Why China was again India's biggest trade partner in 2020, and where did the Galwan Valley clash happen?

Welcome to today's The India China Newsletter.

In this issue, I’m looking at:

- China regaining its status as India’s top trading partner

- What India bought from China in 2020 and what it tells us about import dependence on China: It has not diminished.

- China’s new Galwan footage and the lingering question: Where did the Galwan valley clash happen?

- China’s vaccine diplomacy

- A landmark divorce ruling in Beijing


Despite the border crisis and numerous policy moves to curb Chinese imports, China was again India’s top trading partner in 2020. Bloomberg reports:

China regained its position as India’s top trade partner in 2020, as New Delhi’s reliance on imported machines outweighed its efforts to curb commerce with Beijing after a bloody border conflict.

The Indian Express tells us what India bought from China last year:

Despite a drop from the $85.47 billion traded between India and China from January to December 2019, total trade between the countries stood at $77.67 billion during the same period in 2020 — a year that saw a deadly clash between Indian and Chinese troops at Galwan Valley. The skirmish sparked various measures by the government to cut Chinese presence in the country, including a ban of popular apps, termination of major infrastructural contracts and the approval of production-linked incentive schemes to reduce dependence on critical goods from the neighbour.

Electrical machinery and equipment, at $17.82 billion, and nuclear reactors, boilers, machinery and mechanical appliances, at $12.35 billion, continued to top the goods imported from China in 2020 — a sign of continued dependence as India works towards self-reliance in critical sectors. At the same time, imports of these goods dropped by nearly 11 percent in the calendar year.

Meanwhile, Indian iron and steel saw a 319.14 percent jump in exports to China, with shipments touching $2.38 billion during January to December 2020. Iron and steel exports to China in 2019 were around $567 million.

Meanwhile, total trade with the US in 2020, at $75.95 billion, lagged behind China.

The report’s conclusion that this was “a sign of continued dependence” is correct. The decline in imports of 11 per cent, as I reported earlier for The Hindu, was a less a sign of diversification than an overall slump in demand in India because of badly the economy was hit last year:

While there was no immediate break-up of the data in 2020, India’s biggest import in 2019 was electrical machinery and equipment, worth $20.17 billion. Other major imports in 2019 were organic chemicals ($8.39 billion) and fertilisers ($1.67 billion), while India’s top exports were iron ore, organic chemicals, cotton and unfinished diamonds. The past 12 months saw a surge in demand for iron ore in China with a slew of new infrastructure projects aimed at reviving growth after the COVID-19 slump. China’s total iron ore imports were up 9.5 per cent in 2020.

Whether 2020 is an exception or marks a turn away from the recent pattern of India’s trade with China remains to be seen. While India’s imports from China declined, so did India’s imports overall with a slump in domestic demand last year. There is, as yet, no evidence to suggest India has replaced its import dependence on China by either sourcing those goods elsewhere or manufacturing them at home, and the trade pattern of the coming 12 months, as India’s economy begins to rebound, will reveal whether the past year was an exception or a turning point.

Government sources in India denied a Reuters report saying India was set to clear 45 Chinese investment proposals that were on hold:

No Chinese company has been given the green signal to invest in India and no proposal has been accepted either, government sources said today, denying a report that said scores of investment proposals from China were set to be cleared after easing of border tensions.

Only three proposals of companies based in Hong Kong were cleared in a meeting held on January 22, the sources said. These proposals were by Citizen watches, Nippon paints and Netplay. Of the three, two are Japanese and one belongs to an NRI, sources pointed out.

As the border row escalated in June with the physical clash in eastern Ladakh's Galwan Valley, in which 20 soldiers died for the country, the government made changes to the Foreign Direct Investment (FDI) policy in a clear message to Beijing.

"The government of India has put in place a robust FDI policy. The amended policy says proposals from countries sharing borders with India have to go through security analysis and only after a thorough analysis can permission be given," said the sources, adding that the decision on security assessment was the Home Ministry's.

"Whatever proposals are in the pipeline have to go through a strict scrutiny on the stake of the Chinese government, if any, and the security implications. Only then can they be given the go-ahead," government sources asserted.

Yesterday, news agency Reuters had reported, quoting government and industry sources, that 45 investment proposals from China were about to be cleared, likely including those from Great Wall Motor and SAIC Motor Corp.

An opinion piece in China’s official English language state broadcaster, CGTN, calls for ‘a reset’ in the relationship:

It is time to turn the China-India relationship to focus again on points of mutual interest instead of differences. India is a country with enormous economic potential and will be one of the markets of the future. China is not opposed to India's development or role in the world, and likewise, New Delhi recognizes that China's investment is and will remain an essential part of the country's growth. In this case, rather than tilting towards a de-facto alliance with the United States in what is styled "the quad", it is time to calibrate a new balance in ties between the two countries, seek mutual cooperation, and de-escalation.

Given this, it is important now that both sides move on from this dispute and seek diplomacy as opposed to confrontation and nationalist saber-rattling. India's resumption of Chinese investments and the sustaining of trade constitute a welcome gesture and also a realization that national development cannot succeed without the support of China. Both countries have far too much to lose by designating one another as enemies. Likewise, for Chinese companies, India's growing domestic consumer market remains of pivotal importance.

Moving forwards, there are a number of ways India-China cooperation can take shape, one which does not have to constitute rivalry or competition. First of all, the two countries ought to pool together in supporting other developing countries in the pursuit of mutual development. Forums such as the BRICS represent the frontline of the economies of the future and should be utilized as such. Likewise, institutions such as the Shanghai Cooperation Organization should represent platforms for regional cooperation and security dialogue. And in recognizing its relationship with China, India should be cautious of jumping headfirst into anti-China alliances such as the Quad.

That will be easier said than done. The Hindustan Times reports why India remains wary:

China’s next steps will be watched closely to decide on the future course of engagement either at the bilateral or multilateral level, the people said on condition of anonymity.

“The train went off the tracks. We have just started the process of getting it back on the tracks. Let’s see where things go,” one of the people cited above said.

The people described the recent drawdown of Indian and Chinese forces on the northern and southern banks of Pangong Lake as a “good beginning” but cautioned that more needs to be done to address several other friction points on the Line of Actual Control. “A lot of things have gone wrong and the work of putting things right has just begun. Things have to be put back on track before we can talk of moving forward,” said the person cited above.


As I mentioned in yesterday’s newsletter, China’s media blitz has been aimed at showing India as the aggressor and ‘invader’ in the Galwan Valley clash. That is now the wide impression in China, even though, as I put it yesterday, the context for the clash is missing (which was India trying to evict PLA soldiers who had transgressed).

This image on Weibo has been showing that the clash happened on China’s side of the LAC, via Aadil Brar:

COMMENT: In my understanding, the LAC that both sides had been observing prior to 2020 runs around where the stand-off happened, as marked above, and is not the red line in this image above. According to Indian officials, India had previously been patrolling up to this area unimpeded, but their normal patrolling was impeded from April 2020, leading to the tensions here. Now China’s official maps show its claims up to what it calls ‘the estuary’, or the triangular area at the top, but that’s unrelated to the LAC claims. (India’s maps, too, show this and all of Aksai Chin as India’s, remember.)

Unfortunately, there has been no Indian official confirmation about the LAC here, and I haven’t seen a map of it (though it exists), and I have only what officials are saying on background. I wrote this earlier about 1960 coordinates that China gave India, which, as you can see in my story, places the LAC east of the red line above. (The problem with the coordinates is they are inexact, as round numbers, that give room for error).

In my view, India should respond clearly to the new Chinese footage from Galwan and the serious allegations that it transgressed the LAC, which everyone in China now believes. It’s likely India doesn’t want to for many reasons, including because it would contradict what the Prime Minister said last year that no one intruded, and that the disengagement process is now happening. The latter factor did not, however, stop China from releasing the footage. Until India clarifies this, questions will no doubt linger, which is why, in my view, India should rebut the claims.


The Wall Street Journal on China’s vaccine diplomacy:

The Chinese Foreign Ministry said in a written statement that China is working to provide its vaccines to more than 60 countries and that more than 20 are already using them. In Africa, it said, China has provided shots to Equatorial Guinea, Zimbabwe and Sierra Leone and has plans to provide for an additional 16 countries on the continent.

Africa includes some of toughest places to distribute vaccines, with many countries lacking proper infrastructure to receive and transport them. Two leading vaccines from Western pharmaceutical companies, which studies have shown to be more than 90% effective, use a new technology known as mRNA, and have needed to be stored at extremely low temperatures. New research this month indicates that one of those, manufactured by Pfizer Inc. and BioNTech SE, could be stored in ordinary freezers instead of ultracold ones.

Three vaccines by Chinese companies Sinopharm, Sinovac Biotech Ltd. and CanSino Biologics Ltd., based on more-traditional vaccine-making methods, can be stored using conventional refrigeration and thus have been easier to distribute in developing countries.

And finally…

Nectar Gan on a landmark ruling in Beijing:

A court in China has ordered a man to pay thousands of dollars in compensation to his former wife for housework she shouldered during their five-year marriage, in a landmark divorce ruling that has sparked discussion in the country over the value of unpaid domestic duties.

Wang, a homemaker, demanded restitution equivalent to $24,700 from her husband after he filed for divorce at a district court in Beijing in October. Wang said she was left to take care of the couple's child and housework alone, as her husband "barely cared about or participated in any kind of domestic chores," the state-run China National Radio (CNR) reported.


In its ruling, the court ordered the husband to pay Wang around $7,700 as "housework compensation," after splitting their joint property equally. Wang was also awarded custody of their son and $300 per month in alimony, according to CNR.

The ruling is the first of its kind under China's new civil code, a wide-ranging legislative package that the Chinese government and legal experts say will better protect the rights of individuals. In effect since January, it includes a clause enabling a spouse to seek compensation from their partner during divorce for taking more responsibility in caring for children and elderly relatives.

Thank you for reading this issue!