Boosting trade can help restore trust between India and China

Deep Kisor Datta-Ray says the Chinese premier's visit to India shows that boosting trade is the best way to restore trust between the two nations

PUBLISHED : Saturday, 25 May, 2013, 12:00am
UPDATED : Saturday, 25 May, 2013, 5:27am


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The fact that Li Keqiang made India his first port of call as premier was imbued with significance. It was given definition when he told his hosts that "world peace … cannot be a reality without strategic trust between [Asia's giants]". In highlighting the connection, Li exposed India's need for "strategic trust" - that is, abiding and overall confidence - in China's leadership. There is no better way of engendering trust than for Li to fully engage the concerns of India's diverse polity.

That is probably how Li - who said his purpose was to increase mutual trust, intensify co-operation and face the future - viewed his visit. His statement implies that his mind is not held hostage to a complicated past, but embraces the future. In this, he replicates the sentiments of Indian Prime Minister Manmohan Singh and his top diplomats. As India's ambassador to Washington, Nirupama Rao, formerly ambassador to China, once put it, "here is a need to understand the past in a more redemptive way".

Yet the past overshadows the present, encouraging age-old insecurities of a monolithic and belligerent China among some Indians, especially rightists. They staged anti-Li demonstrations. But the image they nurse was undermined by the fact that Beijing's diplomats, not the People's Liberation Army, handled the recent crisis engendered by the army encamping in territory that India claims. Fallacious misgivings about China might be altogether eradicated if Li clarifies the PLA's role in the military-bureaucratic decision-making complex.

The long-term goal of removing historical distrust demands intertwining the present and future of the two countries. The short-term sinew is trade. Though trade has recently shrunk, the overall figure has grown impressively from a minuscule US$3 billion in 2000 and is expected to touch US$100 billion in 2015.

Trade also serves immediate concerns that can cement relations. India hopes to benefit from Chinese expertise in infrastructure projects. Beijing invested more than US$100 billion in international infrastructure during 2005-2010. In contrast, China's total investment in India is just US$600 million. Li obviously wants to change that. His itinerary included Mumbai, with an entourage of senior development, banking and infrastructure executives.

The benefits of engaging India exceed the confines of short-term profits. Beijing can also look forward to inexpensive but high-quality services and products such as Indian IT services and pharmaceutical companies, which have trouble accessing Chinese markets. While the Chinese businessmen accompanying Li understandably tried to broker deals in Mumbai, it is imperative that he meaningfully consider the grievances of Indian industrialists who feel excluded from China. Addressing their concerns could benefit ordinary Chinese and will alleviate Indian concerns over a US$29 billion (and growing) trade deficit.

"We stand ready … with a more open mind and hope that the world will view China with a calm frame of mind," Li wrote in an Indian newspaper. Realising that hope, as well as building "strategic trust", is contingent on China demonstrating openness. There is no more effective conduit for doing so than trade.

Deep Kisor Datta-Ray is a director in the Mumbai office of the global risk consultancy, Kroll Advisory Solutions. The views expressed here are personal