Relevance: GS-2: India and its Neighborhood-Relations.

Key Phrases: Shanghai, Galwan, Bilateral trade

Why in news?

• India-China trade is expected to top $100 billion in 2021

Analysis:

Evolution of relationship

• Before the mid-20th century, India-China relations were minimal and confined to some trade and exchange of pilgrims and scholars. Interactions began after India’s independence (1947) and the Communist revolution in China (1949).
• Nehru and Zhou signed the Panchsheel Treaty on 29 April 1954 to lay the roadmap for stability in a region (Hindi-Chini Bhai-Bhai) as India acknowledged Chinese rule in Tibet:
• In 1962, China's People's Liberation Army invaded India in Ladakh, and across the McMahon Line in the then North-East Frontier Agency. After the conflict, relations were in a freeze.

Strength of relationship

• Political and Diplomatic Relations-The Communist Party of China (CPC) has maintained friendly exchanges with 9 major Indian political parties including the BJP, Congress and left-wing parties for a long time.
• Since the beginning of the 21st century, trade between China and India has grown from less than $3 billion to nearly $100 billion, an increase of about 32 times.
• People-to-People Exchanges-Both nations have held meetings of China-India High-Level People-to-People and Cultural Exchanges Mechanism. The two countries have established pairs of sister cities and provinces. For example, sister provinces and cities between Fujian Province and Tamil Nadu State, Quanzhou City and Chennai City
• Joint multilateral mechanism and region cooperation-BRICS, SCO, BCIM, China-Russia-India trilateral
• Decreasing cooling off time of normalization -14 years after ‘62 war,2 years after ‘98 nuclear test, and leaders met within days at BRICS after Doklam incident

Strategic importance of China

• Economic significance: Asia is experiencing robust economic performance over the three decades, spearheaded by India and China. Robust growth can’t be realized without economic development of the two countries
• India-China trade is expected to top $100 billion in 2021. The figure could well double or even treble if the impasse on our borders with China is, with a bit of ‘give and take,’ permanently resolved.
• Demographic dividend: Population growth in Asia is expected to continue for at least the first half of the 21st century. This will result in huge demographic dividend in the region. Thus coordination between two nations by providing opportunities and employment driven by economic growth is necessary.
• Investment: India and China relations has not reached full potential due to lack of bilateral investments. Where China can provide market for India to invest in pharmaceutical industry, agricultural products, software industry; India is a market for China for its technological industry.
• China makes 40 per cent of all EVs sold in the world — China could well end up making and selling more electric cars in India than any other manufacturer in the near future.
• Creation of New Development Bank, Asian Infrastructure Investment Bank, and Asian Development Bank are new engine of growth in the region. These institutions would fail without cooperation among New Delhi and Beijing.
• To mitigate the risks of melting Himalayan glaciers from where many of Asia’s major rivers — Yangtze, Indus, Brahmaputra, Ganges, Mekong — originate, India and China need to collaborate in the very areas their armies are in confrontation.
• Regional Stability: Terrorism has impacted regional structures in South Asian countries in a negative way. It is very important for two countries to stand together against terrorism to promote stability in the region. Regional stability would ensure mutual growth and global peace.
• At 253 GW, China has 32 per cent of installed global capacity in solar power and just in 2020 alone it added another 48 GW, more than any other country. Likewise, at 286 GW, its wind-farm capacity is 38 per cent of the world’s total and it added 52 in GW — more than the rest of the world put together.

What has led to this deterioration in relationship?

• Recent standoff by armies in Ladakh Galwan valley and Sikkim sectors-china's attempt to prevent India from upgrading infrastructure on Indian side of LAC-conflicts like Doklam, China’s efforts to prevent UN sanctioning of Azhar Masood, India’s entry in NSG.
• Salami slice technique where China is changing the status of LAC one inch at a time by undertaking minor military incursions and creating new status quo.
• India’s acute dependency on Chinese imports- gives china leverage to play supply chain politics-disruption in APIs, automotive etc. during lockdown.
• China’s diversionary tactics to prevent spotlight of world against her for corona failure, Hong Kong and Taiwan issue.
• China's open support to Pakistan on issues like article 370-took matter to UNSC twice-India warned them of strain in relations if it continues.

Story of border dispute

• Clashes occurred in Galwan Valley (Ladakh) in 2020 that claimed 20 Indian soldiers’ lives and an unknown number of casualties on the Chinese side
• Citing the “emergent nature of threats” from mobile applications, including popular ones of Chinese origin such as TikTok, ShareIt, UCBrowser, and Weibo, the government has banned 59 apps.
• British defined McMahon line in eastern sector but in western sector failed to define proper boundaries with Xinxiang-china's offer for recognition of NEFA in swap of Indian recognition of Chinese Aksai chin (contentious as admitted by India) refused by India which led to the 1962 war.
• Large scale smuggling of Chinese electronic and other consumer goods take place through these border points even after designated areas for border trade
• Inadequate infrastructure due to difficult terrain while china has good
• Multiple forces along Indian border (for e.g.- ITBP, Assam rifles, Special frontier force) as opposed to single PLA commander on Chinese side.

Economic relationship between India and China

• Chinese investment (current and planned) stood at about $26 billion with infrastructure projects accounting for about half the total.
• India’s trade deficit of 58 billion Dollars - China is India’s largest trading partner while India within top 10-100 billion dollars of total trade.
• Low FDI flow from china in india-0.49% of total FDI till now.
• According to data from 2019, a staggering 70% of electronic components, 45% of consumer durables, 70% of Active Pharmaceutical Ingredients (APIs), and 40% of leather goods come from China.
• Chinese firms are aggressively moving into India. An early mover was Huawei. Its R&D centre in Bengaluru has emerged as its largest in the world.
• Many of India’s biggest start-ups like Byjus, Flipkart and PayTm have major Chinese investors. However, it is not all one way.
• ‘Shanghai tops the total investment from India, and is home to IT majors, including TCS, Infosys and NIIT. Zhejiang and Jiangsu are home to manufacturing units, including Dr. Reddy’s Laboratories, Mahindra & Mahindra.

Way ahead

• Establishment of bilateral group with experts from both countries who would work out a plan for further cooperation.
• Capacity building in combating terrorism of intelligence, police, military and para-military forces through training.
• Promotion of greater coordination to resolve boundary disputes among two nations.
• Increase people to people contacts through tourism and cultural exchange.

Source: The Hindu BL