Tuesday, March 19, 2013

India-China Relations

     The government has been publicly and repeatedly sending signals to the new Chinese leadership of intentions to maintain, improve and develop friendly relations.  This signals started even before the new leadership was formally appointed.  The latest (five point) statement from President and Party Chief Xi Jingping on Sino-Indian relations, suggests that the message has been received and understood.  To what extent it will be acted on is still not clear.

       The degree to which this happens depends on two factors.  One is the extent to which the new leadership feels confident about maintaining its control over Tibet.  The earlier ministry and organs of Internal security appeared to follow a very hardline and aggressive policy on, what to an outside observer appear to be, minor agitations that have no hope on earth or heaven/hell, of posing any threat to Chinese communist party rule in Tibet.  The down grading of the Internal security apparatus in the party hierarchy, following the Bo Xi Lai affair, may have had the salutary effect of downgrading the alarmist and perhaps self serving view of the Public Security ministry and party organs.  This in turn may have allowed the party to take a more realistic view of the self immolation in Tibet and to feel more confident about being able to handle any current or future agitations.  If true this would also have the collateral benefit of moderating its unnecessary suspicions about India.

The second factor is the global economic situation and its serious negative impact on the Chinese economy.  In a series of papers since the middle of the last decade I have predicted that the Chinese economy will slow down around the middle of the current decade and assuming that Indian economy maintains its growth trend would start growing at a slower rate than the Indian Economy [See projections in Virmani(2005), Virmani(2006), Virmani(2009)].  The global financial crisis greatly increased the probability that this prediction would come true, even though fiscal and credit expansion measures have eased the slowdown and staved of a sharp reduction in the growth rate. The new leadership, with a long term horizon of a decade, can no longer continue to think only about the short term.  Therefore, if they are to take difficult decisions on the domestic economic front they have to carefully modulate external relations.  With the heating of China's international relations with virtually all its maritime neighbours along the eastern seaboard, it may be considered wise to improve relations with a country that offers a potentially large market for its manufacturing industry and export juggernaut.

It therefore seems that the Indian strategy of carefully cultivating the new Chinese leadership, may actually pay off in terms of positive movement on the issues of terrorism, Afghanistan and perhaps over the medium term, even on the border issue. However, it always pays to resist the temptation to get carried away at the first positive signs, and to keep ones eyes open (particularly with respect to proliferation actions that undermine Indian security).

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