China-India Brief #19

Guest Column 

India and China: Managing Relations During a Time of Transitions

By Kanti Bajpai

India-China relations are uneasily poised.  The Daulat Beg Oldi incident in April 2013 was resolved peacefully after a fair bit of work by the two governments.  It is still not clear what led up to the confrontation between the Indian Army and the People’s Liberation Army (PLA).  Since then, New Delhi and Beijing have signed a Border Defence Cooperation Agreement (BDCA) which they hope will prevent similar episodes in the future.  In the meantime, there have been other bumps along the road.  Two Indian sportsmen from Arunachal Pradesh were given stapled visas by China.  India therefore did not allow the two athletes to go to China for the competition.  India’s determination to raise two new mountain corps for its China border continues to unsettle the Chinese. And the Indian media has recently reported that there continues to be “incursions” by Chinese troops in Ladakh.

On the other hand, there have been more positive signs.  The BDCA was one of the positives.  Another was the Li Keqiang visit to India, in the immediate aftermath of the Daulat Beg Oldi incident.  It was Li Keqiang’s first visit abroad after the leadership transition, a point that was driven home by the Chinese.  He came across as personable and well disposed towards India, a point that even the Indian media, which is notoriously suspicious of China, conceded.  Prime Minister Manmohan Singh subsequently went to China for what is in all likelihood his last visit as Prime Minister.  He was received warmly by Xi Jinping and praised for his commitment to India-China cooperation.

In terms of the substance of the two visits, it is true that there were no great breakthroughs.  But in the case of India-China relations, this is hardly surprising.  Things move slowly between these two massive, elephantine powers.  Indian decision-making with respect to Sino-Indian issues is hampered by the fact that India is a relatively open system.  The media therefore plays an important role in conditioning what the government can or cannot do.  The disposition of the opposition parties and public opinion also become vital factors in any ambitious policy changes.  That China is more powerful and that it defeated India in war make it all the more challenging for Indian decision makers to come to any substantial agreements with China – any agreements will appear as concessions under pressure, that is, as appeasement.  For the Indian government another key factor is that it is in a coalition, and any major agreements with China run the risk of a falling out with coalition partners.

For China, there are limits too.  For one thing, it is going through a leadership transition.  The new leadership must take stock of foreign policy and must ensure that it does not appear weak or inept during this period of change.  Then there is the media and public opinion in China as well.  The latter is expressing itself in the social media.  No Chinese leader today can altogether ignore public opinion in the way that Mao Zedong, Zhou Enlai, or even Deng Xiaoping could.  Ironically, China’s greater power becomes a constraint as well.  Given that its economy is nearly five times India’s and given its greater military power, Chinese decision makers must confront the question:  why, when it is so much more powerful, should it be in any hurry to give India a deal?  For China, there is another problem.  If it appears to make concessions to India in a border deal, how will that be read in Manila, Hanoi, and Tokyo – and Washington – in respect of the territorial quarrels in the South and East China Seas?  Will an Indian deal become a slippery slope for Beijing?

During the leadership transition in China, which is already well under way, and the leadership transition to come in India (the general elections will be held by April 2014), we should not expect much movement forward in solving core problems.  The next two years will probably not be conducive for anything terribly ambitious.  In this period, the two countries must ensure that peace and stability is maintained along the border; that recent agreements are honoured (for India, the understanding reached on river water information-sharing is a key matter); that trade continues to prosper and that the trade deficit at the same time begins to shrink (China has a huge surplus); that Chinese investments begin to flow into India, especially in infrastructure; that the two powers coordinate on global issues such as climate change and world economic arrangements and institutions (such as the IMF and World Bank); that they work closely on the Regional Comprehensive Economic Partnership (RCEP) with East and Southeast Asia; that the movement of ordinary Indians and Chinese is made easier; that third areas are tabled for discussion (for instance, the future of Afghanistan); and that newer areas of strategic talks are initiated (naval confidence-building measures, nuclear weapons).

Good India-China relations are crucial for peace and prosperity in Asia.  It is important for both New Delhi and Beijing to maintain stability and patiently move things along, bit by bit.  If they do, they will have served their interests and the larger interests of Asia.

Kanti Bajpai is Vice-Dean for Research at the Lee Kuan Yew School of Public Policy, Singapore.

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

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News Reports

Bilateral relations

Border disputes will continue: Antony
The Hindu, January 1
Defence Minister A.K. Antony has said he doesn’t rule out the possibility of occasional border disputes erupting between India and China in the coming years. Mr. Antony said India had a long border with China, with vast, unsettled areas of dispute on the Line of Actual Control. “I don’t expect a miracle to happen immediately. Unless both countries find a solution and demarcate the border, I don’t rule out the possibility of occasional disputes,” he responded to a question on increasing incidence of border face-off between India and China in year 2013. However, unlike in the past, both countries were now able to engage in talks soon after such occurrences and settle differences amicably. This was a silver lining, but a total elimination of standoffs would be hard to come by immediately, he said.

Incursions, influx key issues for Arunachal Pradesh
Times of India, January 1
Chinese incursions across the border to India were some of the highlights of 2013 for the state of Arunachal Pradesh. The Chinese People’s Liberation Army (PLA) entered into 20 kilometres of Indian controlled territory for two days in August, which provoked political protests in India. Two athletes from Arunachal Pradesh were also denied entry into China due to stapled visas, an issue raised by Indian Prime Minister Manmohan Singh with Chinese Premier Li Keqiang. Indian President Pranab Mukherjee’s first visit to Arunachal Pradesh also incited tensions between China and India.

Chinese envoy calls for deepening of mutual trust between China, India
Global Times, January 6
China and India should further deepen mutual trust and expand mutually beneficial and pragmatic partnership, said the Chinese envoy to India on Monday. In an article entitled “Deepening Mutual Trust” published in the local daily The Hindu, Chinese Ambassador to India Wei Wei said that the year 2014 is the “Year of Friendly Exchanges between China and India and also the 60th anniversary of the Five Principles of Peaceful Co-existence. “The international situation is undergoing profound changes while the global economy is facing a depth adjustment. Against this backdrop, China and India should deepen mutual trust in a spirit of treating each other with sincerity as well as expand our pragmatic cooperation in political, economic, military, cultural and other fields with a broader vision and increasing efforts,” said the envoy.

India test-fires nuclear-capable Prithvi-II missile
The Times of India, January 7
India recently test-fired its nuclear-capable Prithvi-II missile, which has a strike range of 350-km, from the integrated test range at Chandipur off the Odisha coast as part of “a scenario-based live launch training exercise”. India is also planning to conduct more tests of the 3,500-km Agni-IV and the over 5,000-km Agni-V, which is a genuine ICBM (intercontinental ballistic missile), to prepare them for induction by 2016 or so. Agni-V brings the whole of China — including its northernmost city of Harbin – and Asia as well as parts of Europe, Africa and Australia within its strike envelope. DRDO chief Avinash Chander, on his part, has declared that India can even develop a nuclear-capable missile with a strike range of 10,000-km, rivalling China’s DF-31A missile that can hit targets 11,200-km, but does not see the operational need for it given “the existing threat perceptions”.

India’s new envoy takes charge in Beijing
The Hindu, January 8
India’s new Ambassador to China Ashok Kantha on Monday officially began his term in the Chinese capital, holding his first meetings in the Foreign Ministry in Beijing. Mr. Kantha, a Mandarin-speaking career diplomat, who served in Hong Kong between 2000 and 2003 and was later in charge of the East Asia division at the Ministry of External Affairs in New Delhi, presented a copy of his credentials to Zhang Kunsheng, Chinese Assistant Foreign Minister, on Monday afternoon, the Indian Embassy in Beijing said in a statement. Mr. Kantha “expressed his determination to work with the Chinese government to maintain the present momentum in the relationship and enhance it in all areas,” the statement said.

Chinese troops enter Ladakh every 14 days
The Times of India, January 8
Chinese troops have been making incursions in Chumar, Rakhi Nullah and Takdip areas in Ladakh almost every fortnight in the past few months, according to security sources. Apart from incursions in Depsang plains of Chumar on December 19-20 and the more recent incursion in the first week of January in Takdip, Chinese incursions had been spotted on December 13 as well in the same areas. Sources said the Chinese troops are merely asserting dominance in the area and don’t stay for more than an hour because of the bitter cold. Sources said there is nothing alarming in the movements even though incursions have been more frequent in recent months. The fact that Chinese side has fully developed road network in these sectors helps them to make frequent visits using vehicles.

Army kicks off raising new mountain strike corps against China
The Times of India, January 9
Prime Minister Manmohan Singh on Wednesday was briefed on the operational readiness along the line of actual control (LAC) with China, in the backdrop of the Army kicking off the raising of a new mountain strike corps to get “some offensive punch” against the much larger People’s Liberation Army. The new corps, to be headed by Lt General Raymond Joseph Noronha on promotion, will be raised over the next seven years with around 90,000 soldiers. While the Cabinet committee on security approved the new corps last July, the Army also wants the long-pending infrastructure and “capability development plan” along the “northern borders” with China to be speeded up. The price tag for this, in turn, is pegged at Rs 26,155 crore.

News Reports

China and India in the Region

China offers satellite system use to neighbours in strategic push
The Hindu, December 28
China has said it is willing to offer its neighbouring countries use of its home-grown satellite navigation system free of charge, in a strategic push that has already garnered interest from a number of countries including Pakistan, Sri Lanka, Bangladesh and Thailand, according to officials. China’s deepening cooperation with these countries prompted the Indian government, earlier this year, to belatedly prod the Indian Space Research Organisation (ISRO) in being more active in providing technological assistance to countries in the neighbourhood in launching satellites.

India signs up for six more C-130s
IHS Jane’s Defence Weekly, December 30
India signed a USD1.1 billion contract on 27 December to procure six additional Lockheed Martin C-130J-30 Hercules military transport aircraft via the US Foreign Military Sales route. The supplementary C130J-30s, to be delivered within three years, will be based at Panagargh in eastern India, the proposed headquarters of the Indian Army’s new XVII Mountain Strike Corps. This formation is presently being raised for deployment along the unresolved border with China.

Japan, India agree to push for US-2 amphibian deal
IHS Jane’s Defence Weekly, January 6
Indian defence minister A K Antony and his Japanese counterpart Itsunori Onodera have agreed to promote the export of Japan’s ShinMaywa US-2i amphibious search-and-rescue (SAR) aircraft to India. Chinese media criticised Japan’s attempts to make the US-2 its first overseas military sale since it imposed a weapons export ban in 1967. Japanese defence officials have said the planned sale of the US-2 to India to fulfill the IN’s requirement for nine amphibious aircraft would not infringe its ban on arms exports because the aircraft is a dual-use, unarmed platform.

Japan’s amphibious aircraft not a priority for India now
The Hindu, January 6
India and Japan resolved to continue their defence consultation and cooperation, including in maritime security, at a meeting of their Defence Ministers A.K. Antony and Itsunori Onodera on Monday. According to the reports from Japan, the two sides were “expected to regularise joint training exercises between the MSDF and the Indian Navy in the Indian Ocean so they can protect sea-lanes in the wake of the growing maritime assertiveness of China.” Sources also said that while Japan had been pitching for the sale of US-2 amphibious aircrafts as a special case, for the moment it did not figure on India’s list of priorities.

GSLC-D5 launch places India in elite league
The Hindu, January 6
One of India’s most ambitious dreams became a reality on Sunday when its Geosynchronous Satellite Launch Vehicle (GSLV-D5), powered by an indigenous cryogenic engine, effortlessly put the 1,982-kg GSAT-14 communication satellite into a perfect orbit after 17 minutes of flight. The mission’s success means India now has the ability to put satellites weighing more than two tonnes in orbit, joining the elite club of the U.S., Russia, France, Japan and China who have mastered this perilous technology of using cryogenic propellants — liquid oxygen at minus 183 degrees Celsius and liquid hydrogen at minus 253 degrees’ Celsius.

“Nothing precedes ties with India” although ties with China also “very close”: President Yameen
Minivan News, January 6
President Abdulla Yameen has stated that while the Maldives has “close ties” with China, “nothing will precede ties with India, which are far more precious”. Yameen told Indian media during his recent official trip to the country, that he had assured its leaders that the bond between the two neighbouring countries is “heartfelt” and “based on sentiments”. “India’s primary concern has been security in the region, particularly in the Indian Ocean and our views on the issues are exactly similar to India’s views. So it was not a difficult proposition at all.” “We have agreed and we have exchanged views on areas of concern such as security, fighting against terrorism and fighting against piracy in the Indian Ocean. So we are largely to gain from these matters that are a concern to India while we share the Indian sentiments and we have totally endorsed them,” he continued.

Japan eyes India Air Force links before Abe trip amid China spat
Bloomberg, January 7
Japan and India moved to expand air force ties before Prime Minister Shinzo Abe visits New Delhi in a few weeks, bolstering relations two months after China declared an air-defense identification zone in a disputed area. Japan’s Defense Minister Itsunori Onodera and his Indian counterpart A.K. Antony discussed starting talks between air force officials while reaffirming plans to conduct regular naval exercises, according to an Indian government statement yesterday. Asia’s second- and third-largest economies may also conduct pilot exchanges, it said. Japan and India, which both have territorial disputes with China, are increasing ties as tensions escalate in Northeast Asia. 

China urges Japanese leader to listen
Global Times, January 8
China here on Wednesday urged Japanese leader Shinzo Abe to listen to the international community after his visit to a war-linked shrine sparked opposition from Asian neighbors. Foreign Ministry spokeswoman Hua Chunying was commenting after India told Japan to accept criticisms made by China and the Republic of Korea (ROK). Indian Minister of External Affairs Salman Khurshid on Tuesday told visiting Natsuo Yamaguchi, leader of the New Komeito Party in Japan’s ruling coalition, that Japan should learn from history and move on. “Prime Minister Shinzo Abe’s actions have seriously hurt the feelings of people in victimized countries of WWII, and sparked more criticism and condemnation by peace-loving and justice-upholding countries,” said Hua at a daily news briefing on Wednesday.

Japan wants India’s support on disputes with China
The Hindu, January 9
Engaged in a territorial dispute with China, Japan sought to rope in India’s support over “the recent Chinese provocative actions” saying a message needs to be sent to it collectively that status quo cannot be changed by force. Japanese Defence Minister Itsunori Onodera said dialogue is the only way to resolve the row created by imposition of restrictions by China in the East China Sea and other areas. “For both India and Japan, China is an important neighbouring country. Both countries have important economic linkages with China. However, after the recent Chinese provocative actions, entire international community will have to send a message to China,” he told PTI in an interview in New Delhi.

Space-faring countries discuss cooperation in US
Global Times, January 10
Ministers and high-level officials from about 35 space-faring countries, including United States and China, on Thursday gathered in Washington D.C. to discuss international cooperation on space exploration. The International Space Exploration Forum (ISEF) is the “first- ever ministerial-level meeting to build support for global cooperation in space exploration,” said the US State Department, the host of the event. ISEF, which builds on a process started at the 2011 High-Level International Space Exploration Dialogue hosted by the European Union, the European Space Agency, and the Italian government in Lucca, a city in central Italy, had participants including ministers and high-level officials from the European Union, Japan, Russia, China, India, the Republic of Korea, Brazil, Nigeria, and Saudi Arabia.

2014 report: Pakistan ‘most improved’ in nuclear security, India not so
The Express Tribune, January 11
A US study released on January 9, 2014, on worldwide nuclear material security described Pakistan as the ‘most improved’ country among nine nuclear-armed states, and a state better at safeguarding its nuclear materials than arch-rivals India after having boosted physical protection of nuclear material and weapons. Among 25 countries with weapons-grade nuclear materials, Pakistan was ranked 22 (46 points out of 100) where as India ranked 23 (41 points out of 100). The overall rankings for security of weapons-usable materials put Australia at the top (same as in 2012); United States and United Kingdom tied on the 11th; Russia on 18th, and China, Israel, Pakistan and India stacked together near the bottom, where sat North Korea (same as in 2012).

India prepares to halt Chinese ‘airwave-intrusion’
Hindustan Times, January 12
Along an extensive and ill-defined Indo-China border, from Ladakh in the north to Bihar in the east, Chinese radio and television fare streams freely into Indian homes, aiming to enhance China’s sphere of influence. For six hours every day, the Chinese broadcast a rich mix of multi-lingual news, political commentary, interviews, cultural programmes and even Mandarin language classes from across stations based in Nepal. In pockets with weak Indian signals, Indian listeners are warmly greeted by the Chinese radio, with its growing Nepali network. The programmes have alarmed India’s security establishment, prompting the information and broadcasting ministry to mount a technological upgrade of border broadcast infrastructure through Prasar Bharati, India’s public broadcaster.

China signals concerns over India being courted by Japan and South Korea
Live Mint, January 13
India is set to host the heads of governments from two key North Asian countries this month—South Korea and Japan—a development not lost on Asian power house China, which is tracking the developments with a wary eye, analysts and people close to the development say. Two articles by the Chinese ambassador to India, Wei Wei—one in the Hindu newspaper on deepening India-China relations and the second in The Indian Express about Japan’s recent actions “implementing its right-wing doctrine by trying to get rid of the post-war order”—are a reflection of that wariness, say people close to the developments.

News Reports

Trade and Economy

A third of yarn output to be exported
The Hindu, December 29
India’s yarn exports to be one third of its production in 2013-14, driven by import by China. India’s dependence on China has increased in recent past as it accounted for about 33 per cent of Indian cotton yarn exports as against about four per cent in 2007-08, said a report of rating agency ICRA. With improved export demand, Indian spinners have witnessed improved capacity utilization levels, which stood at record high levels of about 90 per cent in 2012-13. Increased export demand, stability in international cotton and yarn prices and depreciation of the Indian rupee led to improved realizations for Indian spinners.

India pips China to take top trading spot with Kenya
Standard Digital, December 29
India remained the market of choice for Kenya for the better part of 2013 with imports from the Asian country reaching Sh 308.6 billion in the first ten months. Data from the Kenya National Bureau of Statistics shows that India is the largest source of goods to Kenya, accounting for about 20 per cent of the imports. On the other hand, imports from China stood at Sh 146.7 billion, a clear show that India is ahead of its Asian neighbour, despite the hype about African ties with China. While Chinese activities may have been more pronounced in Kenya and generally Africa, the two Asian countries have been battling to be the next major influence in Africa.

Chinese economy to overtake US later than thought
China Daily, December 30
China might not overtake the United State as the world’s largest economy until 2028, much later than what some analysts had predicted, according to a new report. The Centre for Economics and Business Research (CEBR), a London-based economic research firm, said that China’s march to first place will be delayed by the persistent strength of the US economy and the sluggish Chinese one. Japan, which had been the second-largest economy for a period of time before China overtook it, will be outranked by India by 2028, according to CEBR’s predictions. Emerging market economies will inch up in ranking by then as well, CEBR said. The research firm’s forecast for the top 10 countries in order by GDP in 2028 are: China, US, India, Japan, Brazil, Germany, the UK, Russia, Mexico and Canada.

Indian tea tastes success in China
Al Jazeera, January 1
The British brought tea to India from China, but Indian tea traders are now coming back to the Land of the Dragon with ever greater quantities of their black tea. “I tell our Chinese buyers, we have brought back your teas to you,” says Rajiv Lochan, who started the reverse trade seven years ago. A former tea executive with leading multinationals, Rajiv’s start-up venture Lochan Tea got into the first-ever deal with a Chinese company to import India’s famous Darjeeling tea in 2006. Assam, from where most of the tea is exported, accounts for more than 55 percent of India’s tea output that hovers around one billion kilograms a year. That is behind China, whose output is above 1.5 billion kilograms, but only 7 percent of which is black tea.

Worst-ever crisis looms over steel industry: SWFI leader
The Hindu, January 6
With China turning into net exporter of steel, the Central government must introduce heavy anti-dumping duties to safeguard the interest of the domestic steel industry, Steel Workers’ Federation of India (SWFI) general secretary P.K. Das said. Mr. Das stated that as the threat of cheap import eating into Indian market was looming large, it was high time for the powers-that-be to initiate policy changes to prevent a severe crisis. He said the Indian steel industry, already hit by recession, would face a worst-ever crisis unless the government initiates corrective measures like slapping steep anti-dumping duties, imposing a ban on iron ore exports and reducing taxes like Customs Duty and Central Excise to reduce production cost of domestic manufacturers.

R&D culture: Israeli enterprise, Chinese harmony
Haaretz, January 7
One of the main challenges facing Israeli high-technology is the mounting competition from India and China, which each year produce thousands of engineers. To gain an insight into how Israel can remain competitive and continue attracting multinationals, TheMarker met with the heads of Microsoft’s only three strategic development centers outside the United States — in Israel, India and China. Microsoft has 30 development centers around the world, but only three are designated as “strategic.” But while India and China each have 2,000 engineers at their centers – distributed among several sites – Israel has 600, in Herzliya and Haifa.

China’s reform to face global challenges
Global Times, January 8
In the New Year Special of The Economist, an article named “The West’s turn” said that in 2014, the overall contribution of the US, Japan, Britain and Germany to world economic growth will exceed that the four BRICS countries of China, India, Russia and Brazil. In other words, it’s the West’s turn to be the main engine of world economic growth. From the viewpoint of economic reform, 2014 is doomed to be a tough year. The year-end editorial of Financial Times for 2013 was titled “A tougher year for emerging markets”. The article said that “the outlook for the developing world largely hinges on what happens in China”, reflecting that the international community is greatly concerned about China’s reform.

China, India demand adds shine to gold
Business Times, January 8
Riding on the back of increased physical demand in China ahead of Chinese New Year and news that India may reduce its import duties on the metal later this month, the spot price of gold has climbed from a six-month low of US$1,182 on Dec 31 to US$1,248 late on January 6. It was trading at US$1,234 at 10pm January 7.

Growth in Asia’s emerging economies expected to slacken in 2014
Global Times, January 9
Growth in the gross domestic product (GDP) of the emerging economies in the Asia-Pacific region will slow down this year, according to the UN Economic and Social Commission for Asia and the Pacific (ESCAP) and most multilateral lending institutions. The report said that key economies of China, India and Indonesia with large domestic markets grew moderately in 2013 after recent years of strong performance, although China’s economy is still growing relatively fast at 7.5 percent in 2013 and is projected to expand by 7.3 percent in 2014. India’s growth is expected to rebound in 2014 to 6 percent after remaining unchanged at around 5 percent in the preceding two years while Indonesia has recorded the lowest growth in recent years, estimated at 5.7 percent in 2013 after expanding at 6.2 percent in 2012, the report said.

India’s trade deficit with China mounts to USD 31.42 bn
The New Indian Express, January 10
India’s trade deficit with its top trading partner China continued to mount, touching a whopping USD 31.42 billion as the bilateral trade declined by 1.5 per cent in 2013, registering a downward trend for the second consecutive year. India’s trade deficit increased by USD 2.5 billion compared to 2012, bringing into sharp focus the failure of Indian exports to make headway into China despite repeated promises by Beijing to address India’s concerns. Trade data from January to December 2013 released by the Chinese customs today showed that India-China bilateral trade, too, was on a declining trend for the second year. The bilateral trade touched USD 65.47 billion, a slight dip of 1.5 per cent year-on-year. The bilateral trade declined to USD 66.7 billion 2012 from around USD 74 billion in 2011.

Many choosing to go fly a Chinese kite
The Hindu Business Line, January 11
Chinese goods are flying high not just in Indian markets but, apparently, in the skies as well, with youngsters taking a fancy to them. A look at retail outlets and inquiries with kite-dealers indicate a rising demand for these kites. In view of the unorganised nature of the market, exact numbers are tough to get. But various dealers put the quantum of China kite sales at around 10 per cent of the market, especially in the urban areas. According to Saleem Qureshi of King Kite Centre in Bandra, Mumbai, the variety of designs in Chinese kites is a hit with customers. “Even though the price is on the higher side, at Rs 150-200, it has not become a deterring factor in sales of imported kites,” he says. India fighter kites, on the other hand, are mostly priced between Rs 25 and 150. A few come for as low as Rs 5.

India, China may step towards Islamic finance
The Nation, January 12
India and China may step towards the Islamic finance in 2014 where more than 200 million Muslim populations are in compatible search of a financial system with their religious beliefs and thoughts. There is no doubt that international financial crisis will not hit the Islamic finance industry but due to the Arab Spring, Islamic finance industry has faced recession in some countries of MENA but there are chances of revival in 2014. These views were expressed by Islamic Finance expert, Zubair Mughal who is also CEO of Al Huda Centre of Islamic Banking and Economics (CIBE) while commenting on Islamic finance industry in 2014. 

What a Bitcoin is really worth in India and China
The Wall Street Journal, January 12
The Bitcoin saga took an unpleasant turn this December when China’s central bank banned financial institutions from dealing in the virtual currency. Bitcoin was enjoying a surge of popularity in the country; by the end of November, Chinese exchanges were responsible for almost two-thirds of worldwide traffic. The central bank’s decision sent the currency tumbling. Last week, Indian regulators joined the fray. Preferring ominous warnings to outright prohibition, the Reserve Bank of India issued a public advisory on the dangers of Bitcoin. The meaning was clear enough. India’s largest exchange was promptly shut down, and its operator raided by local authorities.

News Reports

Energy and Environment

GAIL asked to use Indian ships for importing LNG from US
The Economic Times, January 7
The government has directed state-run Gail India to use Indian ships for importing gas worth $2.5 billion annually from the US, a model that is practiced by Chinese oil firms to encourage domestic shipping industry. India’s biggest gas utility Gail will require at least five ship to bring about 5.8 million tonnes of gas every year from the USstarting September 2017 and there is a strong possibility of involving Indian shipyards in building liquefied natural gas(LNG) carriers, government and industry officials said. However, Gail is reluctant to take any risk because of huge exposure in the deal. Any delay in delivery of ship would force the company to pay billions of dollar liabilities to the seller in the US as well as gas buyers back home, oil ministry and company officials said. Gail declined comments.

Subsidy is a very costly form of social policy: Daniel Yergin
The Times of India, January 11
In an interview with the newspaper, Daniel Yergin talks about energy policies in India and also China. Particularly he criticises the policy of fuel subsidisation in both China and India. He states that the world’s thirst for oil will be fuelled by the emerging markets, like China and India, as a result of rising incomes and more and more people owning cars. The challenge for India is to ensure that energy is not a continuing constraint on its economic growth and its balance of trade. For India, that means a change of policy and mindset – recognising that it needs policies that reflect the fact that it is now so much more integrated with the global economy and needs policies that support India in that role. At this point India only uses about a third as much oil as China, although India could be the biggest consumer by the second half of the twenty-first century, predicts Yergin. 

HomeMin lists out oil blocks off limits for Chinese firms
The Indian Express, January 11
With distrust growing between both nations, India plans to restrict Chinese firms from participating in the next offer of oil and gas exploration blocks — especially those at the borders and near strategic installations. Of the 68 blocks proposed by the petroleum ministry for inclusion in the 10th auction round, the Ministry of Home Affairs has identified 53 locations where Chinese presence — including machines purchase, sub-contracts or consultancy — would not be allowed. “China is already involved in developing various projects in Pakistan including those located close to India-Pakistan border. Hence, it is advisable that Chinese companies are not given contract for exploration activities in such blocks, and also in blocks close to sensitive defence installations, strategic assets and in Northeast,” says the November 25 advisory from the ministry.

Study shows how China’s air quality affects its global competitiveness
South China Morning Post, January 11
China has the second worst air pollution in the world, after India, according to a state think tank’s report on global environmental competitiveness. The report, covering the year 2012 and issued by the Chinese Academy of Social Sciences (CASS) on Thursday, also concluded that China ranked 87th out of 133 countries in overall environmental competitiveness, after evaluating each country’s ecological status, environmental management capacity and the balance between economic growth and conservation. The data was compiled using 16 indicators, including air quality. Professor Huang Maoxing of Fujian Normal University, a main author of the report, said China’s smog was a major factor. 

Oil Secy: No plans to bar Chinese firms from oil and gas blocks auction
The Hindu, January 12
The Petroleum and Natural Gas Ministry has no plans to bar Chinese companies from participating in the upcoming auction of 46 oil and gas blocks under the 10th round of NELP. “We have no plan to ban anyone. It is for the Home Ministry to decide and they have not informed us anything on these lines,” Petroleum Secretary Vivek Rae told media persons on sidelines of Petrotech 2014. “We want companies to find more oil and gas,” he added. The Government will unveil 46 oil and gas blocks at Petrotech 2014 that would be auctioned soon.

Analyses and Commentaries

US-India diplomatic storm may blow over
Global Times, December 25
The US and India has been caught up in a diplomatic row in recent days over the US arrest of Devyani Khobragade, The US-Indian relations have been rapidly warmed up with the progress of India in the 21st century. The two boasted their “natural alliance” as both are democratic countries and close interaction among leaders in the past years. According to Liu Zhongyi therefore, it is surprising to see the breakout of such a diplomatic row. Zhongyi states also that US and India have different expectations of bilateral ties: India hopes to rely on the US to improve international position, strengthen strategic advantage and boost economy; but it is unwilling to be a tool of the US in containing China, while the US aims at making use of India to balance China and wants a more open Indian market. These mismatching goals offer the potential of conflict. 

India-China Relations: Scenario 2014
Eurasia Review, December 31
P. Stobdan considers the prospects of deepening India-China relations in 2014. The India-China relations story at 2013 end had a more positive than negative tone. China’s new leaders exhibited “positive vibes” and surprisingly affable attitude towards the Indian counterpart; missing since the 1950’s bonhomie. The Depsang incident though overshadowed good part of the story; the exchange of visits by leaders indicated the importance of the relationship. Premier Li chose India as his first overseas stop. This was a deliberate choice. The pronouncements of their intent to deepen ties with India as China’s “strategic choice” along with promise to make “greater efforts” to resolve boundary issue is a welcome move. For, President Xi, the Chinese and Indian “dreams” are inter-connected and mutually compatible. Equally positive voice came from the Indian leadership for rejecting the relevance of “containment” idea in favour of “cooperation” that could bring more gains instead. The overall message was; time for confronting and containing each other is over and the wisdom should lay in cooperation and benefiting from achievements for the common good.

Iran’s Chabahar port transforms its position
Jerusalem Post, January 5
Michael Tanchum argues that the Chabahar port being developed in collaboration with India will ensure that while India will secure cost-effective access to markets vital for its future economic growth, Iran will secure a position in the world economy less vulnerable to international pressure. With the prospect of even wider Iranian trade in the near future, India’s construction of Iran’s first deep-water port to meet modern shipping standards will radically transform Iran’s geo-strategic position, breaking the international economic pressure on Tehran and transforming Iran into the key transit link for the most cost-effective transportation corridor for European-Indian Ocean trade. While Iran and India traditionally have been allies in Afghanistan against Pakistan, New Delhi’s drive to construct a deep-sea port at the Iranian city of Chabahar along with transportation corridors running northward has been motivated by New Delhi’s economic rivalry with Beijing.

Deepening mutual trust
The Hindu, January 6
China’s Ambassador to India, Wei Wei proclaims the year 2013 as a harvest year for Sino-Indian Strategic Cooperative Partnership, which witnessed great progress in friendship and fruitful cooperation. He concludes by stating that the Third Plenum of the 18th Central Committee of the Chinese Communist Party opened up a new historic stage of China’s reform and development, which not only will shape a new China, but also usher in new opportunities of cooperation between China and the rest of the world. It is believed that China-India relations will continue to open up new space for development and upgrade to a higher level in 2014.

India’s Central Asian diplomacy can find common ground with China
Global Times, January 9
Manish Vaid opines that India’s delays in making its presence felt in Central Asia are a result of Russia’s re-engagement with Central Asian countries, the jaded efforts of the US, particularly after the withdrawal from Afghanistan, and China’s energy and connectivity policy. This is in addition to the unstable political scenario in Pakistan and Afghanistan, which otherwise could well have served as connecting points for India to Central Asia. India started to look at Central Asian countries last decade for its increasing energy needs. However India’s efforts were only done in bits and pieces, characterized by an unenthusiastic approach to Central Asian countries. It was outsmarted by more inclusive players like Russia and China. According to Vaid India’s efforts in gaining influence in this region would be massively simplified if China was no longer seen as its direct competitor in the region. A common ground of coexistence could be worked out between the two.

Contemporary Analysis on India-China relationship
Times of Assam, January 9
Hiranya Saikia analyses the India-China relationship particularly in regards to the border dispute. Whenever the Prime Minister of the President of India visits Arunachal Pradesh, China reiterates its historical claim over the territory which it had named as South Tibet, which constitutes the areas of Monyal, Loyal and Lower Tsayal. When President Pranab Mukherjee visited the state on 29th Nov, Beijing reacted in a similar manner. The President asserted India’s sovereignty over Arunachal Pradesh and the Chinese reiterated that the state is currently under India’s illegal occupation because it is located in between the McMahon Line and the traditional boundary between China and India.

Unlike India, idea of China defined by fear of being threatened: Pankaj Mishra
The Times of India, January 9
In his interview, Pankaj Mishra expounds on the idea of China, stating that there’s been a dream of Chinese regeneration through the last century, repeated by Mao Zedong. Deng Xioping’s reason for liberalising was, we must develop – or be bullied. That remains important in how the Chinese perceive themselves and the world. It’s a defensive idea, unlike the idea of India which accommodates pluralism, diversity, etc.  The idea of China is defined against a fear of being encircled, threatened – you see that in Chinese nationalism. He also stated that the notion of China being an authoritarian state with absolute restrictions must be revised – there’s flexibility, available to certain people.

Asian conflict ‘ayes’ have it wrong
Asia Times, January 10
Namrata Goswami argues that the trend analysis for 2014 coming out from think tanks in Washington as well as from much of the Western hemisphere forewarns that conflict in Asia is a real possibility is not entirely accurate.  The signs are rather voluminous, they say: increasing competition for resources between China, Japan, India, and the countries of Southeast Asia; the tumultuous bilateral relationship between China and Japan; India and Pakistan; territorial disputes in the East and South China Seas; border disputes between China and India and rivalry in the Indian Ocean, could spiral out of control, leading to a regional conflict. Goswami however states that while this kind of analysis has a certain ring of truth to it, and is a likely scenario, it does not capture a deeper reality of Asia; that of a continent on the curve of hope. Asians are starting to enjoy better living standards, better healthcare, better job opportunities, better purchasing power parity and dreams of a better future. None of the conflicts are the primary indicators of where people in Asia want to be or where they want to go.

China faces barriers in the Indian Ocean
Asia Times, January 10
John Lee and Charles Horner opine that the East Indian Ocean is a major building block in China’s grand project to transform itself into a great world power, and it is already playing a distinct role in China’s development as both a naval and as a continental power. The Indian Ocean is the place wherethe bedrock concerns of the United States, India, China, Japan, and Australia all converge, making it strategically integral to the balance of power in the Western Pacific. The Indian Ocean is now the world’s busiest trade route. More than 80% of the world’s seaborne trade in oil (equivalent to about one-fifth of global energy supply) – oil which fuels the economies of Southeast Asia, South Korea, Japan, and China – transits it. Accordingly, China cannot move closer to actual strategic autonomy if it gains ascendancy in the South China Sea while the Indian Ocean still remains beyond the reach of its naval capabilities. 

India-Japan-Myanmar: Prospects for Strategic Connectivity
Eurasia Review, January 11
Krishan Varma studies the importance of the India-Japan-Myanmar triangular relation as a counterweight to China in the region. India’s Look East policy aims at building a system of regional cooperation that symbolises a counter-narrative of democratic powers exerting their global influence, as opposed to the Communist Party-ruled influence of China. To this end, India’s positive engagement with its eastern neighbourhood is essential. India and Myanmar share a 1,600 km border, the boundary also representing an ethnic kinship among many communities that live on either side of it. The importance of Myanmar in order to develop a counterweight to Chinese influence is not lost on other leading Asian nations. Japan, for example, realises that a strong bilateral relationship with Myanmar is vital to its own influence in the region. An expression of interest of India and Japan working to develop, in partnership, the Northeast as well as Myanmar, would be an ideal talking point for Premier Abe’s visit.

China can take chance offered by Indian-US diplomatic quarrel
Global Times, January 12
The ongoing diplomatic spat between India and the US over the December 12 arrest and perceived humiliation of an Indian diplomat Devyani Khobragade in New York for violating US immigration and employment law in bringing over her domestic servant is all set to take a huge toll on Indian-US bilateral relations.  According to Rajiv Sharma, this opportunity opens an important diplomatic window for China. The current Indian-US diplomatic spat should bring the two Asian giant neighbors closer. It affords an opportunity to China to reach out to a hurt India with a soothing balm. China, he says, should seize this opportunity and tell the Indians what it has always been saying without having being heard by the Indians in letter and spirit. The Chinese message to the Indians should be a positive and a proactive one.

Fears of Pakistan nuclear deal unjustified
Global Times, January 12
Chen Jidong looks at the impact of growing China-Pakistan relations on India. China has committed to grant a loan of $6.5 billion for the construction of a major nuclear power project in Karachi, a port city of Pakistan, and has already waived a $250,000 insurance premium on the loan. The China National Nuclear Corporation also promised to finance the project with two reactors of 1,100 megawatts capacity each. Each of the two will be larger than the combined power of all operating reactors in Pakistan now, according to Chairman of the Pakistan Atomic Energy Commission Ansar Parvez. This cooperation will ease Pakistan’s shortage of energy, and deepen bilateral strategic partnership between China and Pakistan. Nonetheless, both the US and India showed concerns that the cooperation between China and Pakistan is aimed at the civilian nuclear deal sealed between the US and India during the George W. Bush administration. They also expressed worries over Pakistan’s history of nuclear proliferation. Jidong argues however that these concerns are nothing but obstruction of nuclear cooperation between Beijing and Islamabad.

The Pentagon’s Weather Nightmare
Fortune, January 12
David Stipp argues that the most important security concern for the United States and the global community is climate change. Global warming may be bad news for future generations, but let’s face it, most of us spend as little time worrying about it as we did about al Qaeda before 9/11. Like the terrorists, though, the seemingly remote climate risk may hit home sooner and harder than we ever imagined. In fact, the prospect has become so real that the Pentagon’s strategic planners are grappling with it. The threat that has riveted their attention is this: Global warming, rather than causing gradual, centuries-spanning change, may be pushing the climate to a tipping point. The effects of climate change-induced catastrophes could include nuclear-armed Pakistan, India, and China skirmishing at their borders over refugees, access to shared rivers, and arable land.Countries whose diversity already produces conflict, such as India and Indonesia, are hard-pressed to maintain internal order while coping with the unfolding changes.

Nepal-China Relations and CPC 18th Congress
Telegraph Nepal, January 12
The world’s second largest economy and Nepal’s friendly northern neighbour has successfully completed the 18th Congress of the ruling Communist Party of China (CPC) and its periodic orderly change in leadership. Soon the new leaders will take over the helms of affairs of the State with the new CPC General Secretary Xi Jinping replacing Hu Jintao as the President and Li Keqiang taking over from Wen Jiabao the position of the Premier of the People’s Republic. Shambhu Ram Simkhada looks at the growing Nepal-China relations particularly in light of this development. Nepal also is the best link of China (with 1.3 billion people) with South Asia (with 1.5 billion). China is also pursuing its ‘Develop West’ strategy, and South Asia represents one of the main overseas investment opportunities and potential for trade with Nepal as the best bridge between the two regions. All these create many new opportunities for Nepal to benefit from its friendly relations with India and China.

Journal Articles and Publications

Emerging Powers in a Comparative Perspective: The Political and Economic Rise of the BRIC Countries
Bloomsbury Publishing, 2013
Book edited by Vidya Nadkarni and Norma C. Noonan. Perhaps the most important strategic question for the USA in the twenty-first century is whether it will remain the preeminent global leader or even among the top five global leaders by mid-century. American power and influence remain but are perhaps on a slow decline. Some scholars view the financial crisis of 2008 as a pivotal moment in the unravelling of the American era. Others believe that the American-led era ended earlier as a result of longer trends rather than any single crisis. The rapidly emerging powers, such as China, India, Brazil and Russia (BRIC) have garnered considerable attention.

The Early Effects of Preferential Trade Agreements on Intra-Regional Trade Within ASEAN+6 Members
Journal of Southeast Asian Economies, Vol. 30, Issue 3, December 2013
This study analyses the early effects of recent bilateral and regional Preferential Trade Agreements (PTAs) involving the ten-member Association of Southeast Asian Nations (ASEAN) grouping, as well as Australia, New Zealand, China, India, Japan and Korea. We utilize an augmented gravity model with this ASEAN+6 group of countries to examine the impact of membership in a bilateral versus a plurilateral PTAfor the period of 1994 to 2006. The traditional gravity model is augmented by separately estimating the effects of bilateral memberships against plurilateral PTA memberships. Disaggregated country-by-country results indicate that plurilateral PTAs have had a more significant impact, relative to bilateral PTAs, in stimulating trade among the ASEAN+6 countries, in this initial period of new regionalism in Asia. Authors: Rahul Sen, Sadhana Srivastava, Gail Pacheco.

Successes and Challenges of Emerging Economy Multinationals
Palgrave Macmillan, 2013
Book by Marin Marinov and Svetla Trifonova Marinova. Successes and Challenges of Emerging Economy Multinationals investigates a broad variety of cases presenting clear evidence of fast successful internationalization of emerging economy multinationals originating not only from big economic players such as China, India and Russia but also from other successfully internationalizing emerging countries, namely South Africa and Poland. In terms of size, the firms vary from huge multinational firms such as Huawei, Tata and Gazprom, to really small high technology firms. The in-depth analysis conducted in this book leads to the indication of numerous novel directions for further theoretical expansion and new empirical research.

The New Kings of Crude: China, India, and the Global Struggle for Oil in Sudan and South Sudan 
Hurst Publishers, 2004
Luke Patey’s new book examines how Asia’s emerging powers, China and India, have established oil empires in both Sudan and the new country of South Sudan. Patey’s book looks at Chinese and Indian oilmen and politicians who have become involved in a long-running civil war, and the challenges facing China and India as the world’s largest industrializing powers.

Foreign Direct Investment Decisions into China and India
Asian Economic and Financial Review, Vol. 4, Issue 3, 2004
The paper investigates the foreign direct investment projects of the multinational companies into the two major BRIC countries: India and China. Our results indicate that wage levels and country population and GDP growth are the major factors that affect company directors’ decision to invest into these countries. Authors: Mauricio Zelaya and Ayse Yuce.

The Impact of Oil Price Shocks on the Large Emerging Countries’ Stock Prices: Evidence from China, India and Russia
International Review of Economics and Finance, Vol. 29, January 2014
Although a lot of empirical research has studied the relationship between changes in oil prices and economic activity, it is surprising that little research has been conducted on the relationship between oil price shocks and the large Newly Industrialized Economies (NIEs). Therefore, this paper modifies the procedure of Kilian and Park (2009) and investigates how explicit structural shocks that characterize the endogenous character of changes in oil prices affect three large NIEs’ stock-market returns, in order to fill this gap. From the empirical analysis, we find that the impact of oil price shocks on stock prices in these large NIEs is mixed, partly in contrast to the effects on the U.S. and developed countries’ stock markets. This result is also consistent with the previous empirical findings that the NIEs’ stock markets are “partially integrated” with the other stock markets and oil price shocks. Authors: Chung-Rou Fang and Shih-Yi You.