Investing in Indian health care will bolster AIIB’s global ambition

Given Sino-India tensions, if AIIB agrees to finance India’s ambitious health sector overhaul, it would distance it from Beijing’s foreign policy goals
It could also set a precedent for development banks to lead the financing of health care reforms across Asia

Sophie Zinser

Published: 9:00pm, 16 Aug 2020

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Despite the turbulent Sino-India relationship, Chinese investment may soon provide critical support to India’s pandemic-ravaged health infrastructure.

India’s finance ministry recently discussed an US$8 billion national health infrastructure project with the Beijing-based Asian Infrastructure Investment Bank (AIIB), World Bank and Asian Development Bank. If the deal is signed, the AIIB may have a significant stake in one of India’s most ambitious public sector projects: ameliorating its crippled health infrastructure.

With over 2.4 million confirmed cases of Covid-19 in India, state governments are struggling to provide the mandated health care. Neighbouring countries such as Indonesia and Sri Lanka spend more on health care annually, as a percentage of their gross domestic product, than India, which spends a mere 1.28 per cent of GDP. With only 8.5 hospital beds and eight physicians per 10,000 citizens, and about 80 per cent of the population lacking health insurance coverage, India will only see Covid-19 wreak more havoc unless major reforms are undertaken quickly.

The proposed US$8 billion dollar health system overhaul hopes to stimulate economic activity, increase jobs across the health care and pharmaceutical industries, and finance innovative tech-based solutions to India’s health challenges.

The timing of such an historic deal could not be more critical. This is the worst moment in relations between China and India in decades. Intensified aggression across the Himalayan border region that began in May amplified into a violent June 15 skirmish that left questions looming over the future of the relationship.

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Last week, the fifth round of bilateral military talks since the deadly June clash stalled, as Indian troops prepared for long-haul negotiations with Beijing deep into the winter months. These recent issues build on a long history of tensions between India and its rival Pakistan (China’s ally), and in the Kashmir region where India, China and Pakistan all claim territory.

During this turbulent period, the AIIB is quietly facilitating the only cooperation between high-level public and private sector decision-makers in both countries. A deal would be an invaluable opportunity for the AIIB to improve its reputation and distance itself from Beijing’s foreign policy goals.

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Announced in 2013, the same year as the Belt and Road initiative, the AIIB is largely funded by China – which holds a whopping 26.63 per cent of its voting share – and supported by India, who holds the bank’s second-largest share at 7.65 per cent. Investing in the health infrastructure of China’s adversaries, alongside other multilateral banks, would further affirm the AIIB’s ambition to grow into an influential global development bank.

But given the anti-China public sentiment across India, many are sceptical of what has been branded a “Chinese-funded” project. Many in India still refer to Covid-19 as the “Wuhan virus” or “China virus”, blaming the Chinese government’s incompetence for its spread. Beijing’s efforts to highlight its global pandemic assistance are widely interpreted in India as more patronising than impressive.

If this US$8 billion deal is signed, Chinese investment will be even more deeply entrenched in India’s public health infrastructure, paving the way for increased public scrutiny of India’s health care investments.

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Despite geopolitical tensions, this deal makes geographic and practical sense. It is likely that no amount of political issues will diminish China’s status as India’s major trading partner, and recent calls to boycott “Made in China” products have largely failed to generate a long-term impact.

Further, the critical building blocks of India’s existing health infrastructure – the equipment most needed to combat the virus spread – are primarily being sourced from Chinese companies. While the Sino-India relationship may worsen politically, this deal – if signed and maintained through multilateral development bank bureaucracy – could ensure that China and India maintain at least some level of multilateral cooperation. It could also set a precedent for multilateral development banks to lead the financing of significant health care infrastructure reforms across South and Southeast Asia.

But if the deal does not go through, it may signal that the AIIB may be too entwined with China to emerge as a truly multilateral entity, when multilateral cooperation towards development goals has never been more critical.

Sophie Zinser is a researcher and an incoming Schwarzman Academy Fellow at Chatham House in London. She has worked with refugees and migrants on development-focused policy solutions for five years across the Middle East and Asia

This article appeared in the South China Morning Post print edition as: India health needs outweigh China tension

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