Narendra Modi Visits China-View from Bangladesh

Paper No. 5938                               Dated 25-May-2015

Guest Column by Kazi Anwarul Masud     

It is not unusual for receiving effusive praise from supporters and stinging criticism from opponents, both from home and abroad, about results of high level visits of world leaders.

 Narendra Modi’s recent visit to China has been no exception. Just days before his visit to China in May this year  Hu Zhiyong, a research fellow with the Institute of International Relations at the Shanghai Academy of Social Sciences, wrote an article in Global Times, often regarded as a mouthpiece of hard-line Chinese Communist Party leaders, of  “the Indian elites' blind arrogance and confidence in their democracy, and the inferiority of its ordinary people, very few Indians are able to treat Sino-Indian relations accurately, objectively and rationally." "Worse” he added, “some Indian media have been irresponsibly exaggerating the conflicts between the two sides, adding fuel to the hostility among the public." Indian media, vibrant as ever, found the article reflecting “savage and critical opinion” held by the people in the corridors of power in Beijing and found fault with the texture and timing of the views expressed in the article.

Unsurprisingly BJP’s ally Shiv Sena in its mouthpiece Samaana described China as a country which hugs Indian leaders but stabs in the back. It accused China, during Modi’s visit, of wiping off Kashmir and Arunachal Pradesh from India’s map—which should be of no surprise to people aware of the background of this Chinese position. While security and sovereignty should always remain preoccupations of world leaders the definition of both the terms keep changing with time and these days, global economy passing through the worst of time since the Great Depression of the Thirties, trade occupies perhaps greater importance in the agenda of discussions when leaders meet one another or collectively in regional organizations.

China is India's biggest trading partner with two-way commerce totaling close to $70 billion. But India's trade deficit with China has soared from just $1 billion in 2001-02 to more than $40 billion. Naturally Narendra Modi tried during his visit for greater access for Indian goods into China targeting annual bilateral trade to reach $100 billion. The difficulties are non-tariff barrier put up by China on Indian exports. Besides the difference in the nature of goods exported by the two countries to each other. China, an economy of $9 trillion compared to India’s $2 trillion exports mainly manufactured goods consisting of electrical machinery and transport equipment, nuclear reactors, boilers, and mechanical appliances( amounting to $ 16 billion in 2014-15), and other goods mostly manufactured. As opposed to this Indian exports to China consisted of primary and manufactured products in 2014-15. China’s exports to India in 2014-15 amounted to $ 55.8 billion while China’s imports from India were 10.9 billion. India imported $ 19.4 billion and exported $ i3.9 in 2012. Since the products  are on the lower rungs of the production chain, their realizable value is lower than, say, the finished goods made from them, and also leaves India open to the risk of Chinese economic cycles.

 In comparison, the goods that China sends to India are dominated by intermediate and finished goods.  A study by the Reserve Bank of India made a few years back challenged the conventional wisdom the Indian imports from China is because of lower price of Chinese goods compared to other sources. In 2012, for example, India imported “uncompetitive goods” worth $9.7 billion amounting to 20% of total imports.

In trying to analyze Naredra Modi’s visit to China during which China committed $22 billion worth of projects to India one has to look at the broader picture. Last year during Modi’s visit to Japan Prime Minister Shinzo Abe promised $ 35 billion to improve Indian infra-structure.   The US wants bilateral trade to increase to$500 billion from the present level of $100 billion

It has been noted by many that the proposed Trans-Pacific Partnership that has been on the anvil since 2009, if implemented( depending on the US Congress passing  the Trade Promotion Authority bill simplifying the process of trade legislation like the TPP) would constitute the largest free trade area in the world. Besides the US TPP includes Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. Though India is not included yet given the fact that its economy could become the second largest in the world in the coming decades her inclusion could be beneficial for the West.

One wonders about the logic behind the inclusion of a few countries who are neither in the First World or dependent on a single finite resource or do not have large economy. One could suspect the US’ alleged plan to surround China and maintain her position as a Pacific Power. After all some in the proposed TPP have quarrels with China over Spratly Islands as the modern technology have paved the path of rich resources under the sea.

Apprehension exists that oil rich Arab countries in the foreseeable future would need their own oil for sustenance of domestic economy and may not have much spare to export. Then again, writes Ifthikar Gilani (Narendra Modi's China visit – A hard test of diplomacy Wednesday, 6 May 2015), politically experts believe that China has thrown a big net around India, which is also bleeding the USA in Asia. Its strategies in the East and South China Seas, have imposed high costs on Washington. And on its Western front, Beijing has integrated regions, with is border provinces. Kazakhstan and Turkmenistan are too dependent on China. It is on way to enter Pakistan in a big way, taking control of Gwadar port and routes leading to Central Asia. It has already made strong forays in Nepal, Myanmar, Malaysia and Mongolia. They maintain that Modi’s diplomacy would have to pass the test of a diplomatic balance in Asia through his visit as Chinese leaders   regale and accord him a royal treatment without conceding on any substantial issue.

It was fitting for Narendra Modi to call upon the Chinese leaders to rethink policies that had hindered cooperation between the Asian giants. At the same time he discussed issues and hoped that the Chinese government should consider India’s grievances of contention over  long-running border disputes ( last September while the two leaders were having their first summit in Delhi Indian soldiers were facing off  Chinese soldiers in the Himalays), a heavy trade imbalance in China’s favor and India’s wariness toward China’s partnership with Pakistan, India’s rival. Though these are early days unsurprisingly Congress government’s ex- state minister of foreign affairs Sashi Tharoor viewed Modi’s foreign visits as strutting “the global stage, touting his government as more hospitable to investors and urging foreign manufacturers to “Make in India.” Yet his foreign travels have achieved little, beyond improving his personal standing, which had suffered considerably following accusations that, as Chief Minister of Gujarat, he had been at least negligent as more than a thousand people were killed in a 2002 anti-Muslim pogrom”.

 One is not surprised  After all it is the business of the opposition political parties to have negative views of the works of the government in power. Professor Brahama Chillaney of Center of Policy Research too did not find much to praise Narendra Modi’s visit to China. He found the Chinese condescending in the pronouncements, contained in the joint statement issued at the end of Modi's visit, that China “took note of India's aspirations” to join the Nuclear Suppliers Group, and “understands and supports India's aspiration to play a greater role in the United Nations, including in the Security Council.”

China is the only major power that has not backed India's bid to become a permanent member of the Security Council.. It is surprising that one should have expected otherwise. Nothing has happened to change Chinese policy overnight. Equally India remained reticent over Chinese President’s central initiatives, a network of roads, railways and ports intended to link China to the rest of Asia and to Europe, known as One Belt, One Road., India’s foreign secretary, Subrahmanyam Jaishankar, called the plan “a Chinese initiative” and said Beijing had not approached India’s leaders about participating and that India was   open to discussing this with the Chinese whenever they want to.

In line with Nobel Laureate Amartya Sen & Jean Dreze (An Uncertain Glory- India and its Contradictions) Christopher Runckel, a former US diplomat writes that both China and India are still desperately poor countries with large disparities in incomes across each country.

In China nearly half of the country's labor force remains in agriculture (about 60 percent in India).  Also, despite all the talk about Indian software engineers and Nobel laureates and Chinese engineering whizzes, India has the largest number of illiterate people in the world and China also is burdened with a large number of rural poorly educated who will offer continued challenges for economic development. (India’s illiteracy rate is nearly 40 percent and China’s is nearly 10 percent according to World Bank statistics.)  Of the total of 2.3 billion people in these two countries, nearly 1.5 billion earn less than US$2 a day, according to World Bank calculations. 

The opportunities in both countries are substantial; the challenges are also large. China is the world’s third largest manufacturing nation after the US and Japan while India is placed at 12th. India, however, has the advantage of knowing English language which is essential in communication internationally. Foreign companies also find it comfortable in setting up their plants in India. India further has the advantage of demographic dividend with millions of educated people joining the work force every year. Christopher Runckel is optimistic about India’s future. He projects that India’s economic growth will move roughly equal to Chinas at 10 % by 2008(which proved to be too optimistic) but will then exceed China’s as China’s economy slows to less than double digit figures.

India will increasingly start to replace China as a site for lower-end export manufacturing and for projects that have higher content of labor,  Indian companies will continue to globalize at a faster rate than their Chinese counterparts and   every company needs an India strategy – both for sourcing, review for potential factory relocation and long-term as a sales base.

Indo-China cooperation has to take into consideration Pakistan’s psychotic fear of “attack” from India. This mantra, repeated all the time like Goebbels’s narration of Hitler’s achievements has kept the army as the virtual ruler of Pakistan despite defeated by India three times.

 But the acquisition of nuclear weapons by both India and Pakistan has hopefully removed the spectacle of another Indo-Pak war. China has always been acutely aware of this “fear” of Pakistan that has been demonstrated again by President Xi Jenping during his maiden visit to Pakistan in April this year. Apart from telling the Pakistanis that his visit was like visiting the home of his own brother Xi Jenping showered Pakistan with $46 billion worth of planned energy and infrastructure investment to boost Pakistan's flagging economy. This would include adding some 10400 megawatts to Pakistan's national grid through coal, nuclear and renewable energy projects. Pakistan has been suffering from widespread power cuts disrupting its economy and adding to peoples’ discontent. At the center of Xi Jenping’s gifts to Pakistan  is a new economic "corridor" — railways, roads and pipelines — that would connect an existing mountainous highway from the far western Chinese region of Xinjiang through to the Chinese developed port at Gwadar on the Arabian Sea. It’s an impressive proposal, on a scale that of China’s overseas ventures particularly in Africa. The project will be financed by the Chinese state and its banks would lend to Chinese companies to carry out the work, thereby making it a commercial venture with direct impact on China's slackening economy.

China helped Pakistan build its arsenal of nuclear weapons, and remains one of Islamabad's biggest arms suppliers — even as the U.S. continues to commit significant military aid to Pakistan. After President Obama was India's guest of honor during its annual Republic Day commemoration last January, Pakistan extended a similar invitation to the Chinese President to attend their National Day parade in February. The Chinese leader declined, perhaps he felt that it would be aping Indian invitation to Obama and also put China as a combatant in Indo-Pak rivalry. Since inter-national visits are common and international communication has become the norm of the day the US despite its seeming rivalry with China is not particularly worried by the pursuit of self interest of the two Asian giants.

In June 2013 Harvard Professor Joseph Nye Jr wrote in an article (American power in the 21st century will be defined by the rise of the rest) “China’s size and high rate of economic growth will almost certainly increase its strength in relation to the United States. But even when China becomes the world’s largest economy, it will lag decades behind the United States in per-capita income, which is a better measure of an economy’s sophistication. Moreover, given our energy resources, the U.S. economy will be less vulnerable than the Chinese economy to external shocks. Growth will bring China closer to the United States in power resources, but as Singapore’s former Prime Minister Lee Kwan Yew has noted, that does not necessarily mean that China will surpass the United States as the world’s most powerful country.

The U.S. culture of openness and innovation will keep this country central in an information age in which networks supplement, if not fully replace, hierarchical power”. In the same vein Robert Kagan observed that American isolationism   would make sea lanes of vital interest to global trade unsafe, raise possibility of  nuclearization of Japan and South Korea to face off Chinese perceived threat, war among global powers may break out without US influence preventing such wars from happening, and result in a   less stable and freer world. In sum instant results are not expected after any summit as any contract signed is followed by endless meetings of officials before the project is seen in its practicality.

Narendra Modi should be congratulated for following a graduated foreign policy starting from inviting South Asian leaders to his oath taking ceremony, visits to Bhutan and Nepal, forthcoming visit to Bangladesh, to Japan and South Korea, the United States in his first year in office. Given India’s centrality in South Asia and necessity of regional economic integration Bangladesh as other SAARC nations should cheer Narendra Modi all the way to his destination.

(The writer is a retired Secretary of the Foreign Ministry of Bangladesh)  

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