Barely a month after heightening anti-India protest on border stand-off, China made a somersault against the protest and applauded Modi’s reforms. Further to the surprise, China underpinned India as the future global low cost factory and forecasted that India would edge out China in near future.
This reflected a paradigm shift in China’s stand against India. Till now, the Chinese government and its media were hyper in snowballing anti-India protest over the border stand-off in Sikkim, Bhutan – Tibet tri-junction. China sent precautionary advises to the Chinese investors in India on the imminent anti-China protests , quoting examples of Shiv Sena activist’s burning of Chinese flag last year as a protest against China’s veto to India’s membership in Nuclear Supply Group.
In an opinion piece, the powerful Chinese media, Global Times, acclaimed India’s reforms , saying, India was becoming more attractive to foreign firms. It said “ As low –cost manufacturing is gradually moving away from China, it is now critical for India and even the world whether it can replace China as the next world’s factory.”
A month ago, the same media virtually alleged India for provocation of Chinese and Indian troops’ scuffle at the Sikkim border. It fired a salvo saying that “India needs to be taught the rules”. It reminded India that it was far behind of China in economic and military mighty and asked for mutual respect to each other. India was one- quarter of China’s GDP and its defence budget was one-third of China, it said.
What have driven China to make a volte-face in anti-India protest? Was it China’s fear for boomerang by its own people , who are operating business operations abroad, or fear for loosing India from the net of globalization after Trump receded, leaving a place for Xi Jinping to lead the globalization in the last Davos summit?
Presumably , there are two reasons which prompted China to reverse its anti- India protests. First, growing Chinese investment in India and Chinese engagement in various infrastructure projects and secondly, 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. He was not averse to China for economic engagement. Unlike his predecessor, Mr Modi tried to woo Chinese investment with twin aims – increase Chinese investment in India and use it to reduce wide trade deficit, incurred by Chinese exports to India. Instead of triggering trade war, Modi administration took amicable and economically viable measures to reduce the trade deficit.
India tends to be the next generation investment destination for China. China has emerged a global leader in overseas investment, from a global leader of foreign investment receiver. China lost low cost manufacturing competitiveness in the wake of Chinese currency yuan appreciation . In 2015, China was number two in the world investment abroad. Besides yuan appreciation, Chinese government relaxed several procedural hassles to promote Chinse investment abroad.
These yielded benefits to the Chinese companies , who were loosing out in their domestic market. India’s higher growth trajectory in GDP and large pool of middle class as well as non-aging people ensure substantial windfall to the Chinese investors in India. For example, around six top brand Chinese smartphone makers ( Xiaomi, Oppo, Oneplus, Gionee, Vivo, Huawei) either have or likely to start manufacturing in India. India has become the new turf for these Chinese companies to meet their global ambition.
India accounted for 60 to 70 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.
Chinese interests in economic engagement with India perked up after the successful launching of AIIB (Asia Infrastructure Investment Bank) a year and half ago. China is the biggest stakeholder, followed by India in AIIB. It was a major breakthrough in establishing Asian infrastructure development funding institution and threw a big challenge to the western funding institutions and ADB. India requires US $1 trillion fund for its infrastructure development.
One of the significant features of AIIB, which is benign to India, is that clean energy is not the prerequisite for power development, unlike World Bank, IMF and ADB. In India, most of the upcoming power projects are coal –based. As a result, these power projects were deprived of fund facilities from World Bank, IMF and ADB, after the clean energy became priority for funding. Given the situation, AIIB funding will be a leg up for Chinese companies over its competitors in bidding new power projects in India.
The recent Trump-Modi summit added a new dimension of spirit in the Indo-USA relation. The most important part of this summit was Trump’s clear understanding of Modi’s vision in deepening Indo-USA relation.
During Obama administration, India has often been termed as linchpin to US Asia –Pacific Pivot policy. India lost significance with Trump negation to Asia-Pacific rebalancing strategy. But, USA did not slacken interactions with the countries in this region. The mercurial Trump quickly changed his vision to Asia-Pacific strategy.
In the beginning of May, USA adopted a new initiative for rebalancing Asia power strategy, namely “Asia Pacific Stability Initiative” – proposed by Senator John McCain in the beginning of this year. Pentagon endorsed a plan of US $ 7.5 billion to strengthen US presence in Asia-Pacific region over the next five years. Two security threats – rising China and nuclear North Korea – justified the initiative. At Shangri- La Dialogue in Singapore, US Defence Secretary James Matis said the US will continue to strengthen military capabilities in Asia –Pacific region. Mr Trump will attend the Asia-Pacific Economic Cooperation summit in Vietnam in November. This series of actions prove that Trump administration is taking a new look at USA’s Asia-Pacific strategy.
In these perspectives, India has a chance to regain its position as the linchpin in USA Asia-Pacific policy strategy. India has proved to the taste of Trump, after it refused to be party to China’s OBOR.
Without India, Xi Jinping’s dream project for globalization remain half-baked. To this end, China will strive to engage India in larger economic cooperation in its Asian power game. In this exercise, China is unlikely to focus on border stand-off , which may prove inimical to the Chinese ambition for leadership in the globalization
Views are personal