Manmohan Singh's Visit to ChinaNew Challenges Ahead

China Report http://chr.sagepub.com/ Manmohan Singh's Visit to China : New Challenges Ahead Jabin T. Jacob China Report 2008 44: 63 DOI: 10.1177/000944550704400109 The online version of this article can be found at: http://chr.sagepub.com/content/44/1/63.citation Published by: http://www.sagepublications.com Additional services and information for China Report can be found at: Email Alerts: http://chr.sagepub.com/cgi/alerts Subscriptions: http://chr.sagepub.com/subscriptions Reprints: http://www.sagepub.com/journalsReprints.nav Permissions: http://www.sagepub.com/journalsPermissions.nav >> Version of Record - Jul 29, 2008 What is This? Downloaded from chr.sagepub.com by Alka Acharya on January 6, 2013 Manmohan Singh’s Visit to China: New Challenges Ahead Jabin T. Jacob Indian Prime Minister Manmohan Singh’s three-day visit to China from 13–15 January was the first by a foreign dignitary to the country in 2008, and in a land where symbolism counts for a great deal, it may be seen as notable for just this reason. Earlier, the Indian ruling coalition chairperson Sonia Gandhi’s trip to China in November 2007 was also considered significant for being the first visit by a foreign political leader, following the conclusion of the important 17th Congress of the Communist Party of China. The Singh visit saw the additional highlight of the Chinese Premier Wen Jiabao hosting his Indian counterpart to a private dinner, testifying to both the significance of bilateral ties as well as to the excellent rapport between the two leaders. However, symbolism apart and despite the booming trade that continues to exceed all targets, Sino-Indian relations have seen some major political incidents beginning around the time of Chinese President Hu Jintao’s visit to India in November 2006. These include then Chinese Ambassador to India Sun Yuxi’s statement, on the eve of Hu Jintao’s visit, reiterating China’s claim over Arunachal, the denial of a Chinese visa to an Indian civil servant of Arunachali origin, and the Chinese Foreign Minister Yang Jiechi’s statement that the ‘mere’ fact of populated areas was insufficient reason for China to give up its territorial claims. While the first two incidents are not surprising, given that they reflect the official Chinese position—Arunachalis have been denied Chinese visas in the past as well—it was the last one that provided the real jolt as it was in apparent contradiction of the Article VII of the 2005 Agreement on the Political Parameters and Guiding Principles for the Settlement of the India–China Boundary Question, which stated that ‘the two sides shall safeguard due interests of their settled populations in the border areas’.1 1 ‘Agreement between the Government of the Republic of India and the Government of the People’s Republic of China on the Political Parameters and Guiding Principles for the Settlement of the India– China Boundary Question’, Ministry of External Affairs, Government of India, http://www.mea.gov.in (All Internet sources were accessed on 1 March 2008.) CHINA REPORT 44 : 1 (2008): 63–70 SAGE Publications Los Angeles/London/New Delhi/Singapore DOI: 10.1177/000944550704400109 Downloaded from chr.sagepub.com by Alka Acharya on January 6, 2013 64 Jabin T. Jacob It is difficult to recall such a series of events in close proximity to each other in the recent past. Meanwhile, even as reports of Chinese ‘incursions’ across the Line of Actual Control (LAC) have continued to hit the headlines in the Indian press, the economic front, frequently held up as an area where the bilateral relationship has progressed most rapidly, too has shown signs that things were increasingly unsatisfactory. For the Chinese, economic discontent has arisen because of the continued Indian reluctance to enter into a Free Trade Agreement (FTA) and discrimination against Chinese companies and investments on security grounds; on the Indian side, there are apprehensions owing to the growing trade deficit and the opaque Chinese pricing and regulatory mechanisms. It is against this backdrop that Singh’s visit—only the fifth by an Indian Prime Minister to China—and its achievements or the lack of them have to be seen. The outcome of the visit may be analysed in terms of three broad areas—the boundary dispute, the economic content of the relationship and the proposed bilateral civilian nuclear cooperation—with other issues of international relations such as the situation in Pakistan making minor entries. THE BOUNDARY DISPUTE On the eve of Singh’s visit, China said that the talks had achieved ‘positive and important progress over the past years’2 and the Chinese Ambassador to India, Zhang Yan, referred to the 2005 Agreement while saying that both sides were agreed that ‘a fair, reasonable and mutually-acceptable solution should be brought through friendly consultations on an equal footing’.3 In India, meanwhile, both Pranab Mukherjee, the Minister for External Affairs, and Shiv Shankar Menon, the Foreign Secretary, noted that the two countries were committed to maintaining peace and tranquility along the border and that the border remained peaceful.4 Mukherjee, however, admitted in a TV interview that Chinese ‘incursions’ did take place occasionally5 but both he and the Foreign Secretary stressed that the mechanisms in place to deal with such problems have been successful. During the visit, the two sides for the first time formulated their own drafts on a possible framework agreement involving territorial concessions as a way towards 2 ‘Border talks on right track, says China’, The Indian Express, 9 January 2008, http://www. indianexpress.com/story/259212.html 3 ‘China keen on more military exercises with India’, The Indian Express, 10 January 2008, http:// www.indianexpress.com/story/259913.html 4 ‘India, China committed to maintaining peace: Menon’, The Indian Express, 12 January 2008, http://www.indianexpress.com/story/260403.html 5 ‘China does intrude into India, admits India’, The Indian Express, 12 January 2008, http:// www.indianexpress.com/story/260741.html China Report 44, 1 (2008): 63–70 Downloaded from chr.sagepub.com by Alka Acharya on January 6, 2013 Manmohan Singh’s Visit to China 65 eventual resolution of the boundary dispute. While this may be interpreted as a forward movement, the positions themselves appear to indicate little change. New Delhi insisted that the final settlement of the boundary issue could not involve transfer of settled populations, while Beijing is believed to have proposed the division of populated areas into larger and smaller segments based on population size and then considering some displacement—a position that seems to indicate an unaltered position on Chinese claims to Tawang. Both sides did agree to put the Tawang issue aside for the moment and to concentrate on areas where there is ‘least disagreement’, but it appears that the Special Representatives (SRs) mechanism has not succeeded in reducing differences or gaps in perceptions in any significant manner. The most telling indication of this is surely in the fact that the SRs found it necessary to set up another working group to look at the two different drafts of the framework6—a process that adds one more, larger tier to the negotiations process with perhaps all its attendant delays and complications. Nevertheless, the two countries appeared to strive hard for some semblance of progress as their joint statement declared: The two sides reiterate their determination to seek a fair, reasonable and mutually acceptable solution to the boundary question and to build a boundary of peace and friendship on the basis of the Agreement on Political Parameters and Guiding Principles for the Settlement of the India-China Boundary Question.7 TRADE AND ECONOMIC ISSUES China has emerged as India’s second largest trading partner and is likely to displace the US as the largest partner soon. India, however, is only China’s tenth largest trading partner with the share of Indian exports in total Chinese imports in 2006–07 standing at only 1.3 per cent according to a Federation of Indian Chambers of Commerce and Industry (FICCI) study. Meanwhile, the share of Chinese exports in the total Indian imports stood at 9.4 per cent in the same period.8 The economic relationship suffers from the extremely limited trade basket between the two countries that has China importing iron ore, primary and semi-finished iron and steel, plastic, linoleum and marine products while India imports electronic goods, 6 Pranab Dhal Samanta, ‘Delhi, Beijing agree on roadmap to settle border’, The Indian Express, 16 January 2008, http://www.indianexpress.com/story/261973.html 7 ‘A Shared Vision for the 21st Century of the Republic of India and the People’s Republic of China’, 14 January 2008, http://pmindia.nic.in/speech_14jan2k8-1.pdf 8 ‘No talks on FTA with China this year, says Nath’, The Indian Express, 17 January 2008, http:// www.indianexpress.com/story/262181.html China Report 44, 1 (2008): 63–70 Downloaded from chr.sagepub.com by Alka Acharya on January 6, 2013 66 Jabin T. Jacob organic chemicals, pharma products, coal, coke and raw silk and briquettes from China. The initial Indian trade surplus in the economic relationship turned into a trade deficit by 2006, and by November 2007, the deficit had gone up to over US$ 9 billion. Nirupama Rao, the Indian Ambassador to China, was forthright in stating that the trade deficit with China was ‘tolerable only for a finite period’,9 indicating that besides the usual political and security considerations, economics too was becoming an area of friction between the two countries. In fact, during the visit, the Chinese Minister of Commerce had to assure his Indian counterpart that he would be sending ‘buying missions’ to India to help alleviate the problem.10 While the two sides appeared to express continued faith in the potential of their economic ties by revising their target for bilateral trade upwards to US$ 60 billion by 2010,11 India continued to be unwilling to give China market economy status (MES), which would allow Chinese companies to receive the same treatment under World Trade Organization (WTO) rules as other market economies. India, in fact, initiates a large number of anti-dumping cases against its neighbour every year. The Chinese have been keen on entering into an FTA with India but by most accounts such an arrangement is likely to have a negative impact on India as long as the Chinese economic system does not become more transparent and the Chinese yuan is not allowed to appreciate against the US dollar. The commerce ministers of the two countries are, meanwhile, expected to examine the report of a Joint Study Group on a proposed regional trading arrangement (RTA) that was released during the Singh visit. The Indian minister, however, made it clear that he did not expect an agreement this year.12 In a major speech to a gathering of Chinese and Indian businessmen organised by the China Council for the Promotion of International Trade (CCPIT), the Indian Prime Minister urged Indian business to actively pursue opportunities for expanding non-traditional items of export and called for greater market access for Indian goods in China as a means of dealing with the rising trade deficit. He also announced that the two countries would work together to remove administrative barriers and simplify regulations in order to improve trade in the services sector.13 On the investments front, while actual Indian investment in China till March 2007 stood at US$ 178 million (contracted investment is at US$ 565 million), Chinese 9 Pallavi Aiyar, ‘For a formidable economic engagement across the Himalayas’, The Hindu, 10 January 2008, http://www.hindu.com/2008/01/10/stories/2008011055671100.htm 10 ‘Trade barriers a concern’, The Indian Express, 13 January 2008, http://www.indianexpress.com/ story/260839.html 11 Diwakar and Saibal Dasgupta, ‘India, China aim for $ 60-billion trade by ‘10’, The Times of India, 15 January 2008, http://timesofindia.indiatimes.com/World/India_China_aim_for_60-billion_ trade_by_10/articleshow/2700312.cms 12 ‘Trade pact with China to take more time’, The Indian Express, 16 January 2008, http://www. indianexpress.com/story/262111.html 13 ‘PM address at the India–China Economic, Trade and Investment Summit’, The Hindu, 14 January 2008, http://www.hindu.com/nic/rd2.html China Report 44, 1 (2008): 63–70 Downloaded from chr.sagepub.com by Alka Acharya on January 6, 2013 Manmohan Singh’s Visit to China 67 investments in India between August 1991 and December 2006 worked out to a mere US$ 3.61 million, according to the Indian government (according to Chinese figures, actual investments are about US$ 17 million). Since Hu Jintao’s visit to New Delhi in November 2006, when the two countries signed a bilateral investment protection and promotion pact, there has been a noticeable upswing in Chinese investments, particularly in the areas of infrastructure and project implementation. About thirty major construction companies, including the China Road Construction Corporation and the China Civil Engineering Construction Corporation were, in fact, represented at the CCPIT event. In the matter of investments, however, it was China with complaints against India demanding a ‘level playing field’ and reduction of restrictions against its companies.14 During the visit, in fact, India agreed to let China’s Great Wall Airline, a cargo carrier, to fly to Mumbai and Chennai. Earlier, permission to the cargo carrier had been denied by Indian authorities on the grounds that Mumbai and Chennai had key nuclear facilities located near their airports and that one of the former owners of the airline, the China Great Wall Industry Corporation, had been blacklisted by the US for the alleged transfer of missile technology to Iran. China had responded by withholding clearances for Air India to fly to Guangzhou as agreed between both countries during Hu’s visit and for India’s Jet Airways’ plans to fly to Chicago via Shanghai. The latter is now expected to become among the few international carriers to get transit rights from China.15 CIVILIAN NUCLEAR COOPERATION The joint statement signed by the two countries, ‘A Shared Vision for the 21st Century’, pledged ‘to promote bilateral cooperation in civil nuclear energy’ and observed that such cooperation was necessary to combat climate change and to develop energy security.16 For the time being, such cooperation is likely to be limited to technology cooperation as in the International Thermonuclear Experimental Reactor (ITER) project but there is no reason not to hope that such cooperation can eventually extend 14 Pallavi Aiyar, ‘For a formidable economic engagement across the Himalayas’, The Hindu, 10 January 2008, http://www.hindu.com/2008/01/10/stories/2008011055671100.htm; Saibal Dasgupta, ‘China eyes Indian investment’, The Times of India, 14 January 2008, http://timesofindia.indiatimes.com/ Business/China_eyes_Indian_investment/articleshow/2697377.cms; ‘Chinese cos keen on Indian market’, The Indian Express, 10 January 2008, http://www.indianexpress.com/story/259948.html 15 Pranab Dhal Samanta, ‘Let us understand each other, think out of the box, PM tells Beijing’, The Indian Express, 14 January 2008, http://www.indianexpress.com/story/261199.html; Anubhuti Vishnoi, ‘Chinese cargo airline to get clearance to fly to Mumbai, Chennai’, The Indian Express, 22 January 2008, http://www.indianexpress.com/story/264086.html 16 Pranab Dhal Samanta, ‘N-energy, UN: China and India signal friendship, not rivalry’, The Indian Express, 15 January 2008, http://www.indianexpress.com/story/261560.html China Report 44, 1 (2008): 63–70 Downloaded from chr.sagepub.com by Alka Acharya on January 6, 2013 68 Jabin T. Jacob to areas of commercial benefit to both countries. In his speech to the Chinese Academy of Social Sciences, Singh noted that the two countries could ‘do much more to jointly develop clean and energy efficient technologies through collaborative research and development’17—certainly a cooperation that has commercial implications. And while the Indian Prime Minister admitted he got no categorical assurance of Chinese support at the Nuclear Suppliers Group (NSG), when the Indo-US nuclear deal comes up for discussion,18 certainly such support is no longer looking as impossible as it once did. While the proposed civilian nuclear cooperation between the two countries has been viewed by some in India as an apparent Chinese recognition of India’s nuclear status,19 it needs to be remembered that the head of the China National Nuclear Corporation (CNNC) had, as early as June 2005, expressed his country’s desire to cooperate with India in the nuclear power sector, under internationally agreed guidelines.20 Therefore, it is either that China had long ago accepted India as a de facto nuclear power, or that such positive movement in the civilian sector is purely a matter of Chinese self-interest and does not necessarily translate into outright acceptance or support for a nuclear India in any other forum. In this context, it is noteworthy that the Chinese have offered similar help in the civilian nuclear sector to Pakistan. In fact, the Pakistan Atomic Energy Commission’s (PAEC) plans, announced in July 2005, for thirteen new nuclear power plants over a twenty-five year period, depend heavily on Chinese technical and financial assistance.21 PAKISTAN AND THE UNITED STATES With the Indian Prime Minister stating that he and the Chinese President had agreed on the need for the two countries to have regular consultations on regional issues,22 it is obvious that Pakistan and the US are likely to remain important factors in the Sino-Indian relationship. On Pakistan, the two countries did not go beyond expressing 17 ‘PM in China seeks intl cooperation in civil nuke energy’, The Indian Express, 15 January 2008, http://www.indianexpress.com/story/261663.html 18 Pranab Dhal Samanta, ‘Delhi, Beijing agree on roadmap to settle border’, The Indian Express, 16 January 2008, http://www.indianexpress.com/story/261973.html 19 ‘Beijing thaw’, The Indian Express, 15 January 2008, http://www.indianexpress.com/story/ 261454.html 20 ‘China says willing to cooperate with India on nuclear power’,_ The Indian Express, 7 June 2005, http://www.indianexpress.com/archive/StoryO-71838-China-says-willing-to-cooperate-with-India-onnuclear-power.html 21 Ihtasham ul Haque, ‘PAEC told to set up 13 N-power plants’, Dawn, 15 July 2005, http://www. dawn.com/2005/07/15/top4.htm 22 Pranab Dhal Samanta, ‘Delhi, Beijing agree on roadmap to settle border’, The Indian Express, 16 January 2008, http://www.indianexpress.com/story/261973.html China Report 44, 1 (2008): 63–70 Downloaded from chr.sagepub.com by Alka Acharya on January 6, 2013 69 Manmohan Singh’s Visit to China concern about the instability that has followed Benazir Bhutto’s assassination, but in two editorials following Singh’s visit, the People’s Daily expressed alarm at what it perceived as increasing US involvement in the country. One opinion piece called the recommendation by the US Secretary of Defense to send additional troops to reinforce North Atlantic Treaty Organization (NATO) in the tribal regions along the Pakistan– Afghanistan border ‘a provocative move’ that could ‘hamper and derail regional progress’.23 Another editorial titled, ‘No More Turmoil in Pakistan is Permissible’, was a strong statement of support for the Musharraf regime and implicitly criticised the US when it referred to ‘a few powers overseas impos[ing] pressures or punitive measures against Pakistan in the name of “democracy”, “freedom” and “opposition to terrorism”’.24 It is apparent that China views the US as the biggest threat to its interests in Pakistan and at the same time is not quite willing to engage with India on evolving a common approach to Pakistan. Of the many reasons that may exist for this reluctance, the evolving nature of Indo-US relations is certainly one. The Chinese have, for example, not been too happy with the perceived China-containment overtones of the Quadrilateral Initiative involving the US, Japan, Australia and India. CONCLUSION India and China will continue with more high-level exchanges throughout the coming year, including a proposed visit by the Indian President, visits by the respective foreign ministers and a defence dialogue at the level of defence secretaries. The two armies are also expected to engage in the second round of joint exercises in India, following the first round between the two countries in at Kunming in December 2007. Several memoranda of understanding, relating to collaboration in traditional systems of medicine, geosciences, railways, planning, land resource management and housing were also signed during the Singh visit, and a significant agreement was reached on conducting studies on climatic and environmental changes, for the first time, in the Qinghai-Tibet plateau.25 Further, China has tried to allay Indian fears on its use of trans-Himalayan rivers that flow into India from the Chinese side. Taken together, the Hu Jintao visit to India and the Manmohan Singh visit to China mark perhaps the beginning of a new stage in Sino-Indian ties. For one, both 23 ‘Recommendation imperils regional security’, People’s Daily, 16 January 2008, http://english. people.com.cn/90001/90780/91343/6339236.html 24 ‘No more turmoil in Pakistan is permissible’, People’s Daily, 23 January 2008, http://english. people.com.cn/90001/90780/91343/6343888.html 25 Pranab Dhal Samanta, ‘China agrees to joint research in Tibet plateau’, The Indian Express, 15 January 2008, http://www.indianexpress.com/story/261511.html China Report 44, 1 (2008): 63–70 Downloaded from chr.sagepub.com by Alka Acharya on January 6, 2013 70 Jabin T. Jacob sides seem to have reconciled themselves to the fact that every visit will not produce a ‘great leap forward’ in ties but that progress can only be incremental. Two, it appears now that the economic relationship is also beginning to witness increasing problems and given that the actors involved are more than governmental ones, these are likely to crop more often and more visibly in the future. While the boundary talks continue with no end in sight, the relationship is likely to be tested further by these and other newer issues. Author’s Address: Research Fellow, IPCS, New Delhi. E-mail: jabin@ipcs.org China Report 44, 1 (2008): 63–70 Downloaded from chr.sagepub.com by Alka Acharya on January 6, 2013