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China-India Brief #195

December 15, 2021 - January 11, 2022

China-India Brief #195BRIEF #195

Centre on Asia and Globalisation
Lee Kuan Yew School of Public Policy

Published Twice a Month
December 15, 2021 - January 11, 2022


Announcement

China-India Brief’s Top 5 articles for 2021
By Byron Chong


CIB178_1Image credit: Wikimedia Commons

The year of 2021 marked significant developments for China-India relations. While the border situation remained volatile, the two Asian giants successfully disengaged from Pangong lake and the Gogra heights, taking another step towards finding a peaceful resolution for the standoff. However, both China and India have also had to respond to new challenges both domestically and regionally: from managing new COVID-19 variants, to the return of the Taliban in Afghanistan, and renewed tensions between Russia and NATO.

We would like to thank our China-India Brief contributors for providing their valuable analyses and opinions on these important issues, as well as other emerging challenges that have shaped China-India relations over the past year. Many of their contributed articles have not only been well received, but provided a much-needed understanding of the complex dynamics between India and China. Below, we have compiled a list of the China-India Brief's top 5 most popular articles for 2021, based on their view counts.

#5. Contrasting Takeaways from the India-China Boundary Crisis   

“Trust built up over two decades on the management of the border has evaporated. India has made it clear that there will be implications for the larger relationship, including economic ties. Meanwhile, Chinese analysts and commentators appear not to have appreciated the effects of Beijing’s build-up, and continue to lay the blame at New Delhi’s doorstep”. — Dhruva Jaishankar

#4. India’s Vulnerabilities Leave No Choice but Partnership

“India finds itself vulnerable to Chinese coercion, unable to satisfactorily resolve its territorial dispute, and facing debilitating economic and political constraints for the foreseeable future. If only for want of better alternatives, New Delhi looks poised to take another major step closer to geopolitical partnership with the United States and its allies.” — Daniel Markey

#3. Is China Responding to India? 

“there is some evidence that Beijing is starting to counter India in the IOR; but, this is largely an asymmetric rivalry and it is difficult to decouple China’s response to India from China’s response to the US. In addition, the evidence presents no ‘smoking gun’ that Beijing is clearly engaged in a form of competitive tit-for-tat with India.” — Christopher K. Colley

#2. India’s paradoxical multilateralism: The curious case of India’s dual embrace of the Quad and the Shanghai Cooperation Organisation 

“One likely explanation is that India is simply compartmentalising its interests, using the SCO for its multilateral security engagement with Asia whilst using the Quad to further its maritime interests in the Indo-Pacific. Alternatively, India’s simultaneous participation in the SCO and Quad could be an example of it hedging its bets. Indeed, by engaging both groups, India can ensure strategic autonomy and avoid becoming too closely enmeshed with one side in the emerging geopolitical rivalry.” — Stephen P. Westcott

#1. A Trying Time in Sino-Indian Relations

“In addition to the underlying differences that have long dogged the border negotiations and precipitated the violent altercation last year, at least two other factors are likely to adversely impact the overall state of the Sino-Indian relationship. The first stems from the American withdrawal from Afghanistan and the second from India’s renewed affirmation of the significance the Quadrilateral Security Dialogue.” — Sumit Ganguly


Byron Chong is a Research Associate at the Centre on Asia and Globalisation, and is the editor for the China-India Brief.


Guest Column

Sri Lanka’s economic crisis and the China-India competition
By Akhil Bery


CIB195_1Image credit: Wikimedia Commons

The island nation of Sri Lanka, sitting just 18 nautical miles from India, has been the object of an intense competition between India and China—a competition that has taken on more prominence recently as India and China remain locked in a border dispute in the Himalayas while jockeying for influence across South Asia. Despite Sri Lanka’s proclaimed “India-first approach”, the country’s ruling Rajapaksa family is widely perceived to be pro-China. However, Sri Lanka’s ongoing economic crisis has created an opening for India. By providing meaningful support at this crucial moment, India hopes to prevent Sri Lanka from getting closer to China, while allowing New Delhi to regain some of its lost influence.  

The COVID-19 pandemic hit Sri Lanka particularly hard. Prior to the 2020 parliamentary elections, the government enacted a cut to the nation’s Value Added Tax rate, putting tremendous pressure on the government’s finances and resulting in the premature end to the structural reform programme under the International Monetary Fund (IMF). The government was banking on a surge in tourism to help fill the revenue gap while also providing valuable foreign exchange that was needed to pay off Sri Lanka’s debt. However, the pandemic ended hopes of a rebound in tourism, and Sri Lanka’s ability to pay off its debt became more questionable. Complicating matters was Sri Lanka’s ineligibility for the World Bank’s Debt Service Suspension Initiative, which would have allowed the country to temporarily suspend debt-service payments to its creditors. And when it sought a Rapid Finance Instrument from the IMF, it was unable to obtain the emergency loan due to its considerable public debt. 

With no other options, Sri Lanka has had to look elsewhere, and assistance has come primarily in the form of additional Chinese loans. Beginning in March 2020, China has provided Sri Lanka with US$1.3 billion in loans along with a three-year US$ 1.5 billion currency swap (though this was conducted in renminbi, and the purpose was for Sri Lanka to use the money to buy Chinese exports). These loans have come with strings attached though: Sri Lanka has made a number of policy decisions that seemingly favour Chinese interests. For example, the government passed the controversial Colombo Port City Economic Commission Bill, which opponents charge will make Sri Lanka a Chinese colony as the bill granted the President the power to appoint foreigners to the Commission (later amended to ensure that 5 of the 7 members have to be Sri Lankan). Second, the Sri Lankan government cancelled the Eastern Container Terminal (ECT) project, which was to be developed jointly with India and Japan, and later awarded that contract to the China Harbour Engineering Company (CHEC). The CHEC also won a contract in May 2021 to develop a new highway in Colombo, and will own and operate the highway for the next 18 years before handing it over to the Sri Lankan government. 

The cancellation of the ECT project was the second major infrastructure development project between India and Sri Lanka that has been cancelled in recent years (in July 2020, a joint venture between the Airports Authority of India and the Government of Sri Lanka to develop Mattala Airport was suspended). 

Sri Lanka’s decisions to pull out of the infrastructure projects are some of the most visible examples of the tense relationship India has with the ruling Rajapaksa family. India made its displeasure known by not acting on Sri Lanka’s multiple requests to temporarily suspend debt repayments, while also declining to extend a US$ 400 million currency swap, saying at the time that “India abides by all of its international and bilateral commitments”, a clear swipe at the Rajapaksas. Despite the lack of help from India, Sri Lanka was able to make its debt repayments last year. However, the real test is this year, as Sri Lanka has about US$ 6.9 billion in foreign currency debt service repayments due this year. And over the next four years, Sri Lanka will have approximately US$ 26 billion in foreign currency debt repayments to make. 

Crisis leads to opportunity though, as the current situation in Sri Lanka has re-opened the door for India to regain some of its lost influence in Sri Lanka. While China’s help has come primarily in the form of new loans, it has shown no interest in engaging in what Sri Lanka really needs, which is debt renegotiations, likely because of the precedent it would set for other countries, such as Pakistan, which are heavily indebted to China and have also been seeking their own debt renegotiations. 

After approaching other countries, Sri Lanka turned again to India for help, as Finance Minister Basil Rajapaksa visited India on 30 November and met with both Finance Minister Nirmala Sitharaman and External Affairs Minister Jaishankar. His visit was to ask India to step in and help. Recognizing that this was an opportunity to generate goodwill with Sri Lanka while moving forward on its own priorities, India reacted positively, agreeing on a four-point package to deepen economic cooperation. Later, India also provided Sri Lanka with nitrogen fertilizers to ease the current shortage (in contrast, a Chinese firm is suing the Sri Lankan government after Sri Lanka rejected a shipment of organic fertilizer). In exchange for its help, India has extracted concessions from the government, primarily an agreement to speed up development of the Trincomalee oil tank farm, an agreement that has been pending since 1987. 

Outlook for 2022

To begin the new year, Chinese foreign minister Wang Yi visited both Sri Lanka and the Maldives from January 7-9, while Finance Minister Basil Rajapaksa was set to visit India (but he postponed due to the cancellation of the Vibrant Gujarat summit). With no debt resolution plan in mind, Sri Lanka’s energy is focused on obtaining debt relief and foreign exchange from both China and India.  

India has an opportunity now to leverage this economic crisis to prevent Sri Lanka from moving even closer to China. A full break in the Sri Lanka-China relationship is impossible; Sri Lanka maintains extensive economic ties with China and is heavily reliant on Chinese investment—China accounts for about 10% of Sri Lanka’s total debt, as compared to about 2% for India. And China is also more willing/able to defend Sri Lanka’s human rights record at the UN. In March 2021, China voted against a UN Human Rights Council resolution on alleged human rights violations in Sri Lanka, while India chose to abstain. India though, is working fast to make sure it does not lose any more ground in Sri Lanka by coming to Sri Lanka’s help at its moment of crisis
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Akhil Bery is the Director of South Asia Initiatives at the Asia Society Policy Institute.


Guest Column

High Peaks, High Stakes
By Shibani Mehta 


CIB195_2Image credit: pxhere

The question of where India ends and China begins has been the subject of continued negotiations, including between the British Empire and the Qing Dynasty as well as independent India under Jawaharlal Nehru and Communist China under Mao Zedong. Even as I write this, high in the snowy peaks and glacier-fed rivers claimed by both India and China, a tense military standoff in Ladakh between the two armies is well into its second winter. India and China are no strangers to border incidents. The disagreement over where the boundary lies led to a war in 1962 and several altercations since. Despite agreements on confidence-building measures to ensure stability, a final settlement of the border dispute has remained elusive as India and China appear no closer to reaching an agreement. 

What is it that makes the de facto boundary between India and China—the Line of Actual Control (LAC)—a magnet for military standoffs? Unlike other international borders and boundaries, the LAC is best described as a concept that differentiates Indian-held territory from Chinese-held territory. The alignment of the LAC has never been agreed upon, and it has neither been delineated nor demarcated. Possibly the world’s remotest and most uninhabitable, the contested territory does not hold significant natural resources or population centres. The terrain varies from dry and desolate in the Western sector to hilly and dense in the Eastern sector. 

Nearly thirty years ago, when India and China signed the Border Peace and Tranquility Agreement in 1993, they agreed to maintain the existing status quo on the frontier along the LAC. Over the next two decades, India and China operated to stabilize the LAC and made progress on the boundary dispute by reducing troops in the area and refraining from the use of force. Economic ties strengthened between the two, and the boundary was delinked from other elements of the bilateral relationship. The problem, however, is that the question over where exactly the LAC lies remained unanswered. There are substantial differences between the two countries’ perceptions on where the LAC lies, especially where it passes through Ladakh. The differences in perception often lead to Indian and Chinese patrols coming into contact with each other as they patrol what they consider their territory. Each country’s interpretation of the LAC is based on the amount of territory it believes can be militarily controlled or dominated by patrolling. That means that either side can alter its interpretation of the LAC simply by improving its military position along the frontier. 

The number of reported incursions by China along the border began to increase significantly after 2010. Compared to the stand-offs in Ladakh in 2013, 2014, and 2015, the Doklam stand-off in 2017 took considerably longer to resolve. The current stand-off has seen 13 rounds of inconclusive negotiations between military commanders since June 2020. What does this suggest about the role of diplomacy in preventing escalation? At the start of the Modi-Xi era, it was widely argued that with the right combination of resolve and tough diplomacy, India could prevent future military stand-offs with China from escalating. In 2015, both sides pledged to show “mutual respect and sensitivity to each other’s concerns, interests and aspirations”. Yet, personality-centric diplomacy between the two leaders, which included two bilateral summits (2014, 2015), meetings on the sidelines of multilateral gatherings, and two informal summits (in Wuhan and Mamallapuram in 2018 and 2019, respectively), has been accompanied by more frequent, more prolonged, and more dangerous military stand-offs at the border. 

It would be simplistic to argue that the existing diplomatic mechanisms to prevent and manage such situations have proved altogether ineffective and therefore should no longer be employed. Diplomacy cannot be based on pessimism; it must be based on realism. To be effective, diplomacy must be a consistent effort, change as interests evolve, and account for multiple realities. First, India cannot ignore agreements already reached and must hold China to key accords. Over the last seven decades, both New Delhi and Beijing have voiced political readiness to resolve the border dispute. For instance, the two countries agreed on the political parameters and guiding principles for settling the boundary in 2005 and began a dialogue at the special representative level to work out a mutually agreeable framework. While the momentum has tapered off, and the two countries appear no closer to finalizing a framework for making progress, this record of agreements cannot be ignored. Secondly, India’s diplomacy going forward will be affected by its view that Beijing’s vision for Asia is hierarchical, with China at the top. Any negotiations with China will be coloured by this view. Third, India, as a rising power, brings its own economic and geopolitical interests to the table, and must protect them. Even with the power asymmetry, India’s interests clash against what it views as China’s growing strategic ambition. Delhi’s diplomacy with Beijing cannot simply be border-centric, a reality that its leadership has acknowledged. As India’s Minister of External Affairs S. Jaishankar said in May 2021, “…if there is intimidation, if there is continuing friction on the border, then obviously it is going to tell on the relationship”. Finally, diplomacy must take account of the realities on the ground—the nature of borderland terrain and operational imperatives. The longer the LAC remains unclarified, the greater the strain it will place on an already declining India-China relationship
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Shibani Mehta is a Research Analyst with the Security Studies Program at Carnegie India.


The views expressed in the article are solely those of the author(s) and do not necessarily reflect the position or policy of the Lee Kuan Yew School of Public Policy or the National University of Singapore.



News Reports

Bilateral relations

India 'Monitoring' Bridge Being Built by China Along Border
Voice of America, January 8

The bridge being built over Pangong Lake lies in territory that Beijing controls but is also claimed by India.

With recent overtures, India, China eye stability in ties after a year of tensions
The Hindu, January 2

Exchange of sweets at border, Chinese Foreign Minister’s talks with Indian envoy, and booming trade between the two sides raise hopes of a peaceful relationship.

Chinese embassy threatens Indian MPs for attending Tibet event
Wion, December 31

The Chinese embassy has shot off an angry letter to some Indian members of parliament (MPs) who attended a meet organised by the Tibetan govt in exile.

India says China 'inventing' names in disputed region
The Straits Times, December 31

China's Ministry of Civil Affairs said it had "standardised" the names of 15 places in Zangnan (“South Tibet”) - Beijing's title for the region India calls Arunachal Pradesh - and gave them all formal Chinese names.

India, China ‘effectively managed’ border frictions: Chinese FM Wang Yi
Hindustan Times, December 21

Wang was speaking on China’s Diplomacy in 2021: Embracing a Global Vision and Serving the Nation and its People at a symposium on the international situation and China’s foreign relations.

 

News Reports

China and India in the Region

Indo-Pacific: Amid growing Chinese assertiveness, German warship to dock in Mumbai
The Times of India, January 11

Seen as a "signal" to China, the deployment of frigate Bayern by Germany in the Indo-Pacific followed Berlin's announcement of its strategy in 2020 to uphold rules-based international order in the region.

No ‘third party’ should interfere in China’s Sri Lanka ties: Wang Yi
The Hindu, January 10

Mr. Wang, who met the Sri Lankan leadership, spoke of the “friendly relationship” that “benefits the development of both countries and serves the fundamental interest” of both people.

‘Done deal’: Philippines allocates funds to buy India’s BrahMos missile system
Hindustan Times, December 30

The Philippines is set to become the first foreign customer for the BrahMos cruise missile system jointly developed by India and Russia.

Colombo sends financial SOS to Delhi, but India wants Lanka to first walk the talk on China
Firstpost, December 18

Sri Lanka seeks urgent help from India as its net foreign exchange reserves plunge to an all-time low of $1.2 billion, barely enough to pay for a month’s imports.

Indo-French defence dialogue touches upon Afghanistan, Pak, China
India Today, December 17

Indian Defence Minister Rajnath Singh held a dialogue with his French counterpart, Florence Parly that focused on military cooperation. The two ministers also discussed aerospace cooperation.


News Reports

Trade and Economy

India's Trade Deficit With China Has Come Down: Piyush Goyal
NDTV, January 3

Trade deficit with China has come down to $44 billion in 2021 from $48 billion in 2014-15, said Commerce minister Piyush Goyal.

India imposes anti dumping duty on 5 Chinese goods for 5 yrs
The Indian Express, December 26

The DGTR in separate probes have concluded that these products have been exported at a price below normal value in Indian markets, which has resulted in dumping.

Chinese business groups urge India to stop irregular tax probes, saying move shakes confidence
Global Times, December 26

Two Chinese chambers of commerce in India have urged New Delhi to change its irregular tax probe practice and treat foreign investors equally, and to actively create an open, fair, and non-discriminatory business environment for Chinese enterprises operating in India.

India outlines $10 bln plan to woo global chip makers
Reuters, December 15

Under the plan, India's government will extend fiscal support of up to 50% of a project's cost to eligible display and semiconductor fabricators, the government said in a statement.


News Reports

Energy and Environment

India among largest emitters, could cause extreme climate impacts: Study
Business Standard, January 7

The emissions of just five economies -- India, China, the US, the EU and Russia -- over the period 1991-2030 will double the number of countries experiencing extreme hot years every second year by 2030, according to a new scientific paper published in Communications Earth and Environment.

China to remain renewable energy leader with strong capacity growth in 2022, despite subsidies phase-outs
South China Morning Post, January 2

Phasing out industry subsidies and a heavy reliance on coal are countered by government policies requiring investment in renewable energy.

Human cost of China's green energy rush ahead of Winter Olympics
Channel News Asia, December 21

China has vowed the upcoming Winter Olympics 2022 will be the first Games to be run entirely on wind and solar energy, and have built scores of facilities to increase capacity - but activists warn ordinary people are being exploited by "land grabs" in the process.

China and India to drive record world coal demand next year
PV Magazine, December 20

China set to experience 1% annual rises in coal demand, and India set for 4% annual market growth in each of the next three years.


Analyses

Why China transferred a submarine to Myanmar
Channel News Asia, January 10

By Ian Storey, Senior Fellow, ISEAS-Yusof Ishak Institute, and Editor, Contemporary Southeast Asia

Myanmar has two very eager sellers in Beijing and Moscow, with the former having offered a product trial in the form of a submarine.

China’s Two-Ocean Strategy Puts India in a Pincer
Foreign Policy, January 4

By C. Raja Mohan, Visiting Research Professor, Institute of South Asian Studies, National University of Singapore

The Chinese foreign minister’s island hopping is the latest sign of contestation over the Indo-Pacific.

India’s China policy in 2021 has been a failure
Money Control, December 30 

By Jabin T. Jacob, Associate Professor, Department of International Relations and Governance Studies, Shiv Nadar University, Delhi NCR, and Adjunct Research Fellow at the National Maritime Foundation, New Delhi.

Instead of responding in kind to China’s actions since Galwan, the Indian government seems to have allowed itself to be taken in by Chinese propaganda and its sabre-rattling.

The India–Russia strategic partnership is key to Indo-Pacific stability
East Asia Forum, December 27

By Joshy M. Paul, Research Fellow, Centre for Airpower Studies, New Delhi

Moving towards a more militarily powerful India is not only in its own interest — it will also help to maintain stability by bolstering India’s active contribution to regional security.

India remains divided about AUKUS
The Interpreter, December 22

By Abhijit Singh, Senior Fellow, and Head of the Maritime Policy Initiative, ORF

Something about the new Australia, UK and US deal suggests it could detract from the value and usefulness of the Quad.

Foreseeing the China-India Boundary Dispute: 2022 and Beyond
China Brief, December 17

By Jagannath P. Panda, Research Fellow and Centre Coordinator for East Asia at the Manohar Parrikar Institute for Defence Studies and Analyses (MP-IDSA), New Delhi

As long as the deadlock continues, the best that can be hoped for is that Beijing does not utilize its new border law as a justification for renewed conflicts.

 

Books and Journals

COVID-19 and India-China Equations: Examining their Interface in the Indian Ocean Region
Chinese Studies Journal Vol. 15: 111-132


By Swaran Singh, Professor for Diplomacy and Disarmament at Centre for International Politics, Organization and Disarmament (CIPOD), School of International Studies, Jawaharlal Nehru University (New Delhi)

The last two decades have seen the spread of diseases that frequently trigger transnational crises. None of these, however, have inflicted a global ruination and fear like COVID-19. Its onset threatened to reset human life, including interstate relations. This health crisis triggered deep economic recession, led to widespread unemployment, accentuated social tensions and political polarization, and helped reshape geopolitical alignments worldwide. In this crisis, the world’s largest nations, China and India—together home to more than a third of humanity—had a special responsibility. Their effectiveness in combatting COVID-19 at home and in the Indian Ocean Region (IOR) was contingent upon their bilateral equations, which had seen irritants and even multiple violent face-offs in the midst of pandemic. The pandemic has not just carried implications for their success or failure at home and abroad but has also become a test case of their mutual, decades-long trust-building efforts and resultant subtle synergies. In face of their different development levels and trajectories and their varying efficacy of their strategies in redressing COVID-19, this pandemic both germinated and showcased strengths of their expanded mutual stakes. This article uses complex interdependence theory to assess how, in midst of the pandemic and border tensions, India and China have managed to come to a modus vivendi. It first outlines a few novel trends that showcase their coordination in providing COVID-19 assistance among IOR nations. It briefly discusses each country’s response to the health crisis, its impact on India China equations, and examines their interface in the IOR to identify sinews of cooperation in midst of confrontations and crisis. It elucidates how prompt and ‘parallel’ India-China assistance in IOR’s fight against COVID-19 revealed signs of expanded interdependence and an improved coordination that can enable them to mitigate and manage their future conflicts.


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Compiled and sent to you by Centre on Asia and Globalisation and the Lee Kuan Yew School of Public Policy, National University of Singapore.

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MEHTA, Shibani