Why Modi and Xi need to meet in Bali
Welcome back to The India China Newsletter!
I'm happy to be returning to your inboxes after a hiatus. It's been a busy few months settling back into life in Beijing, and I'm finally able to take a breath after the Party Congress. I'm hoping - as always, and against hope! - to be more regular with shorter, sharper and more frequent issues going forward.
Prime Minister Narendra Modi and Chinese leader Xi Jinping will both head to Bali early next week for the G20 Summit. As I write three days before the summit, India and China have announced bilaterals with a number of countries -- but NOT with each other.
Modi and Xi avoided each other entirely at the SCO Summit in Uzbekistan, so a meeting at the G20 is by no means a given. They haven't spoken on the phone since their last in-person meeting in November 2019 in Brasilia at BRICS, which followed an intense period of engagement between the two, and came a month after Xi travelled to Chennai for the second 'informal summit'.
How things have changed since. At the SCO, not only did they not hold a bilateral, they even didn't shake hands or make eye contact at group events, which made for somewhat awkward optics, especially as they were stood next to each other at the group photo op. This video captures the moment:
This video also tells us a lot about the state of relations, which remain perilous even after disengagement in five of the seven friction points. There is no sign of a broader de-escalation on the border. Even beyond the border, strategic mistrust is growing as recent developments indicate — all of which, to me, underline the importance of a high-level conversation. Note that Biden and Xi are meeting in Bali, despite all the problems on the bilateral front, and after all the hand-wringing after Nancy Pelosi's Taiwan visit. Xi and Japanese PM Kishida are likely to meet next week too.
For Modi, what would be the pros and cons of meeting? "Optics" is an apparent reason why Modi might not want a meeting -- India is understandably aggrieved at China's refusal to correct its transgressions at the LAC and return to status quo -- and the Modi government's critics in India would expectedly pounce on a meeting as India "normalising" relations. Curiously, optics might in a sense also mean Xi wanting a meeting, given his apparent keenness to meet with a succession of world leaders as seen in the flurry of diplomacy post the Party Congress.
The reason to meet, as I see it, is to convey India's stand -- no complete normalisation of ties until a restoration of peace on the border -- at the highest possible level and to chart a way forward for the relationship. Much was made about the importance of 'high-level diplomacy' when Modi travelled to Wuhan in 2018, and then Xi came to India the following year. After 18+ meetings since 2014, it's pretty glaring they haven't had a phone call when ties fell to the lowest level in decades and violence on the border claimed the lives of 20 Indian soldiers and at least 4 Chinese troops. Would the loss of Indian lives not even merit a call to express India's deep concerns at Chinese actions at the highest level, if nothing else? And to dial down tensions?
After all, both sides have publicly said they want to improve relations and the current low level suits neither. In my view, India doesn't lose anything by conveying this at the highest possible level, and Opposition noise at home to me shouldn’t be a deterrence. It may or may not lead to an eventual breakthrough on the border, but I don't see the logic of not meeting, particularly when irritants are growing.
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One area of relations that is not just normal but booming is trade. As I recently reported for The Hindu, India’s imports from China have risen 31% for the nine months ended September, propelling two-way trade past $100 billion and the trade deficit to a record high. India imported $89.66 billion worth of goods from China in the period, the highest on record for three quarters in any year. Imports stood at $68.46 billion at the end of Q3 of 2021, which was itself a record high.
The rise in imports isn't an entirely "bad" thing. India imports lots of intermediates from China, and then exports those finished products elsewhere. Reliance on China for key goods such as Active Pharmaceutical Ingredients is, however, a concern for Delhi. The Print has a useful breakdown of the different categories of goods imported by India:
A deeper look at the government’s trade statistics reveals that while there has been a gradual fall in overall imports of consumer goods from China, most of the rise in imports is due to input or capital/ industrial goods.
Last year, by September, India had imported $62.2 billion worth of goods from China, which means that this year, India has reported a 43% rise in Chinese imports.
In 2011, India used to import $19.5 billion worth of capital goods from China, which was 33 per cent of its total capital goods import. This has risen by about 4 per cent on average every year and has reached $29.53 billion and 40 per cent of the total capital goods imports, ThePrint’s calculations using UN Comtrade show.
The Business Standard reports on a mismatch between Indian and Chinese data of up to $12 billion:
Dr Jayant Dasgupta, former Indian Ambassador to the WTO, thinks that while under-invoicing can surely be a factor, it might not be enough to account for such a huge difference. Instead, he points to yet another possibility. While imports are collected on the basis of entry into Indian ports, export data is collected on the basis of products leaving China, he says. There will be a slight delay in calculating the two data.
The levels of strategic mistrust are reflected in India's current concerns over a Chinese military tracking vessel's presence in the Indian Ocean. My colleague Dinakar Peri has details in The Hindu on the Yuan Wang 6, which enters the Indian Ocean close on the heels of the Yuan Wang 5, which India unsuccessfully tried to prevent Sri Lanka from hosting. He reports:
The timing of the entry of Yuan Wang-6 coincides with a planned long range missile test by India next week. According to the open source intelligence handle on Twitter @detresfa, India has issued a notification NOTAM (Notice to Airmen), for a no-fly zone over then Bay of Bengal between November 10 and 11 for a maximum distance of 2,200 km. Given the range, the test it is likely to be related to an Agni series of Intermediate-Range Ballistic Missile.
According to the maritime vessel tracking portal marinetraffic.com, the Yuan Wang-6 departed from Jiangyin in China on October 21, and as on the morning of November 4 was located near Indonesia and heading in the southwest direction.
While research activities are allowed in international waters as per international regulations, the data generated has a dual nature, including military, and many times, the motive of Chinese vessels seems doubtful, Defence officials had stated.
The Global Times responded:
"The move reflects the Indian military's vigilance and lack of confidence in dealing with China. It is clear to all that Yuan Wang 6 is not a military vessel, and its passing harmlessly through the zone is totally normal and legitimate," Qian Feng, director of the research department at the National Strategy Institute at Tsinghua University, told the Global Times on Monday.
In 2019, the Indian Navy also forced the Chinese research vessel Shi Yan 1 out of India's economic zone after it was found "lurking near Port Blair," local media reports said.
India has been wary of China "expanding its influence" in the Indian Ocean over the years and has tried every possible means to prevent it, Qian said, adding that such a long-term attitude is not conducive to the improvement of ties or the restoration of trust between the two largest neighbors in Asia.
Against the backdrop of the prolonged standoff in their border regions, India has repeatedly emphasized the rebuilding of trust. However, such actions by the Indian military will only run counter to their own words, the expert noted.
In addition to harming the development of ties between the two countries, abusing laws and conventions to interfere or even suppress the legitimate scientific research activities of other countries is also not the proper way of doing things for a mature world power, observers said.
And finally.....
Two recent analytical pieces on the relationship that I recommend:
Tanvi Madan in Foreign Affairs on the current state of ties brings up a phrase that I quite like, quoting former Foreign Secretary Vijay Gokhale:
"For the foreseeable future, India’s approach to China has moved from competitive engagement to one of competitive coexistence—if not “armed coexistence,” as former Indian foreign secretary Vijay Gokhale put it."
Lt Gen HS Panag (retd) in the Print on the LAC has another useful pithy phrase - "no war, no peace" - to describe the situation, and looks at possible ways the stalemate might be ended, providing a useful reality check:
Negotiations for disengagement in Depsang Plains and Demchok will be arduous and prolonged. I predict that India will accept the 1959 Claim Line with buffer zones in areas of disagreement except in the Indus Valley. This, along with the fairly well-settled Central sector (except for Barahoti Plains) and the well-recognised McMahon Line in the Northeast, will de facto demarcate the LAC along the entire northern border. The rest is for India to safeguard it by establishing BOPs in all un-held areas to prevent salami slicing and military embarrassments short of war. Unless there is political collapse, there is no chance of India ever recovering its territories lost to China. It may be prudent to take the clock back to 1959 and bargain these for recognition of the McMohan Line for a final settlement.
A "no war, no peace competitive coexistence" to me quite usefully sums up where we are at with India and China. Let's see if Modi and Xi have any intent to take things forward, but I'm not holding my breath.
Thank you for reading this issue!