India and China diplomatically agreed to pull out their troops in Doklam in Bhutan territory on August 27 after a 72 days fierce scuffle against the protests made to China to stop building road on the Doklam plateau, heading towards the Jampheri ridge.
This was first time when China bowed to India’s strong determination for not budging an inch, even though India ramped up its military presence on the other side of LAC ( Line of control) for the first time. It was also first time when Chinese strategy for cowing down India ended in nadir in the border disputes. Chinse media, Global Times, was puzzled and paradoxical. At one point it escalated the threat of China’s military might, saying, “New Delhi did not draw lessons from 1962 border war”. It triggered a threat of war , clamouring “India’s provocation will trigger all-out confrontation on LAC ….India has most to lose in border spats.”
But, at another point of time, Global Times applauded India’s growth potential in the beginning of stand-off. It stated that, “As low cost manufacturing is gradually moving away from China, it is now critical for India , whether it can replace China as the next world’s factory”. This deciphers China’s bewilderment, unlike the previous border disputes
What had made China a volta-face in the beginning of stand-off and a later turnaround? Were the fears for boomerang by its own people, who are operating businesses successfully in India and loosing India’s support in accelerating globalization after Trump receded, haunted China’s strategy for accelerating threat of confrontation?
Presumably, three reasons prompted China to reverse its anti-India protests. First, Chinese investment in Indian manufacturing and infrastructure projects, second, the upcoming 9th Summit meet of BRICS in Xiamen in China in September and its sensitiveness for solidarity where China is likely to gain more because of its big stakes in New Development Bank, affiliated to BRICS and AIIB ( Asian Infrastructure Investment Bank) and third, Trump’s relook into Asia-Pacific policy, where India is likely to regain its role as linchpin, entrusted during Obama administration
India-China economic relation increased manifold during Modi administration. Unlike his predecessors, Mr Modi tried to woo Chinese investment with two main goals. First, to increase Chinese investment as FDI since India requires huge cash flow to uptick its Make in India initiative and generate employment and use Chinese investment to reduce wide trade deficit gap through curbing cheap Chinese exports, instead of using anti-dumping measures. Modi administration’s forward outlook to Chinese investment seemed to have encouraged Chinese investors, burying the hatchet of the security threat.
Eventually, these yielded results. Chinese companies, who were loosing business in their domestic market, were attracted by India’s higher growth trajectory, large pool of middle class and non-aging people. Six top brand Chinese smartphone makers (Xiaomi, Oppo, Oneplus, Gionee, Vivo, Huawei) have established their manufacturing facilities in India.
India has become the new turf for these Chinese companies to meet their global ambition. India accounted for 60 to 70 percent of the global sales of these Chinese companies. Global sales account for 30 to 35 percent of the total sales of these companies. In a way, India acted an engine for the global presence of these Chinese companies. For Xiaomi’s smartphones, India accounts for 67 percent of its global sales, for Vivo, it is 73 percent, for Oppo, it is 48 percent and for Gionee, it is one-fourth.
Besides, China has become the fourth company to manufacture metro coaches in India as a part of India’s drive for import substitution.
Gung-ho Chinese investment woke up Indian authorities to perceive the Chinese financial muscle for investment, since FDI has become an important instrumental to Make in India. India has mulled a relaxation of visa rules and considered withdrawing China from the list of PRC ( Prior Referral Category).
With Modi-Xi Jinping relations entering in the horizon of hobnob, Chinese investors rushed into India with mega investment proposals. During 2016, Chinese companies proposed US $2.3 billion worth of investment in India. The proposals included acquisition of 86 percent stake, worth US $1.4 billion, by Shanghai Fosun Pharmaceutical Co in Hyderabad Grand Pharma Ltd, Beiiing Miteno Communication Technology ‘s investment of US$900 million in Media.net, Jiangsu Longzhe’s investment of US$125 million in Diamond Power Infrastructure and Tidfore Equipment’s investment of US$150 million in Uttam Galva Metal Works.
Responding to the Chinese relook towards India as an important investment destination, Indian think tank NITI Aayug renewed interests in attracting Chinese investment, despite the security concern. Underpinning the concern over a large trade deficit, close to US $53 billion — which alone accounts for almost half of India’s global trade deficit — Indian honchos assert that India cannot forever remain a Chinese market without broader economic ties. Both NITI Aayug and the National and Reform Commission of China entered several agreements of economic cooperation in November 2016, embracing energy, urban development, Digital India, Internet Plus, as well as greater access to Indian IT firms in China.
Against this backdrop, the Docklam stand-off imparted back gears to the Chinse companies. The Chinese big investors – Oppo and Vivo – plunged into low sales in India. More than 400 Chinese expats returned home after sharp falls in sales in July and August.
China Railway Corporation (CRC) is carrying out feasibility studies of high speed trains between the Chennai – New Delhi route. It will be no wonder if China can grab the construction deal of the longest route of high speed train and could pose a major challenge to Japanese hegemony in the high speed train field. China has already proven its capability after winning the Jakarta – Bandung 150 km high speed rail project against stiff competition from Japan. Both China and Japan carried out comprehensive studies of the project.
Given the Chinese penchant to invest in India, Sino-India relation has made a strategic shift from politically dominated to business relation. After loosing the low cost manufacturing competitiveness in the wake of the Chinese currency yuan appreciation, China went to vie for overseas investment for survival. Given the India’s sustainable growth and vast domestic market, China cannot afford to lose the attraction of Indian market. Chinese investment should warrant a wake-up call to Chinese aggressive policies for political outreach.
Views expressed are personal