While the world was grappling with how to contain the ongoing global pandemic, China fixed its eyes on its disputed border with India. Since mid-April more than 5,000 People’s Liberation Army (PLA) soldiers intruded across the Line of Actual Control (LAC) into what India views as its territory. In past, both sides – India and China – have patrolled areas that the other side claims as its own but the size of the patrolling party as well as the extent of the foray has rarely exhibited the aggression that we recently witnessed. The size and nature of Chinese activities, which eventually compelled negotiations between senior Indian and Chinese military officials as well as a public response from the Indian Prime Minister, also suggests that these have not been the decisions of an eager local commanding officer but directives from ‘higher up’ within the Chinese establishment.
The violence and subsequent negotiations between the two countries have put India on a backfoot. While PLA and Indian army commanding officers agreed to pullback from the Galwan region to lessen the tensions, India also agreed to reduce its presence in what has historically been viewed as Indian territory in exchange for PLA forces withdrawing from the area as well. Reducing immediate tensions has therefore come at a high cost.
The inability to broker temporary peace without losing out on territory that has historically been under its control, lays bare India’s military asymmetry viz. a viz China. Not only does the dragon state have a larger military budget at its disposal, it boasts of stronger land, air and naval forces. In addition to the higher firepower, China has also steadily built up its infrastructure all along the Indo-China border that gives it a further edge over its neighbour, which India is now trying to catch up with.
Much to India’s displeasure, the presence of a hostile Pakistan along its western borders further tilts the balance in China’s favour. The possibility of a two-front war makes for a tough environment for India, especially when it may not have any allies of its own in South Asia. This disparate relationship puts India in a sticky position where its ability to negotiate with a superior power is being tested.
Why economics matters?
Shortly after news emerged of the continued tensions between India and China, the Indian government pushed ahead with an attempt to hit back economically – first with a call to boycott Chinese products and later by banning 59 Chinese apps. Let this not be misinterpreted as a knee-jerk reaction even though timing may suggest otherwise.
In early June, Indian railways which is the world’s fourth largest railways network terminated an INR 4.7bn (USD 62.5m) project with a Chinese firm on account of “non-performance”. At the onset of COVID19 lockdown, in April, India even amended its foreign direct investment policy to ward off any ‘predatory’ investments. Though worded as to review investments from neighbouring countries, it clearly targeted Chinese investments into India.
Creating roadblocks for Chinese investments and imports is not an anomaly. The steel, solar and mobile industries in India, as well as globally, have been petitioning for years to impose high tariffs on Chinese imports in a bid to subvert what they see as anti-competitive behaviour. ‘Dumping’ of cheaper, government-subsidized products by Chinese companies has been knocking local players out of the market and is an area of grave concern.
This may beg the question – what does economics have to do in a military and political conflict? The answer is simple. India is on the backfoot when it comes to confronting China militarily and hence it needs to play all its cards intelligently. India and China are unequal powers and weaker powers rarely get to dictate the terms at the negotiating table. Hence, arm twisting China and hitting it where it hurts needs to be a part of India’s multi-pronged approach. Simultaneously, it needs to reduce its economic disadvantage with China while maintaining its national interests.
Post Dokhlam standoff, in 2017, India increased the scrutiny of Chinese foray into sectors that closely tie with national security, such as technology, data and defence. India began reviewing Chinese-backed browsers and electronics companies for leaking user data. China’s dominance in electronics and its ability to misuse large quantum of gathered data for commercial as well as strategic purposes may prompt India to even ban 5G technology offered by Chinese firm Huawei. India is not alone – Australia, UK and US too are concerned about the security implications.
The need to team up with the US and others
India for long has been lulled into a false sense of security with China. The last time the two countries went to war was in 1962 where India tasted defeat. But since then the two countries have carried on their own paths despite an eerie unease. While both India and China are referred to as the “next superpowers” and “emerging economies”, India would be grossly underestimating China if it were to think that the two are on the same level.
Over the last three decades China has grown spectacularly – since the 1990s its economy has steadily grown. In 2010, it overtook Japan as the world’s second-largest economy and its current GDP of USD 13.6bn is just USD7bn short of the US’ while India’s GDP stands at a total of USD 2.72bn.
India’s exports from China stand at USD 65bn with a trade deficit of nearly USD 50bn. India’s import account for 3% of China’s total exports while India’s exports to China makeup 14% of India’s total exports. This means that India alone cannot make a large enough dent to force China into altering its confrontationist and revisionist posturing. Fortunately for India, China finds itself embroiled in conflict with many countries across Asia-Pacific. Its longstanding issue with Taiwan and confrontation with littoral states in the South China Sea despite the Hauge rejecting its Nine Dash Line claims provides India an opportunity to make allies.
In 2015, Yang Hengjun wrote about why China needs to demonstrate that it is a responsible power or risk containment by other countries. “If China wants to rise, it needs to solve not how to restrain the US, but how to restrain its own behaviour. If you do not let the world see that a risen China can be restrained, it may be that China will not get a chance to rise at all.” Sadly, China is yet to gain the trust of the global system by acting in a responsible way. The Galwan Valley standoff is case in point.
The efforts to counter China are now evident. China’s largest trading partner the US, under President Donald Trump, has slapped tariffs on nearly USD 550bn worth of export from China in an attempt to limit Chinese gains. It is concerned that currency devaluation by the Chinese state has made its products more competitively priced much to the disadvantage of other players. As a result, it has faced retaliatory tariffs on its USD 185bn worth of exports to China but feels that the temporary damage is necessary to rein China in.
Despite higher tariffs, trade wars and regulatory scrutiny being a ‘lose-lose situation’, the aim of economic measures against China is to force it to come to the negotiating table. When more countries align together, China will have to come to the table sooner rather than later. So while India alone cannot curtail a bully, it can strategically cooperate with other countries when it comes to economic boycott, intel sharing and military partnerships in the Indo-Pacific to check China.
There are concerns that India aligning with the US could pose a threat to its ability to exert independence while formulating its foreign policy but that appears to be a hangover from the non-alignment era. Moreover, the freedom to choose between cementing partnerships with the ‘enemies of my enemy’ and confronting China all by itself was lost when China crept up on us and overtook us economically.
Akanksha Narain is a consultant with a political and security risks consultancy. She has previously worked as a researcher with think-tanks in Singapore and India.
Views are personal and may not necessarily reflect Qrius Editorial Policy
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