military officers and arms dealers, and right-wing Hindi nationalists who want to score marks by opposing the incumbent government. At the same time, there are people in China who harbor bias and misunderstanding about India. Due to the complicated political and social transformation and rising nationalist sentiments, things are getting more and more complicated. People of the two countries can not view and handle bilateral problems and differences in a normal, calm, positive and inclusive way.


3. Addressing Trade Imbalance Has Become the Top Priority


The undeniable existence of structural problems in China-India relations leads to many uncertainties in the development of bilateral ties. The rapid economic development and the consequential huge market potential in India has fundamentally improved its external environment, uplifted its international standing, and thus become a natural ally to the countries that are seeking to contain Chinas development. Demand for natural resources, energy in particular, brought by the rapid economic growth of both countries, has put China and India on the competitive terms in maintaining their respective resources security.

As things stand now, the increase in the bilateral trade frictions may continue to be the hot potato for the Chinese and Indian leaders. In the past, business ties had always served as a stabilizer and driving force for the healthy and steady development of the bilateral relations. However, recent years have witnessed the intensified trade frictions between the two countries. India frequently initiated anti-dumping investigations on imports from China. It claimed that two-way trade in 2010 reached US$61.7 billion, among which however, US$20.8 billion belonged to Indias exports and US$40.8 billion were Indias imports. Imports from China accounted for 10% of Indias total imports, and the US$20-billion trade imbalance was almost as large as Indian governments fiscal deficit. Besides, trade mix was unreasonable. India mainly imported machinery and manufactured products from China and exported cotton, iron ore and other raw materials to China. India believes that such a trade situation is unsustainable. On the other hand, Chinese companies are complaining about Indias discriminative policy against Chinese investment and its restrictions on the Chinese enterprises through security clauses or the visa policy.


4. Sub-Regional Cooperation Needs to Find Breakthroughs


The competition between China and India in South Asia and Southeast Asia is evolving. From Indias perspective, South Asia is its backyard and sphere of influence. Since the end of last century, India has made major adjustment to its South Asia policy, shifting to the policy of “giving more and asking for less” towards its neighbors and promoting a free trade agreement with Sri Lanka. Its relations with neighboring countries have thus been substantially improved. In recent years, India has taken the development of relations with its neighbors and consolidation of its leadership as the diplomatic priority for South Asia. On the other hand, China, as a neighbor of South Asian countries, has seen rapid growth of its ties with countries in the region. It has overtaken India to be the biggest trading partner of the countries concerned, which has undoubtedly shocked Indias leadership in the region.

To expand its influence in Southeast Asia and catch the fast train of East Asias rise, India introduced a Looking East strategy in the early 1990s and strengthened ties with Southeast Asian countries. In recent years, Indias influence on the regional political, economic and security affairs has been constantly on the increase. Despite the repeated statements by China and India that they support multilateral cooperation mechanisms in Asia and view each others participation in Asian inter-regional, regional and sub-regional cooperation processes in a positive light, Chinese public opinion still has misgivings about Indias strategic interactions with Vietnam and Indonesia, especially about Indias cooperation with the US, the ROK, Japan and Australia in strengthening Asia-Pacific security.


IV. Countermeasures and Thoughts for the Future China-India Relations


Future progress in strategic cooperation between China and India in the next decade or beyond will be determined by the will, and more importantly, concerted efforts of the two countries. Chinese and Indian leaders are devoted to developing healthy and stable China-India relations on the basis of equality and mutual benefit, enriching strategic cooperation and expanding the convergence of interests. Such commitment is required if the two countries are to avoid the tragedy of the rise of other major powers, break the shackles of geopolitical calculation and jointly shape a future of mutual benefit and common prosperity.


1. Vigorously Explore New Thinking and Model for the Development of Bilateral Ties


To tackle the complex situation of the China-India relations, the two countries should on the one hand, stick to the consensus and principles already reached, and on the other, design new ways and means for interactions. First of all, they should rise above geopolitical calculation and foster a new framework of thinking. The Chinese Indian Professor Tan Chung believes that China and India must give up the logic of horizontal expansion by a geopolitical model and adopt a model of geo-civilization, in order to avoid clashes and realize common development. He has pointed out that unlike the geopolitical model based on comparison between me and others and consideration about military power, territory and alliances, the geo-civilization model advocates the pursuit of self comparison and reflects the diversity of fair and equal relations between individuals and the group. As two ancient civilizations, China and India enjoy favorable conditions for promoting interactions by a geo-civilization model, due to their history, culture and values.


2. Pay Attention to the Effectiveness of Strategic Communication and Constantly Build Strategic Mutual Trust


To address the lack of strategic mutual trust between China and India, the role of existing mechanisms should be given full play. The two countries should constantly enrich their strategic dialogue and increase dialogue and communication between their military and security agencies. At the same time, they should explore new dialogue agendas and areas.

After the American scholar Robert Kaplan put forward the view that the Indian Ocean would be the center stage for 21st century rivalry among major powers, maritime security on the Indian Ocean became a new hot topic. Chinas participation in the escort missions in the Indian Ocean to counter piracy off the coast of Somalia further prompted the international media to focus on maritime security cooperation and competition between China and India. The Indian media worried that China would seize the opportunity to implement its “Pearl Chain” strategy and seek to establish naval bases in the littoral countries, in order to protect the security of its energy passage.

In a speech at the National Maritime Foundation of India in November 2010, Foreign Secretary Nirupama Rao put forward the idea that India was a consensual stakeholder in the Indian Ocean. She stressed that India would promote and play a leading role in the establishment of a stable, open, inclusive and balanced security cooperation framework in the Indian Ocean on the basis of common security and shared prosperity. China and India have agreed that the two navies will carry out a joint counter-piracy exercise in the Gulf of Aden and exchange views on maritime security issues.


3. Seek Ways to Resolve Bilateral Issues with a Pragmatic Attitude


The current mentality will not only help gradually build mutual trust, but more importantly, reflect the maturity of China-India relations. The two countries should patiently seek fair and equitable solutions to the boundary issues under the existing mechanisms and principles, dilute the negative impact of the said issues in the bilateral relations, reduce its negative impacts and prevent it from becoming a burden on the bilateral relations or an obstacle holding back normal growth of bilateral ties. Just as the Hindu journalist Siddhat Varadarajan said that the fragility of the China-India boundary question was caused by artificial demand for an expedited resolution. Premier Wen also recognized that the complete resolution of the boundary question needed more patience and time.

Pending the resolution of the boundary issue, the two sides should genuinely act on the principle of mutual understanding and mutual accommodation. The early resolution of this issue also requires proper handling of new problems in the bilateral relations. Cross border water resource bears on the development and utilization of water resources and environmental protection. On this issue, China has always been positive. Now a joint working mechanism for the cross border water resource has been established. China clearly stated that it would take seriously Indias concerns over this issue and stand ready to further improve this mechanism. Chinas positive and constructive stance should get positive response from India. Besides, cross border interactions are an important way to increase trust and dispel misgivings. Connectivity between China and India is conducive to the development and stability of China-India border areas.


4. Vigorously Boost Coordination and Cooperation on Regional Issues


South Asia and Southeast Asia are areas where China and India share converging interests. The changes in Afghanistan have made Central Asia a new stage for China-India interaction, which will become an important factor in the development of regional paradigm as this region undergoes the reshaping of order and transformation. How to promote the stability of their neighbors through cooperation and avoid vicious competition is of great significance to the open and inclusive Asia-Pacific security mechanism advocated by both China and India.


5. Further Step up Cooperation on Global Issues


The Copenhagen Conference highlighted the global and strategic dimensions of China-India relations. The sound cooperation on climate change between the two countries was determined by their similar situation and concerns on this particular issue. To make the best of the features of the bilateral ties, the two countries should tap the potential of coordination and cooperation in multilateral mechanisms and groups such as the China-Russia-India cooperation mechanism, the BRICS cooperation and the G20.On 1 January 2011, India began its two-year term as a non-permanent member of the UN Security Council. Coordination and cooperation between China and India at the Security Council will provide new opportunities for bilateral cooperation on major security issues. In responding to the sudden changes in the Middle East and North Africa and opposing the establishment of the no-fly zone in Liberia proposed by US-led Western countries, China and India showed quite a lot of cooperation potential at the Security Council.


6. Reinforce Economic and Cultural Basis and Popular Support for Bilateral Ties


In the new era, the two countries should deepen business ties, strengthen cultural and people-to-people exchanges, reinforce the bond of mutual interests and consolidate popular support for greater progress in their friendship and cooperation. Premier Wen put forward four important initiatives during his visit to India, i.e. making joint efforts to boost two-way trade and investment, such as exploring the possibility of establishing overseas economic cooperation zones in the two countries; expanding cooperation in finance, tourism, energy, environmental protection and other areas, and beefing up exchanges in social undertakings such as science, technology, education, culture and health in order to deepen mutual understanding and friendship between the two peoples; and encouraging greater business exchanges, setting up more platforms for such exchange, giving fuel to the role of industrial associations and chambers of commerce as a bridge and an intermediary, and helping enterprises understand and explore market potential of the two countries. All these initiatives should be implemented in real earnest. The history of exchanges between China and India during the last decade shows the importance of mutual learning. The two countries have a lot of common language in exploring a development path that would be in line with the national conditions, improving domestic governance, and meeting economic and social challenges.

 (Source: The CIIS Blue Book on International Situation and China's Foreign Affairs 2010/2011, Current Affairs Press, Aug.2011)