On the border itself, China now seems happy with the new status quo and argues for a return to business as usual. Whether India is satisfied with the changed situation, or will continue to insist on the restoration of the status quo as it was before April 2020 is not entirely clear from the government of India’s public statements (they have not said they won’t, but they haven’t said they will either in recent press and joint statements, eg. Wang Yi-Jaishankar in Moscow, etc.). In any case, the Line of Actual Control (LAC) has now been militarised and called into question all along the line, and this is a new military reality that will have to deal with.
India-China relations have been reset to a new normal. There is no going back to what they were, to the surface calm that prevailed before 2020 or the coexistence before 2012. Political relations will now be more adversarial, antagonistic, and contentious. Although theoretically, India-China relations could see a new modus vivendi after the crisis, as they did after the Sumdorungchu/Wangdong crisis in 1986-88, this seems unlikely with authoritarian strongmen in power in both countries; troop buildups on the border, aroused public opinion, and differences are out in the open.
The other possibility is of a downward spiral to conflict, as occurred between 1959 and 1962, but both governments are so far signalling an unwillingness to be trapped in that scenario. More likely, we will see continued efforts to negotiate side by side with jostling for local advantage along the LAC and a continued buildup of infrastructure and capabilities by both sides — in other words, muddling through and attempting to avoid outright conflict, though the risks of conflict are certainly higher than ever in the last 40 years. What seems likely is antagonistic cooperation in a fragmented world.
The crisis has made it clear that India’s China policy cannot optimise for both security and prosperity. Apart from its military response of defensive deployments and filling gaps on its side of the LAC, India has also responded by external balancing actions and by seeking to lessen its economic dependence on China.
These dependencies are considerable in auto parts, pharmaceuticals, electronics, telecom, power, and fin-tech. India has tightened scrutiny of Chinese investments in India, banned some Chinese apps, and cancelled some public contracts with Chinese firms. However, there are limits to decoupling.
China accounted for about 12% of India’s imports in 2019 when total two-way trade was $92.68 billion, $56.77 in China’s favour. China was India’s largest trading partner until overtaken by the United States in 2019. The Narendra Modi government, like Xi Jinping’s, has adopted “self-reliance” as a strategy after the COVID-19 pandemic and economic crash, though it is unclear how much autarchy this will mean in practice. The signs — raising customs duties for four years and walking out of the Regional Comprehensive Economic Partnership (RCEP) negotiations — point to a more insular and protectionist India.
Is the US replacing Chinese investment in the tech sector? As soon as India banned Chinese apps, Google pledged a $10 billion investment in the India Digitisation Fund. It then invested $4.5 billion in Jio Platforms. Facebook soon followed Google, investing $5.7 billion in Jio.
Chinese presence in the Indian digital space was negligible five years back. However, tech players like Alibaba and Tencent have made considerable investments in the last three years. According to Venture Intelligence, which provides information and analysis on private company financials, Chinese tech firms have invested $4.3 billion in venture capital funding between 2017 and June 2020. According to Tracxn, a technology research firm, 28 Chinese corporations have invested in India since 2010. Some of the top Chinese venture capital players like Shunwei Capital, Fosun RZ Capital, and CDH Investments have bet big on Indian startups apart from the ones owned by the tech giants Alibaba and Tencent. Among the top 10 Indian tech unicorns valued at more than $1 billion, seven are backed by Chinese investors.
The primary focus of India-China contention will be in the Indian subcontinent and the Indian Ocean region. China has recently shown a willingness to involve herself in the internal politics of countries in the subcontinent and to make sizeable investments in them. China brokered unity between the two Nepalese communist parties to bring them to power, offered to mediate between Bangladesh and Myanmar on the Rohingya issue, and has made very clear her preferences in Sri Lankan and Maldives elections. China’s Belt and Road Initiative (BRI) commitments to the subcontinent, excluding Myanmar, amount to over US $100 billion. An India-China competition for influence is seen and used as an opportunity by many of India’s neighbours.
There are calls in India to review India’s one-China policy by developing relations further with Taiwan, to use the “Tibet card” and to agitate China’s “Malacca dilemma”. It remains to be proved that this is a practical policy. Does the government of India wish to make such fundamental changes in its China policy? It has so far resisted such calls and left it to political parties, non-officials and others to hint at changes and make the running on such issues.
There is no grand bargain, no modus vivendi, no accepted rules of the road to be had. China has little interest in this, and uses uncertainty to keep India off-balance, as the tearing up of the confidence-building measures (CBM) and Border Peace and Tranquility agreements since 1993 in the spring of 2020 suggest.
In this complex and complicated relationship where we simultaneously contend and live with China, India has some advantages, some high cards. These include
- the US and others’ desire to counterbalance China’s rise,
- China’s territorial disputes with its neighbours, and
- China’s weak and needy allies who are more of a burden than support.
The great unknown, of course, is the future twists and turns of China’s internal course. China herself recognises that the geopolitical context in which she rose so rapidly has changed. The fifth plenum of the Chinese Communist Party (CCP) central committee in November said that China’s development environment was facing “profound and complex changes” — although it was still in a period of “strategic opportunity.”
India and China are neighbours, and are interdependent economically and ecologically. At the same time, they see themselves as political and security competitors particularly in the subcontinent and the Indian Ocean region (IOR).
In devising a strategy to deal with each other, we should have a clear answer to the question: what are we competing for? We must define our goals. Otherwise, we could fall into a cycle of competing for competition’s sake. Without clear ends and means in mind, that will be in an endless and fruitless cycle of confrontation. My answer would be that India is competing primarily to be secure at home in the subcontinent and IOR, and for an Asian order that enables India’s transformation. Both India and China should accept the other’s rise as inevitable and learn to live with it, accommodating each other. And India must try to put in place the means to make that the reasonable choice for China.
What that means in summary is: self-strengthening while avoiding a hot or cold war or a two-front war by being ready for it; cooperating where possible and competing when necessary, working with others to shape China’s external behaviour.
Now that the crisis has settled into a long-term problem, it is time for us to learn and change. India will have to undertake a series of self-strengthening steps, if for no other reason than to restore effective balance on the border. These would include military and intelligence reforms based on lessons learnt from the crisis, jointness, and other changes that we all know are necessary but which have been postponed repeatedly. Even more than equipment, we need to change our thinking, from preparing only for a big war that may or may not come to dealing with smaller and more political applications of force by our adversaries such as the Chinese salami-slicing that we faced this year.
Fortunately, the Asian context in which we seek to shape China’s behaviour has evolved recently.
The likely consequence of China’s increasingly assertive behaviour is a strengthening of the informal coalition in China’s maritime periphery that has evolved over the last two decades in response to China’s rise. India’s role in these arrangements may have taken a hit from what happened this summer on the border. But defence, security and intelligence links between India, Japan, Australia, Indonesia, Vietnam, Singapore and others have greatly increased in quality and quantity in the last decade and a half.
The China crisis increases Indian willingness to work in the Indo-Pacific with countries that share India’s concerns about freedom of navigation and security in this extended body of water that has been increasingly militarised. The India-US Malabar exercises now include others, and a Quad-plus security dialogue is emerging in practice. The security and stability of supply chains in the more difficult economic environment that we face is another issue on which one might expect these countries to work together. At the same time, given the stakes that each of these countries has in its ties with China, this informal coalition is probably more a hedging rather than a balancing exercise for its members.
But if India is to look to southeast Asia and northeast Asia for political and security partners, she cannot at the same time be walking away from economic cooperation and integration with them. The 2020 trifecta of the pandemic, economic crash and crisis with China has driven India into itself, into stressing self-reliance and an attempt to concentrate on building internal capabilities and cutting external dependencies. (In this respect the effect of the pandemic is similar to what it has done to China’s economic policy with the new stress on the domestic economy in the “dual circulation” adopted by the Politburo in May.) To walk out of the Regional Comprehensive Economic Partnership (RCEP), raise customs duties for four years running, and turn away from already signed free trade agreements (FTAs) with the Association of Southeast Asian Nations (ASEAN) members. This makes it much harder to cooperate with Asian partners who may share our concerns about China’s behaviour.
China is successfully building a continental order in Asia through the Belt and Road Initiative, and accounted for 40% of global growth in 2019, probably more in 2020. It is in the maritime domain that China is challenged, both by her own lack of experience as a maritime power and by the US and others for whom the maritime space of the Indo-Pacific is critical to their prosperity and security. India is both a continental and maritime power and faces China in both domains. As Asia tries to recover from the pandemic and economic crash of 2020, it will turn to for growth to the only major country which has shown economic growth in the September quarter, the first to recover from the pandemic, and the one with capital to invest — China. Given the success of the northeast Asian and some southeast Asian economies in controlling the pandemic and limiting the economic damage, it seems likely that, at least in the short term, we will see the creation of travel and trade bubbles in northeast and southeast Asia.
Politically, Asia faces a more ideological and nationalist China and the US, whose contention seems structural and therefore likely to last. US pushback under Donald Trump has not changed Chinese behaviour, if anything it is now worse. What the US election has done is to bring the US back into play, despite internal preoccupations, but so far, it is hard to say that it has changed the direction of evolution of the international order.
Given their mutual economic dependence, so unlike US-Soviet links during the Cold War, China-US decoupling could remain limited in practice to the internet, high technology and some aspects of finance. These two most powerful powers in India’s extended neighbourhood both use economic sanctions to get their way, and both see a zero-sum future for Asia. The reaction of the countries in the Indo-Pacific is to hedge, balance and bandwagon, all at the same time, avoiding a choice between the two powers and trying to create agency for themselves.
My own sense is that Asia’s future is not necessarily either China-centric nor US-led, but fragmented and disorderly, with Asian states hedging against all possibilities and working with both China and the US where it suits them. Contention between powers of different strengths and attributes, and therefore the formation of coalitions seeking equilibrium in the balance of power. Complicated by the presence of revisionist states.
Asia’s economic order is now based on China. But it is still difficult for China to get her way in other respects. She is learning the limits of economic and military power. (Just as interdependence did not prevent conflict and contention between Britain and Germany in 1914, or between China and the US this decade.)
As my friend Bilahari Kausikan, recently said: “The U.S. is an irreplaceable component of any Asian balance. No combination of Asian powers alone has sufficient strategic weight to balance China. The most dangerous issues in Asia require hard power: the Himalayas, the Taiwan Straits, and the East and South China seas. Asia’s continued prosperity rests on a foundation of the stability provided by a balance of hard power.”
With the coming of the Biden administration early next year, there is likely to be an amelioration in the tone of US-China exchanges. Some of the new president’s priority issues like climate change would require Chinese cooperation. Given the overwhelming domestic preoccupations of the new administration in a polarised domestic political context, it is difficult to predict how far US trade policies or dealings with Asian partners will change. But despite the likely shifts in tone and in the margins of policies, the basic strategic congruence between India and the US should see India-US relations proceed along the track of transformation and closer strategic cooperation that they have been on for the last two decades. Many of the important players in the new administration, including the president himself, have been active promoters of that transformation in the past.
China must have known the consequences for India-US relations of her actions this spring. As a consequence of the China crisis, India will likely move from her traditional balancing between China and the US to lean to one side, the US. Presumably, China saw recent advances in India-US defence and security links, particularly interoperability, as having crossed a point of no return.
As a senior Chinese scholar said in mid-September, “India has given up nonalignment and has the motivation to become a US ally, using nonalignment as a cover to make policy.” As Liu Zhongyi of the Shanghai Institute of International Studies put it at the end of September: “Presently, India and the United States have formed a de facto military alliance. Under the current situation, we must re-assess our understanding of the U.S.-India alliance and reset our India strategy.”
If China has indeed concluded that India-US relations have gone beyond the point of no return and that she cannot count on Indian neutrality in her contention with the US, China’s actions on the LAC were designed to show the US and India’s neighbours that an India which could not even defend its own territory could not countervail China. They were also intended to show India that the US is not the solution to India’s China problem when it comes to dealing with China on land.
Indeed, as India embarks on the self-strengthening necessary to deal with a more antagonistic China and a harsher security environment, India is likely to turn again to the US as she accelerates military reform. The US remains an essential partner for the transformation of India. While India-US ties may not become a formal alliance, they could increasingly adopt the characteristics of one, short of the commitment to mutual defence that neither side is ready to offer.
All policy is a bet on the future. India has already made her bet on a multipolar Asia, on the fact that Asia will remain open rather than tied to the apron strings of one power or another. Leaving RCEP was one such bet, opposing BRI from the inception, and not just because the CPEC goes through Indian territory, was another, as is the resuscitation of the Quad in a new avatar. Only the future will tell whether that bet is the right one.
Shivshankar Menon is a former national security adviser of India.
(This article has been adapted from a lecture delivered by the author to the Manthan Foundation in Hyderabad last month)