Li Keqiang’s India visit: Why Trade not Border High on Agenda

Wealth (fu) and power (qiang) has remained the dream of China throughout its long history. The best manifestation of this is reflected during the modern period when China was down and out with the defeats it suffered at the hands of foreign powers starting from the Opium War (1840). The defeats demonstrated to the Qing dynasty (1644-1912) the importance of being rich and powerful. A movement, which came to be known as “self-strengthening” movement, was launched from 1861-1894 and carried out in three stages. During the first phase (1861-1872), the slogan was ziqiang (self-strengthening); the aim was to build up a strong military power through the purchase and manufacture of modern weapons. Slogan for the second phase (1872-1885) was fuqiang (wealth and power), and the aim was to build modern enterprise such as railways, shipping, mining and telegraph with the private capital. The third phase (1885-1894) was marked by building up of navy and the establishment of modern iron and steel works.  ‘Self-strengthening’ movement marked the beginning of industrialisation and sowed the seeds of modern capitalism in China. However, the modernisation campaign was constrained, as China adhered to the Confucian traditions; had disliking for merchandise and discouraged private enterprise and competition; and made no attempt to assimilate western institutions, philosophy, art and culture. Secondly, whatsoever attempts of modernisation were hampered by subsequent foreign aggressions: Japanese invasion of Formosa [Taiwan] in 1874; the British attempts to open Yunnan in 1875; the Russian occupation of Ili in Xinjiang, 1871-72, French invasion of Annam [Vietnam] in 1884-85, and Japanese aggression in Korea, 1894-95.

Five and half a decade later, Mao Zedong attempted to re-enact the ‘self-strengthening’ aura by following the Soviet model of industrial and agrarian development. Mao was successful in turning China powerful (qiang) by building the largest standing army in the world, but failed to make China rich (fu), as some of the constraints of “self-strengthening” movement were inherent in his developmental model besides the self-imposed isolation and economic blunders.

Mao’s successor, Deng Xiaoping de-Maoised China, ended the self-imposed isolation by initiating a policy of reforms and open door during the 3^rd Plenary Session of the 11^th Central Committee of the Communist Party of China (CPC) in 1978. The thrust of the reforms was in rural areas, where a ‘contract household responsibility system’ was implemented that linked remuneration to output. Besides, a two-layer management system featuring the integration of centralisation and decentralisation was also implemented. During the 3^rd Plenary Session of the 12^th Central Committee in 1984, reforms were taken to the urban areas, and various systems of ownership such as collectively owned enterprises, individual, private and foreign owned enterprises were introduced and encouraged. During the 13^th national Congress of the CPC held in 1987, a three-stage modernisation formula (sanbuzou) for the next 62 years was advocated, which compared to the 33-year three-stage modernisation programme of ‘Self strengthening’ Movement allotted double the time for realising the defined strategic objectives. These three stages were defined as: 1) Doubling the 1980 GDP to end shortages of food and clothing (jiejue wenbao wenti). 2) Quadrupling the 1980 GDP by the end of 20^th century and achieving a relatively comfortable life for all the people (dadao xiaokang xueping). 3) Basically completing China’s modernisation by mid 21^st century, raising the per capita GDP to that of moderately developed countries and achieving a fairly well off life for its people (dadao zhongdeng fada guojia de shuiping) . 

The new vision of modernisation paid dividends as China showed its enthusiasm for merchandise and encouraged private enterprise and competition; and made serious attempt to import advanced western technology and management skills. China’s entry into the World Trade Organization in 2001 brought in export boom, registering almost 30% annual growth until 2007 capturing more than 10% of the global market. Politically, China sought a stable and peaceful surrounding. It is remarkable to note that ever since its Vietnam adventure in 1979, China remained committed to peace with global powers and regions in its vicinity. To everyone’s surprise, China achieved the first stage by the end of the 1980s and the second stage in 1995 ahead of schedule.

The third and fourth generation of Chinese leaders pursued the growth model relentlessly. They not only legitamised the communist rule by adhering to growth model but also set new benchmarks for developments. Especially during Hu Jintao’s tenure (2002-2013), China witnessed unprecedented level of economic growth. China’s GDP touched $8.3 trillion from a meager $1.20 trillion when he took over from Jiang Zemin, registering an impressive 10% and above annual growth. Not only the financial crisis was effectively dealt with, but it also together with other Asian economies contributed almost 50% to the world’s economic growth during the slump. Rapid growth catapulted China to second largest economy of the world leaving behind countries like UK, France, Germany and Japan. Urbanization registered fastest ever growth anywhere in the world, and by the end of 2012 over 52% Chinese were living in the urban areas. The urbanization opened up real estate sector, and in fact became catalyst in maintaining and sustaining rapid growth; as a result the ghost cities in China also registered an increase, and the gap between China’s haves and have-nots have widened as could be seen from the rural urban income levels in China.

The fifth generation leader Xi Jinping has advocated the notion of China dream and would be on a mission to make China a fully well off society by 2020 by doubling the 2010 GDP. If done China’s GDP in 2020 will reach around $12.54 trillion. However, it has also been reported that China’s GDP by 2020 will reach $16 trillion, close to the US economy in 2012. Probably the sixth generation leadership in China would be able to trounce the US as the largest economy in the world and gradually achieve the task of making China a developed nation by the mid of 21^st century.

It is this context that the visit of Premier Li Keqiang to India should be viewed and analysed. Chinese leaders have a long-term agenda of economic development and the trade with world including India would be high on the agenda. Politically, even though China has taken maximalist positions vis-à-vis its disputes in the region, however, it would not wish to see them spiraling out of control and jeopardize the economic agenda that was set in 1979 and more specifically by way of initiating the three step strategy for making China a developed nation by the middle of this century in 1987. The bilateral trade between India and China could be a catalyst in sustaining the domestic growth in China on the one hand and maintaining the desired continuity in the bilateral relations on the other. Secondly since the US would also be looking towards India for greater trade and investment, job creation and economic growth, China would like to compete with the US in Indian markets for getting a sizeable pie, be it the infrastructural development, power and energy sector or the telecom and banking sectors.

We may refer to Chinese president Xi Jinping’s recent speech at Boao forum for Asia, considered as ‘China’s Davos’, which was attended by people from political, and academic affiliations but dominated by the business leaders. Xi Jinping in his speech talked about peace, development, cooperation and mutual benefits. He said China’s trade with its neighbors has grown from $100 billion and more to $1.3 trillion in the last decade. Talking about the future trends, he said it is projected that in the coming five years, China's import will reach some $10 trillion and China’s outbound investment to $500 billion; and also the number of its outbound tourists may well exceed 400 million people. Li Keqiang would have large Indian market in mind and as expected is leading a huge business delegation. It was revealed by Chinese Vice Commerce Minister Jiang Yaoping on 16^th May that an investment promotion mission will travel to India next week to follow up on the work of three earlier missions sent in 2008, 2010 and 2012. Jiang said the nature of the trade relationship was changing, particularly with India emerging as the biggest destination for project contracts for Chinese companies. According to him as of March, 2013, Chinese companies had completed projects in India worth $35.1 billion .

Bilateral trade between India and China reached a record $73.9 in 2011. In 2012, the trade faced a downturn and reached only $66.5 billion and the deficit of $29 billion for India. Even though both countries have pledged to take the figure of bilateral trade to $100 billion by 2015, however, in the face of ballooning trade deficit and declining volume throws new challenging to the future leadership in India and China alike. India would reciprocate provided the balance of trade issue is addressed through a bigger market access to Indian companies in the Chinese markets. The investment in high speed railway and other infrastructural building projects could be considered as big opportunity windows to both the countries.  For India it could prove as an opportunity to learn from China experience, for it was during last 30 years of experience that China could develop its own technologies, perfect its  manufacturing facilities, bring in new managerial practices and become self reliant in many sectors, like heavy machinery and computer hardware.

Notwithstanding the fact that both India and China no not want the border to be an irritant in developing bilateral relations in other areas, especially trade and investment, culture and people to people relations, but the recent border standoff is also a pointer to the fact that India-China relations remains “fragile” and the hyper sensitive nature of the border issue remains at the core of trust deficit and mutual suspicion, if not handled properly could rekindle the animosities in no time. It almost jeopardized the visits of Indian External Affair Minister Salman Khurshid to China and Chinese Premier Li Keqiang’s India visit. Therefore, it becomes pertinent for both India and China to show political will and resolve, and reach an agreeable resolution of the border as soon as possible so that a way is paved for a firmer hand shake and trust between the two. India and China should also take a cue from the deteriorating Sino-Japanese relations that shows that the trade volume not necessarily mitigate the political and security deficit.