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Why India should embrace China, not Trump’s America in 2017

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Jaivir Puri
Jaivir PuriDec 26, 2016 | 16:02

Why India should embrace China, not Trump’s America in 2017

Following a year of uncertainty, India may find itself in a foreign policy deadlock in 2017 as we look ahead to Donald Trump’s presidency and its possible impact on India and its neighbours.

The US President-elect has, on numerous occasions, voiced his admiration and support for India, describing India as a “strategic trading power” and “important pacific partner”. While the common understanding is that India will be the beneficiary of Trump’s approach to China and US-China tensions, that will be a short-sighted reading of a more complex issue.

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For India, it is clear that at present, strengthening our ties with both China and the US simultaneously will be politically impossible. And by strengthening our ties with Washington alone, we could have more to lose than gain, particularly when it comes to our relations with China. Never in the post industrialisation era has there been a situation where the two fastest-growing economies have shared common borders.

Ever since the Sino-Indian war in 1962, China and India have been trapped in their territorial disputes. At the same time, we have improved political and economic relations with China.

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The only way India can counter the overwhelmingly close Sino-Pak relationship is by exploring the idea of a stronger Sino-Indian one.

China is rapidly developing the China Pakistan Economic Corridor (CPEC), part of the One Belt, One Road (OBOR) initiative. From April 2015 to the beginning of 2016, India’s trade deficit with China stood at a whopping $44.48 billion while the net imports from China accounted for $52.6 billion.

In the past four years, China’s trade with United States has grown by 21 percent. We have, unfortunately, taken the wrong message from our massive trade deficit with China. Rather than encourage trade with China, the government has for a long time obstructed further development with overly protectionist policies.

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While PM Modi’s visit to China in 2015 was fruitful for a number of reasons - most notably, exposing India’s state governments to Chinese provinces - history has shown us that every instance we are close to breaking political barriers and strengthening ties, the boundary question jeopardises such aspirations.

Donald Trump throughout his campaign has rebuked America’s trade situation, with a current account balance deficit of almost $485 billion as per 2015 figures. Trump believes that trading nations try to “rip off” the US and has vowed to improve the current account balance.

For India, at least in the near future, trading with America might be neither easy nor lucrative. China, on the other hand, offers more potential. Despite geographical proximity and similar economic development growth patterns in the past 20 years, India and China have greatly varied demographics and economic structures. There will be an estimated 360 million Chinese people over the age of 60 by 2030, whereas India has an exponentially growing young population.

More importantly, China has massive overcapacity in its economy. What is even more interesting is that heavy industries, primarily heavy engineering and construction industries, are going to feel the strongest force of the overcapacity problem in China.

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China’s woes in this matter can and should be a blessing for India — but only if we have the right diplomatic and economic strategy. India’s economy is dealing with the problems of obsolete machines and factories and unskilled labour - problems that China has overcome. The Chinese are well aware of India’s potential and need to generate demand for their heavy machines and industry equipment.

A case in point: Both India and China are the world’s biggest suppliers of bulk drugs, a necessary ingredient in producing pharmaceuticals. There is an emerging trend of Indian researchers and scientists being lured by Chinese pharmaceutical firms to convert the bulk supply of raw drugs into finished pharmaceutical products ready to sell in the market.

China’s massive consumer base (accounting for 51 per cent of the world’s active pharmaceutical ingredients) could be a boon for a growing industry in India. Furthermore, India’s specialised workforce could thrive in China’s advanced laboratories and advanced infrastructure.

It is clear that in terms of economics, there is significant potential for collaboration in the best interests of both nations. The ambitious Bangladesh-China-India-Myanmar (BCIM) economic corridor covers a resource and mineral-rich region of 1,65,000 sq km. What is unfortunate is the lack of communication between India and China on pushing this project, a direct consequence of mistrust between the two nations. Since Modi’s 2015 visit, little progress has been made.

Meanwhile, the CPEC is undoubtedly raising many eyebrows among our policymakers, not only because of the irresponsibility on part of the Chinese for taking forward projects on Indian territory in Pakistan-occupied Kashmir (PoK), but also because of the speed of execution.

At the same time, the CPEC is beset by problems. Internal tensions have already started to emerge in Pakistan, with the Balochistan region and the Khyber Pakhtunkhwa province voicing deep resentment. Along with the fact that only a fraction of people, primarily of the Punjab region in Pakistan, are benefiting from the corridor, the western routes continue to be underdeveloped. Further, the Pakistani government is reportedly going to buy power and electricity at higher costs than current local energy providers to safeguard the interests of Chinese firms.

The future of the Silk Road Economic Belt and the entire OBOR initiative is likely to depend more on the BCIM corridor, which aims to connect the four countries via a network of roads, railway lines, ports and communication lines, than CPEC. The region is one with a vast base of natural resources and minerals that remain untouched. Bangladesh has natural gas reserves of 200 trillion cubic feet, yet its exports are astonishingly low and, in fact, face acute shortages to even address domestic demands of a rapidly growing population.

More importantly, India can gain immensely in developing the Northeast, which continues to suffer from large-scale poverty. Arunachal Pradesh and Assam respectively have 34 and 32 percent of the population living under the poverty line. Tourism avenues remain insufficiently exploited. Waterways and road lines connecting the four nations may finally tap the enormous potential of the disconnected Northeast.

Hence, this is an opportune moment to rethink entrenched conventions and pursue a more dynamic and pragmatic foreign policy with China. Rethinking convention does not mean diluting relations with the US; India should still pressure China on its claims and actions in the South China Sea and emphasising sovereignty in PoK.

At the same time, revitalising regional economic cooperation with China should no longer be seen as a compromise of our foreign policy principles. Increasingly, the economic future of the subcontinent, and unleashing its potential, will rely on China and the Sino-Indian relationship. The OBOR is an important step towards this goal.

As a start, transitioning from mistrust to limited cooperation could move us towards fulfilling that mission.

Last updated: December 26, 2016 | 16:02
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