Modi & Xi could make history at Wuhan
Deccan Chronicle| Mohan Guruswamy
The greater economic integration of India and China is the best hope for China's and India's sustained long-term economic growth.
Prime Minister Narendra Modi and China's President Xi Jinping. (Photo: PTI)
Prime Minister Narendra Modi and China’s President Xi Jinping will meet once again this Friday-Saturday at Wuhan, the capital of Hubei province which stands at the confluence of the Han and Yangtze rivers and is recognised as the political, economic, financial, cultural, educational and transportation centre of central China. It has a 3,000-year-old history and has played a significant role in China’s recent history. Will history be made now once again in Wuhan?
The significance of this meeting is not that the two leaders are meeting under the shadow of Doklam.
There is a larger shadow of the looming trade war and the attendant rollback of
globalisation, in which US President Donald Trump has fired the first shot with sanctions targeting $100 billion of US-China trade.
The collapse of the globalisation arrangements that had set off the greatest expansion of the world economy in the past three decades threatens not just China’s economic well-being but that of India as well.
Globalisation has benefited China the most, but India too has hugely benefited by it. While China has a huge market for its manufactured goods in the United States and has a trade surplus of $245 billion, India had an IT market of $120 billion last year.
We must not forget that the value addition of India’s IT exports vastly exceeds the value addition generated by China’s export of manufactured goods to the US. The high economic growth rates in both countries owe a great deal to their trade with the United States and the huge trade deficits the US has with both countries. Thus, for the first time in decades, the most immediate and important objectives of India and China coincide. Both leaders will see the need to act in concert. Clearly this will be at the top of the Xi-Modi agenda in Wuhan.
Next on the agenda will most certainly be the huge trade gap in favour of China that has resulted in India directly contributing about $350 billion to China since the turn of this century. Of this, almost $250 billion has happened in the past five years. The reduction of this will almost certainly be next on the agenda. India was hoping that China would mitigate this somewhat by investing in India, preferably by commercial FDI, instead of the debt trap OBOR investments. India has rightly been sceptical about the OBOR economic play, which is little more than a grand scheme to run down Chinese reserves in US banks and relieve China’s industrial overcapacity in its infrastructure related sectors like cement, steel and power generation.
In this manner, the zero earning reserves are converted into interest-bearing loans to hapless countries like Pakistan and Sri Lanka. Sri Lanka is already feeling the bite of the Hambantota "investments" and has to restructure the debt by giving the port and 19,000 acres on a 99-year lease to a Chinese SOE.
By providing large loans on generous repayment terms, investing in major infrastructure projects such as the building of roads, dams, ports, power plants and railways, and offering military assistance and political support in the UN Security Council through its veto power, China has secured considerable goodwill and influence among countries in the region around India.
The list of countries that are coming within China’s strategic orbit appears to be growing. Sri Lanka, which has seen China replace Japan as its largest donor, is a case in point — China was no doubt instrumental in ensuring that Sri Lanka was granted dialogue partner status in the Shanghai Cooperation Organisation. China has made major inroads in Nepal and has forged ideological and pecuniary relationships with many leading Nepalese politicians and opinion makers. Anti-Indianism, always a given in Nepali domestic politics, is growing more legs now. Most recently, China has been attempting to bring a change in India’s historical and treaty relationship with Bhutan.
The rise of China as the world’s greatest exporter, its largest manufacturing nation and its great economic appetite poses a new set of challenges. At a meeting of Southeast Asian nations in 2010, China’s foreign minister Yang Jiechi, facing a barrage of complaints about his country’s behaviour in the region, blurted out the sort of thing that polite leaders usually prefer to leave unsaid. "China is a big country," he pointed out, "and other countries are small countries and that is just a fact."
The fates of India and China in a world of rapid economic, technological and social change are inextricably linked. The GDPs of India and China within the next two decades will exceed that of the G-7.
A major global power shift is underway. India and China must wake up to this reality and be prepared to play a historic role instead of living out the childish fantasies of their half-baked and under-educated "strategic experts". China is bound to express its concern about joining the Quadrilateral, a quasi-alliance favoured by American strategists, of the United States, Japan, Australia and India. It is just a Western wish. We know what is in our interests and what is not. The United States, Japan and Australia are separated from China by vast oceans and enjoy a sense of security that India cannot. We have a big land border with China and it will feel the immediate consequences of any armed conflict.
The US and Japan are too closely economically integrated with China to be taken as credible allies by India. If anything India knows, it knows it stands alone.
India didn’t take part in OBOR because there was nothing of interest to it in that. When China makes a proposal that will incorporate India into its worldview, India will respond suitably. Otherwise India has no intention of paying court to the "Emperor Far Away". There are some indications that there is a belated realisation of this within China now. The greater economic integration of India and China is the best hope for China’s and India’s sustained long-term economic growth.
The writer, a policy analyst studying economic and security issues, held senior positions in government and industry. He also specialises in the Chinese economy