China’s Iron Fist in a Velvet Glove

Brahma Chellaney

The Economic Times, May 26, 2013

Behind the hype and hustle, any India-China summit meeting runs along familiar lines: India flags its concerns sedulously, especially over Beijing’s reluctance to clarify the line of control, the lopsided trade relationship, China’s activities in Pakistan-occupied Kashmir (PoK), and the opaque Chinese projects on transnational rivers. The Chinese side responds with pious platitudes about friendship and cooperation that win front-page coverage in Indian press. All this is quickly forgotten until the next summit, when India goes through the same motions again.

In the intervening time, however, the trade pattern has turned more unequal, China has unveiled new dam projects on transboundary rivers and enlarged its strategic footprint in PoK, and the number of cross-frontier forays and border incidents staged by Chinese troops to pressure India has increased. This is exactly what happened between the 2010 New Delhi visit of Premier Wen Jiabao and the just-concluded trip of his successor, Li Keqiang.

Take the growing trade asymmetry. The joint statement issued at the end of Li’s visit promises “measures to address the issue of the trade imbalance.” But when Wen Jiabao came calling, China made a similar commitment to level the playing field by taking “measures to promote greater Indian exports to China with a view to reduce India’s trade deficit.”

Yet China’s trade surplus has soared since then, significantly expanding India’s current account deficit. With trade talks that began in late 2010 yielding little, there is little hope of any respite for India from China’s escalating dumping of goods.

Confident that India will continue to do little else other than file anti-dumping cases at the World Trade Organization, Beijing is systematically undermining Indian manufacturing. Moreover, it still largely imports raw materials from India and exports finished products. One new way it is seeking to perpetuate this distorted pattern is by providing debt financing through its banks to financially troubled Indian companies that agree to buy Chinese equipment or supply primary commodities.

Now consider China’s response to India’s exhortations to stem its growing strategic involvement in PoK, a disputed territory. Li, as if to mock India’s pleas, went straight from India to “all-weather” ally, Pakistan, and signed an agreement to build an economic corridor through PoK, where China is already engaged in several strategic projects. To shield these projects, Beijing has stationed its own forces in the rebellious, Shia-majority Gilgit-Baltistan, with the result that India now faces Chinese troops on both flanks of Jammu and Kashmir, one-fifth of which China has annexed.

Contrast China’s refusal to heed New Delh’s PoK-related protestations with the intense diplomatic pressure it mounted after India’s ONGC Videsh Limited (OVL) signed a contract with PetroVietnam to jointly explore for oil in two blocks in the South China Sea. Beijing warned India against “any unilateral exploration activities” there. OVL eventually withdrew from one block in 2011 and the other in 2012 after paying millions of dollars in exit fees to PetroVietnam.

Water has emerged as a key security issue in Sino-Indian relations and a potential source of enduring discord. But like Chinese President Xi Jinping earlier, Li snubbed Prime Minister Manmohan Singh’s plea that water cooperation ought to extend beyond mere data-sharing to institutionalized transparency on dam building.

China is the source of river flows to a dozen countries. But India is the most vulnerable of them to China’s reengineering of transboundary flows because it alone receives nearly half of all river waters that leave Chinese territory. Beijing, however, continues to spurn India’s proposal to conclude a pact or establish an inter-governmental institution to define rights and responsibilities on shared rivers. China wants only to sell flood-related hydrological data.

While working to disturb the status quo on international-river flows, China is clearly unwilling to accept the territorial status quo with India. The Indian assumption that greater trade would make Beijing more amenable to solving the border dispute and more sensitive to India’s other concerns has been belied.  

For more than three decades now, India has engaged China in never-ending rounds of sterile discussions on the boundary issue in what has become the longest, most-barren process of negotiations between any two countries in modern history. China has not only derailed the process to clarify the Line of Actual Control (LAC), rendering that term farcical, but it has also signalled unequivocally that it will not accept the LAC as the basis for a boundary settlement.

When Wen Jiabao came in 2010, he delivered a hard message on the border issue — that it will “not be easy to completely resolve the question” and that, in any event, it will “take a fairly long period of time.” These remarks in a prepared speech amounted to a public disavowal of the “firm commitment” enshrined in the joint statement issued just hours earlier to resolve the border dispute “at an early date.”

The latest joint statement, deferring to China, actually drops the “early date” reference. The fact that Li’s visit was preceded by a 19-kilometre-deep Chinese incursion into Ladakh attests to China’s resolve to keep India under sustained pressure by neither clarifying the LAC nor moving towards a border settlement. Beijing earlier sabotaged the Joint Working Group (JWG) on border talks by going back on its 2001 commitment to exchange maps of the eastern and western sectors with India. And by playing the Arunachal and Kashmir cards, it is now seeking to stymie the JWG’s replacement mechanism led by the so-called special representatives (SRs).

Having being shaken by the daring Ladakh incursion, India has every right to tacitly link China’s one-sided market privileges and bilateral political and military exchanges to substantive progress on the border issue. But it is flubbing the opportunity. The joint statement, for example, preposterously expresses “satisfaction” over the decade-long border talks between the SRs, even as it encourages them to “push forward the process of negotiations.” This stance only aids the Chinese game-plan to take India round and round the mulberry bush.

India, however, has done well to counter China’s draft “Border Defence Cooperation Agreement” by proposing its own accord designed specifically to prevent border flare-ups and incursions. The Chinese-drafted agreement, in the name of preserving Himalayan peace and tranquillity, cleverly aims to keep India vulnerable to Chinese military pre-emption by freezing its belated build-up of border defences.

Li’s visit has served as a fresh reminder that India-China summits yield little more than hype, spin and reassuring clichés. Imploring China to see reason on border, trade, water and other issues is pointless because Beijing only understands the language of leverage. Combating China’s containment-behind-engagement strategy demands a concerted Indian plan of action that combines beefed-up deterrent capabilities with leveraged diplomacy and military cooperation with friendly countries.

Brahma Chellaney is professor of strategic studies at the Centre for Policy Research in New Delhi and the author of  “Water: Asia’s New Battleground.”

(c) The Economc Times, 2013.