Beijing’s focus on restoring full commercial ties has found resonance in the Indian business community that is pressing the government to open up to China.
Dec 9, 2024 05:48 IST First published on: Dec 9, 2024 at 05:02 IST
External Affairs Minister S Jaishankar’s statement in both Houses of Parliament last week summarising the situation on the Ladakh border with China signalled cautious optimism about relations with Beijing. Four years of chill in bilateral ties have followed Beijing’s incursions in eastern Ladakh during the spring of 2020 and the death of several soldiers in the Galwan Valley clashes of that summer. Unfreezing this relationship has been hard, but India held steady with its demand for restoring peace and tranquillity on a border disturbed by the sudden Chinese decision to move a large number of troops to the Line of Actual Control in violation of previous agreements for military confidence-building. China finally relented to complete the military disengagement from the six friction points on the LAC just before Prime Minister Narendra Modi met Chinese President Xi Jinping on the margins of the BRICS summit in October.
The two sides are now set to resume talks at the level of foreign secretaries and special representatives, signalling the resumption of a broader political dialogue. Over the last four years, the only dialogue between the two sides has been about the military situation on the border. Expectations of a rapid expansion of political and economic cooperation between the two countries, however, must be tempered. Much military work remains to be done on the border. On its part, Delhi would like to see the “disengagement” of troops from close positions followed by a military “de-escalation”. Over the last four years, both sides have deployed a large number of troops on the frontier and have constructed a wide range of facilities to support them. India would like to see the withdrawal of the troops to their traditional peace time locations and dismantling of the infrastructure. China, on other hand, is in a rush to resume bilateral commercial cooperation and would like Delhi to lift the restrictions it imposed on economic engagement in 2020.
Beijing’s focus on restoring full commercial ties has found resonance in the Indian business community that is pressing the government to open up to China. This would seem to make sense, given the massive dependence of Indian industry on cheap Chinese inputs. This instrumentalism, however, could turn out to be problematic for Indian industry for two reasons. China is in the middle of a massive export boom — the so-called ‘Second China Shock’ — as it places priority on production for external markets rather than domestic consumption. China is also importing less from the world. Most countries, including its Asian neighbours, are trying to cope with Beijing’s dumping by erecting barriers against Chinese imports. Opening up to China now could severely hurt Indian manufacturing, especially its small and medium enterprises. It will also help explode India’s trade deficit with China — currently running at more than $100 bn a year. There is another reason for India to hold its nerve — the prospect for an intensified trade war between Trump’s America and China. Delhi’s focus for now should be on military de-escalation on the border and negotiating small steps such as restoration of direct flights, easier grant of visas, and consultations on the changing regional and global geopolitical environment.
