As China woos South Asia, India remains wary
The flowers in the ‘spring city’ of Kunming, capital of China’s southwestern Yunnan province, were in full bloom and the pleasant weather was at its best as it played host to the 4th China-South Asia Expo and the 24th China Kunming Import and Export Commodities Fair (June 12-17). At the end of the six day Kunming Expo and Fair co-hosted by China’s Ministry of Commerce and the provincial government of Yunnan, foreign trade contracts and agreements of intent worth USD 24 billion were signed.
With the exception of India, the other participating 89 countries plus regions were apparently in the grip of this ‘spring’ when it came to building trade ties with China. On the other hand, a winter chill seemed to have had enveloped India’s participation in the event. The cold reflects the fact that trade and business interests have been overtaken by New Delhi’s concerns over Beijing’s perceived geopolitical ambitions and aims. Obviously, India has chosen to sacrifice economic potential and opportunities presented by the likes of the Kunming Expo and instead concentrate on its foreign policy narrative as it tangos with China.
Without doubt New Delhi remains peeved with its gaping trade imbalance with China (34% deficit for India during 2015). However, the apparent studied lack of Indian excitement at the Kunming Expo goes beyond.
It has a lot more to do with the undercurrents in the bilateral relationship injected by Beijing’s ongoing move to block India’s entry into the elite Nuclear Suppliers Group (NSG), the geographical expanse the One Belt One Road (OBOR) dream initiative of Chinese President Xi Jinping, the route of the China-Pakistan Economic Corridor which is part of the OBOR as well as the Bangladesh-China-India-Myanmar (BCIM) Economic Corridor. In fact, India has shown little interest in attending the preparatory meeting for the next BCIM car rally which begins from Kolkata and ends at Kunming driving through Dhaka, Imphal (India) and Myanmar. The meeting was scheduled to coincide with the Kunming Expo but was cancelled because there was no response from New Delhi. Kunming is still awaiting a response from India.
Kunming’s annual big time event is dovetailed into China’s policy to develop its border provinces into trade hubs and development of economic corridors to enable it to reach out to South and South-East Asian markets, bring about regional connectivity for purposes of economic progress and tourism.
In this context, Yunnan province lying in the southern western region of China, is an enviably located placed as it is at the junction of the three big markets of China, South and South-East Asia. No wonder that as Beijing makes moves to open up to the world, it considers Yunnan as its south-westward gateway to South and South-East Asian countries. Yunnan, with its 23 international ports, more than 20 international highways, provides China overland connection not only to the region but also West Asia, South Europe and Africa.
China is evidently looking at growing shared interests and demands in the South Asia and South-East Asia region. According to Chinese Vice Minister of Commerce Gao Yan, China’s direct investment in South Asian countries stood at USD 12.29 billion by the end of 2015. South Asian investment was USD 890 million. In 2015, trade between China and eight members (Nepal, India, Bangladesh, Bhutan, Pakistan Sri Lanka, Maldives and Afghanistan) of the South Asia Association for Regional Co-operation (SAARC) was USD 111.22 billion showing a 4.9% rise from the previous year.
In 2015, India, which is China’s leading trade partner in the South Asian region, exported to it goods to the tune of USD 11.95 billion, while the imports stood at USD 60.39 billion. The trade deficit grew from 21% in 2013-2014 to 34% in 2015. During the same period, Bangladesh sent goods worth USD 791 million to China and imported goods worth USD 8.22 billion. Trade deficit for Bangladesh was USD 7.43 billion. Nepal exports were USD 0.02 billion and imports 0.94 billion USD bringing the deficit to 0.91 billion USD. Pakistan and China trade too had a USD 3.398 billion deficit for Pakistan, with exports to the tune of USD 1.694 billion (2014-15) and imports USD 5.092 billion. Figures available for 2013 trade between Sri Lanka and China show Sri Lanka exports of USD 121 million and imports USD 3,001 million. The trade deficit for Sri Lanka was USD 2879 million. The trade value between Maldives and China for 2013 was USD 98 million.
China is looking at the One Belt One Road (OBOR) initiative, the dream project of its President Xi Jinping, to take off. China expects it to promote further economic growth in the pan-Asian region and boost regional cooperation. Evidently, Yunnan has a crucial role to play in the OBOR initiative which was unveiled in Sept-Oct 2013. The initiative has two components – one, is the land-based Silk Road Economic belt which proposes to run through Central Asia, West Asia, Middle East and Europe and includes South Asian and south East Asian countries; the other is the ocean going Maritime Silk Road which will run through South China Sea, South Pacific Ocean and Indian Ocean.
Significantly, Kunming is the starting point of the Bangladesh-China-India- Myanmar (BCIM) Economic corridor (which will touch Kolkata, Bihar and the north eastern states of India), China-Indochina Peninsula Economic corridors and the China-Pak Economic Corridor. The CPEC has caused great concern to India for two reasons. In May 2015, Indian Prime Minister Narendra Modi is understood to have “very strongly” raised the issue of CPEC running through the area which India calls Pakistan Occupied Kashmir (POK) and Pakistan calls Azad Kashmir. China has promised development projects to the tune of USD 46 billion in the area under dispute between India and Pakistan. The CPEC also includes the Chinese built Gwadar port at the point where the Arabian Sea meets the Persian Gulf. India has not taken too kindly to large Chinese investment in Pakistan which it feels is detrimental to its strategic interests.
India is also concerned about what it perceives as China’s growing presence and clout in the Indian Ocean. It has been watching with apprehension China’s increasing strategic and economic presence in the waters it considers its backyard. China pumping in money into port projects in Sri Lanka and Bangladesh and other construction projects in Maldives is viewed by New Delhi as a move that challenges India’s dominance in the Indian Ocean region. India remains wary of Chinese initiatives to promote connectivity. It sees it as a move by China to further its geopolitical aims. India views this as a threat to its interests.
With this mindset it is easy to understand why India is remains unexcited about trade corridors and connectivity. It is looking closely not only at their economic implications but also at geopolitical ones. India remains focused on the interplay of geopolitics and connectivity. Indian foreign policy mandarins and political leadership has stated more than once that trust and confidence are a pre-requisite for a more inter-connected world. While India and China’s top leaders, Prime Minister Narendra Modi and President Xi Jinping, interact bilaterally around the world, the latest being in Tashkent, they still have much work to do on this front.