India must counter China economically
CHINA is concerned about its relations with the US, as could be made out from Foreign Minister Wang Yi’s summing up of his country’s foreign policy situation in 2022. Wang took pains to emphasise that Beijing is keen to correct the US’s wrong perception that China is either a competitor or a threat. And Wang seems satisfied that China’s relations with Russia are quite stable as both diplomatic and military channels of communication are open. Beijing looks upon Russia as a junior partner and considers it a close ally.
Besides, Wang has said China is opposed to the formation of blocs such as the Quad comprising the US, Australia, Japan and India because it is clearly intended to counter China. It is both important to understand what China thinks of India and other countries to make sense of the changing world scenario.
China is a troubled country because of its falling economic growth rate in the wake of Covid-induced disruptions. And the emergence of a hardline leadership under Xi Jinping is a sign that Beijing feels that it has to fall back on its old-fashioned tactics of using force enabled by the one-party rule of the communists to set things in order.
Wang’s views show that at the moment China wants to play its cards carefully because it is not yet in a position to challenge the US either economically or militarily, and its alliance with Russia is not of much help. And China does not want a confrontation with the West that the old Soviet Union wanted in the heyday of the old Cold War. China’s economy is more integrated with the global economy than that of India, and it wants the European Union (EU) and American global supply chains, connecting China to the West, to continue. While the Americans want to loosen their economic dependency on China by shifting some of their businesses to countries such as India and Vietnam, the Europeans are in no hurry to move away from China.
The bad reputation that China has earned of giving aid to vulnerable countries such as Sri Lanka and Pakistan, and pushing them into a debt trap — a charge that Beijing denies — does not alter the situation that the Chinese are putting money in other countries. One of the signals of a big power is that it invests in other countries, and China is a leading strategic investor globally. Xi’s Belt and Road Initiative (BRI) did not become a grand success as it was intended to be, but it has helped China make headway in many parts of the world.
The BRI is an example of China’s strategic thinking that it has to reach out to the world for its economy to thrive. So, Chinese foreign direct investment (FDI) in the US, though small in terms of the total FDI that the US attracts, is the highest for China, and its second-biggest FDI destination is Australia. US think-tank American Enterprise Institute has divided China’s foreign investment into FDI and construction contracts — Chinese FDI mostly in the developed countries and the construction contracts in Southeast Asia. It is not surprising that whatever may be the sabre-rattling that Xi may want to indulge in, other Chinese leaders and policy wonks are quite aware that China’s economic power rests on the global economy.
This would mean that India must think of China in a larger context than in terms of the border dispute. There is no overlooking the irritants that China created through its episodic incursions across the Line of Actual Control (LAC), but they must be seen as irritants, and to deal with the Chinese, India will have to spend quite a lot on its military infrastructure along the border. And China would remain a thorn in India’s side through its unqualified support to Pakistan.
In many ways, India’s position, as stated by External Affairs Minister S Jaishankar, is firm and aggressive as nothing less would do. But it is India-China trade relations that serve as a better barometer of the ties between the two countries. Jaishankar is right when he says that the relations between the two countries cannot be normal until China changes its behaviour on the border, but the relations are less likely to deteriorate into a war-like situation whatever the hardline strategy experts in India want to predict. The reality is that China is militarily vulnerable despite its impressive economic strength and it is unlikely to fight a full-fledged war with India because it would not gain any advantage by doing so.
The question is whether India should consider China a big threat or a big competitor. The US is inclined to pit India and China against each other, and on a recent visit to India, US Treasury Secretary Janet Yellen made it clear that India should emerge as an alternative to China for US businesses. It would be unwise for India to feel gratified that the US wants India to replace China in the global economy. China does not consider India a factor in its global perspective, and it considers the US as its main concern.
India has to carve out its own niche in world affairs, but without using China as a reference point. And a way of tackling the prickly relations between the two countries is to let the trade ties between India and China grow, and the interlocking of economic interests should attain strategic status.
The then External Affairs Minister Sushma Swaraj had said in the Rajya Sabha, “India has to counter China not just militarily but economically.” India’s China challenge has to be managed through trade and investment rather than by flexing military and diplomatic muscles. India has a diplomatic advantage over China because it is a more westernised country. But India has to find a more substantial way to deal with China and that lies in the economic sphere.
