China heads into 2019 confronting myriad challenges, starting with a slowing economy and a bruising trade war with the United States that is nearing the 200-day mark. Beijing is approaching a year of important political anniversaries – culminating in the 70th anniversary of the People’s Republic of China in October – with a sense of uncertainty, in sharp contrast to the sense of confidence it exuded a year ago.
Indeed, India faces its own year of change, with the upcoming general elections that are likely to be held between April and May. So, for different reasons, Beijing and Delhi are invested in ensuring there are no major disruptions to bilateral relations. It was only two years ago that one such disruption plunged ties into a deep freeze with the unexpected border stand-off at Doklam, until the disengagement in August 2017.
Since then, however, there has been an unexpected rapprochement between the neighbours, culminating in the April “informal summit” in Wuhan between President Xi Jinping and Prime Minister Narendra Modi. To underline that it was no one-off, reports suggest Xi may soon travel to India for a second such meeting.
While the Doklam incident was certainly a wake-up call – and in one sense added to the urgency to fix relations – what isn’t often appreciated is that the recalibration in relations was, in fact, under way before the stand-off.
When Xi and Modi met in Astana in June 2017, they outlined two major points of agreement as basic principles to re-craft relations: firstly, differences shouldn’t become disputes, and secondly, in a world of uncertainty, both countries could become a factor of stability. While the unexpected border stand-off a week later did delay this effort, it’s clear that what continues to drive this recalibration is both countries’ shared anxiety over the increasing uncertainty they are confronting, at home and abroad.
India is closely watching how China grapples with its two major internal and external challenges: its economic transformation at home, and the bruising trade war with the US abroad. After all, India has different stakes than the West riding on the outcomes of both.
Consider the trade war. Indian officials believe it is already opening doors that had long remained closed in Beijing, particularly as China looks to diversify sources of agricultural commodities such as soybean and rapeseed.
In Wuhan, Modi also pressed Xi on opening up the market to Indian rice varieties, in addition to sugar and pharmaceuticals. These remain works in progress, but Indian officials are more optimistic than they were in the past, when lobbying efforts usually reached dead ends.
Many Indian companies are also viewing Beijing’s “Made in China 2025” plan to upgrade its industries and technological capacities as an opportunity, rather than the threat it is viewed as in the West, where many experts see the plan as the real target of the trade war.
Here again, there are both short- and long-term opportunities for India.
Should Beijing relent to Western demands of creating a level playing field and curbing forced technological transfers, India, too, stands to gain.
In the short term, Indian IT companies are already working with local Chinese governments – starting with Guiyang in Guizhou province and Dalian in Liaoning – to boost their capacities particularly in big data and artificial intelligence.
In May, both governments launched a joint IT matchmaking initiative called the Sino-Indian Digital Collaborative Opportunities Plaza to help Chinese companies address their software needs as they upgrade under the “Made in China 2025” plan.
At the launch, then-Indian ambassador to Beijing Gautam Bambawale said Indian companies were “uniquely suited” in helping Chinese firms implement their initiatives in big data, AI and Internet Plus, the latter an initiative to move the Chinese economy toward services and the tech sector.
Indeed, India’s National Association for Software and Services Companies has placed “Made in China 2025” at the centre of its current IT outreach plans for China, although again, this is a work in progress.
China’s other big external challenge this year will be addressing rising regional concerns over its “Belt and Road Initiative”. When the second Belt and Road Forum is held in Beijing this summer, the backdrop will be rather different from the optimism that welcomed the inaugural summit two years ago, which was attended even by American and Japanese delegations.
Then, India was the only major absentee, but it has found its sharp criticisms of the belt and road plan, particularly on the debt burdens foisted on host countries, gaining wide traction.
Both India and China have since looked to move beyond their differences on Xi’s signature initiative.
In Wuhan, China’s vice-minister of foreign affairs, Kong Xuanyou, went as far as saying that regardless of whether India endorsed the plan, both countries would go forward with “China India Plus One” projects in third countries. The first initiative, to train Afghan diplomats, was launched last year. More ambitious projects in the infrastructure domain are yet to be agreed.
The concerns over the belt and road plan are, in some sense, a reflection of a growing global debate on the implications of China’s rise. China ended 2018 with an effort to make nice with its neighbours as it dealt with rising competition with the US, evinced in both the Wuhan summit and the visit of Japanese Prime Minister Shinzo Abe. This course correction could, in the short term, yield dividends for India, but whether it is merely tactical remains to be seen.
India, for its part, is still deepening relations with other like-minded countries that share its longer-term concerns on China’s growing regional muscle, particularly in the maritime domain, such as Japan, Australia, Indonesia and the US. What only appears certain is that a year of uncertainty awaits. ■
Ananth Krishnan is Visiting Fellow at Brookings India