Diplomacy

LAC Tensions to Fester Till Modi, Xi Revive Prospects for India-China Strategic Cooperation

If the two leaders succeed in taking a broad view of the bilateral relationship, the current border crisis can not only be transcended but turned into an opportunity.

This is the concluding instalment of a two-part article on the continuing military standoff between India and China. The first part was published on July 23, 2020.

Beijing’s repeated use of the word ‘strategic’ is the key to understanding its military posture in Ladakh. In its view, India’s recent actions in the Asia-Pacific region had invalidated the underlying premise of India’s foreign policy upon which the 1993 and subsequent agreements with China had been based. This was that India would use  its ‘soft power’ to minimise conflict in Asia and the west Pacific, and create a multipolar, rule-guided, world order in opposition to the US goal of creating a unipolar world. This was also India’s stated goal then, and indeed throughout the Cold War. So this commitment was formalised by the creation of BRICS in 2009, and was made explicit in its Delhi declaration of 2012.

China’s misgivings began to grow when, within months of his coming to power, Prime Minister Narendra Modi signed the US-India Joint Strategic Vision for the Asia-Pacific which obliged its signatories to maintain freedom of navigation in the South China Sea; became a ‘Major Defence Partner’ of the US; sent a flotilla of warships to join a US-Japan task force in the South China Sea;  and began regularly hosting operation Malabar in the Bay of Bengal, one of whose war games is the closing of the straits of Malacca through which 40% of China’s exports and close to 90% of its oil imports have to pass.

When India  also signed the Military Logistics Supply Agreements with the US and  Japan and began working on one with Australia, China could no longer ignore the fact that under Modi, India did not feel duty bound to abide by the tenets of  Panchsheel, which are reiterated in  the first paragraph of the 1993 Border Agreement.

Why China wants a strategic partnership

For China, this was hugely disturbing because, unlike Britain in the 19th and the US in the 20th century, its prosperity and growing  hegemonic power did not stem from its dominance of global manufacture but from its dominance of global trade. In some categories of consumer goods, China accounts for over 90% of US imports, and nearly 20% of the EU’s total imports – probably amounting to more than half of its consumer goods imports –  come from China.

But that is only one half of what accounts for China’s pivotal place in world trade. The other half is that  an increasing proportion of its exports  contain components and raw materials that China imports from other ASEAN countries, Australia and South America. This complex web of connections,  maintained by sea,  air and digital communication, can survive only in conditions of peace. War is therefore anathema for China, because it will itself be the first casualty.

Maintaining peace has, however, become more and more difficult as the US has become aware of the speed at which China is converting its growing economic power into hegemony, through investment of its foreign exchange surpluses in developing countries. This awareness had remained dormant in the US through the ‘roaring nineties’ and the ‘dotcom’ boom  of the early 2000s, but sprang to life after the financial crash of 2008 because China’s economy powered on, seemingly unaffected by the global crisis.

Within months of its onset, therefore, analysts had begun to credit China’s immense demand, especially for raw materials, for the early end of the recession that had set in after the crash, and to talk of the US and China as the  G-2.

US reaction – ‘Containment’

President Obama reacted to the implied threat to US hegemony with his ‘pivot to Asia’ in November 2011. Its purpose was to ‘contain’  China by strengthening its neighbours but it soon became apparent the strengthening being referred to was mostly military. As a result,  by 2016 China found itself  encircled by a large number of US military installations and bases stretching from Japan through Okinawa, South Korea, Taiwan, the Philippines and Thailand, to Australia.

China was acutely aware of the destruction that that these could unleash upon it. It had seen how a single American warship, acting without any legal backing from the UN, had destroyed nearly all of Gaddafi’s air force and radar installations in Tripoli by unleashing more than 132 Tomahawk missiles in a single night.   It was also aware that the version of Tomahawk missile that is standard equipment on US warships has a range of nearly 1,600 kms. So the 12-mile exclusion limit for territorial waters enshrined in the UN-drafted Law of the Sea  no longer offers any protection against annihilation.

China responded by building an airport on the disputed Fiery Cross reef in the middle of the South China Sea with material dredged up from the ocean floor,  and  declaring the South China Sea a part of its core security area in which it wants prior notification of the passage of non-commercial craft. This has  ratcheted up the tension another notch. Since then, there have been annual confrontations between US-led task forces and Chinese naval vessels  in the South China sea.

If not defused, such military confrontations tip over sooner or later into war – cold or hot. To avoid this, China turned to BRICS, and particularly to India with its immense ‘soft power’ for support. In two momentous meetings, between Manmohan Singh and its new president, Xi Jinping, at Durban in 2013, and between Prime Minister Singh and Premier Li Keqiang in Delhi in 2013, China  sought to consolidate  a long term strategic partnership with India. To remove hurdles in the way, President Xi Jinping  offered ‘an early settlement’ of the border dispute in the Himalayas.

Enter Narendra Modi

That was the point at which the UPA government fell, the BJP came to power, Modi turned two decades of patient bridge building with both China and Pakistan on its head, and made India a partner of the US in its  effort to ‘contain’ China.

Despite that huge setback, China did not give up on India. Instead it turned to its Belt Road Initiative to continue binding the two nations together. The  BRI had assumed supreme importance for China not only because it promised to provide a number of  escape hatches through which China could carry on its international trade in the remote contingency that its sea routes out of the South China Sea and through the  Malacca straits got blocked. But more immediately and urgently, the BRI became important because it offered a way to stave off the severe recession that was enveloping its  machine tools and other engineering industries after the fiscal stimulus programme it had launched in 2008-9  to fight the global recession came to an end in 2013.

The problem it faced was  exceptionally severe because the planned fiscal stimulus – with a budgeted investment of 4 trillion Yuan ($586 billion dollars) – ended up creating huge excess capacities in steel, power generation, roadbuilding and construction, and an even more crippling excess capacity  in the heavy machine building industries that produced the equipment these projects needed.

The resulting unemployment was largely hidden, because the Communist Party ensures that there is virtually no unorganised labour force in the county outside the fringes of agriculture.  So prolonged unemployment for the workforce is not an option for the government because it will cost the party its Mandate from Heaven. Xi Jinping therefore turned to the BRI, and to a  massive redirection of domestic investment into the western  and border regions, in its 13th Five Year Plan. Both programmes were therefore outcomes of domestic politico-economic concerns, and not of the inherent expansionism of “the Middle Kingdom” that western defence analysts keep harping upon.

How Modi cut off India’s nose to spite China’s face

India’s capacity to absorb new investment in infrastructure and make it yield quick returns is greater than that of the seven next largest  countries involved in the BRI put together. While the combined GDP  of these seven countries – Russia, Uzbekistan, Tajikistan Turkmenistan, Kazakhstan, Pakistan and Malaysia – was $2.1 trillion in 2015, India’s GDP was $2.256 trillion.

China had hoped that India, with its huge need to modernise its antiquated road, rail and ports infrastructure, would fill the order books of China’s basic and heavy engineering industries for a decade. Therefore, when Modi opted  out of the BRI in 2017, it was an even bigger blow than his sudden abandonment of equidistance in foreign policy.

Unfortunately, even that is not the end of the story. The reason Modi gave for refusing to send even a representative to the  inaugural conference in Beijing in 2017 was China’s refusal to formally recognise Gilgit as a part of India illegally occupied by Pakistan. This gave Beijing even greater cause for alarm because it showed that Modi would respect neither history nor the commitments of its  predecessors if it suited his whim or fancy. For, in its view, not only had the people of Gilgit nothing in common with the Kashmiris of the valley, but, since 1889, the area had been ’leased’ to the British to protect against foreign (i.e Russian) invasion.

In 1947, therefore, when the British terminated their lease and ‘returned’ Gilgit to Maharaja Hari Singh, a section of the local population revolted and declared itself for Pakistan. Gilgit therefore took no part in the Kashmir war, and the question of retaking it never arose in the meetings of the defence committee of the Indian cabinet in 1947 and 1948.

What is more, the Simla agreement of 1972 and the Delhi agreement of 2005 had both explicitly accepted the Line of Control in Jammu and Kashmir as the de facto border between the two countries. The Modi government’s perversity therefore sowed the suspicion that it would feel few qualms about reneging from the 1993 agreement with China too, if that suited its purpose.

The effective abrogation of Article 370, the bringing of Ladakh directly under Delhi’s rule, and the near simultaneous publication of a new map of India that shows Ladakh and the whole of Aksai Chin as a Union Territory may have been the straw that tipped the scales in favour of sending a warning to India via the PLA.

Turn crisis into opportunity

The acid test of statecraft is the ability to turn crisis into opportunity. India and China can do this today in a manner that makes them both winners. The talks now going on will not serve their purpose, if they do not address the core anxieties of the two nations. Since the signal of growing disquiet has come from China, it is India that needs to take the lead in doing this.

The most important reassurance China needs is that the Modi government’s frequent claims to Gilgit and PoK are nothing more than theatre  for its domestic audience –  full of sound and fury but signifying nothing. This is supremely important for China because the China-Pakistan Economic Corridor, which runs through Gilgit, envisages an investment of $68 billion, which will  not only be the largest component of the BRI by far, but also China’s  most important escape hatch for continuing its trade and ensuring its supply  of oil,  should some future western coalition decide to blockade the seaways out of the South China sea.

A second way to reassure Beijing would be to lift the various bans on Chinese apps, the import of Chinese goods, the banning of  Chinese investment, and the termination of ongoing contracts that PM Modi has decreed since June 19. Since trade with India accounts for only 2.4% of China’s exports, but 14% of India’s imports, this is hurting India more than China. But the far more dangerous message that Prime Minister Modi has unwittingly sent is that since he feels no obligation to respect minor international economic commitments, it would be folly to expect him to uphold major political ones. If that impression is allowed to sink in, then for Beijing force will remain the only alternative.

The least politically sensitive way to repair relations would be for India to join  the Belt Road Initiative. Estimates of how much money China has pledged for the BRI vary. According to the US Council on Foreign Relations, China has so far committed $200 billion to projects in 60 countries. But its experience has been mixed. Since China is offering finance in the form of low interest loans and not grants, many smaller countries have over-leveraged their projects and been forced to sell off equity in them to China when demand projections have turned out to be too rosy and they have been  unable to service their debt.  In sensitive projects like the Hambantota port in Sri Lanka, this has looked far too much like an engineered take-over of a strategic asset, and has made several  countries shy away from projects in which they had initially welcomed Chinese financing.

China has been trying to persuade India to join the BRI since well before its inauguration, because India has the financial reserves and markets that can ensure a more balanced funding of projects, and the deep, unsatisfied demand that  guarantees immediate returns on investment. By not doing so, Prime Minister Modi has only cut India’s nose to spite China’s face. This would be a good time to correct that error. Revisiting the BRI in the discussions being held now would therefore be the surest way of cementing peace in the Himalayas.

Victor Gao was the English language interpreter for Chairman Deng Xiaoping, from 1984 to 1988. (In this photo he is seen interpreting for Chairman Deng and US Vice President Walter Mondale in Beijing in 1984.) He is currently chair professor, Soochow University and vice president, Centre for China and Globalisation. The CCG is ranked 94th among the world’s top think tanks.

Victor Gao is seen interpreting for Chairman Deng and US Vice President Walter Mondale in Beijing in 1984.

Prem Shankar Jha is a columnist for The Wire, former media adviser to V.P. Singh when he was prime minister and  former Editor of the Hindustan Times. He is the author of Managed Chaos: The Fragility of the Chinese Miracle (2009) and Crouching Dragon, Hidden Tiger: Can China and India dominate the West ( 2010).