India needs a two-track policy to handle China

TEN years ago, the rise of China suddenly hit the world. The US, which had viewed the East Asian country as a partner, realised that it was dealing with a putative rival. As its Belt and Road Initiative (BRI) swamped the world, reports of China’s burgeoning influence and power became a global narrative. In 2020, symbolising the stupendous growth of Chinese military power, the PLA (People’s Liberation Army) Navy surpassed the US Navy in terms of numbers of ships. China’s military became more assertive in the arc from Taiwan, the South China Sea to Doklam and Ladakh.

Today, however, China is facing internal and external challenges impacting its rise. Its fabled economic growth has faltered and youth unemployment has become a major threat to social stability. At the global level, Beijing is facing a pushback against its export-oriented growth strategy. On the security front, other countries have ganged up on China. The revival of the Quad in 2017 was the first sign of the new geopolitics of the region; it was followed by the revival of the US-Philippines alliance and the slow-motion growth of India-US security ties.

Whether China is flourishing or is down and out, it still remains a major threat to the world as long as it is ruled by the Communist Party. The party is ideologically driven and believes that China is destined to become a global power, and it is the West that is declining.

Given China’s military and industrial strength, there has never been a question of coercing or inducing it to follow any specified course. The main challenge is to manage Beijing’s rise, just as today we must deal with its downturn that could leave it stagnating in what is called the middle-income trap.

The shift in the American and European view of China from being a partner to a systemic rival has led to shifts in their strategy. From the somewhat chaotic Trump administration’s handling of China, the Biden administration has adopted a more systematic approach. The progressive ban on semiconductors’ export to China, since 2022, was aimed at not just military applications, but also to restrain China’s development as an economic power.

The Biden administration’s China management strategy included vital plans for the revival of American manufacturing. The US passed the CHIPS and Science Act to provide $52-billion subsidy for chip manufacturers to build plants in America and another $200 billion to revitalise US science institutions.

Biden also devoted significant time to promoting the Quad and the Australia-UK-US (AUKUS) alliance, besides creating the Indo-Pacific Economic Forum to support the economic component of a military, political and diplomatic framework of the US-led policy of containing China.

India, however, has a unique place when it comes to managing China. In terms of their GDP, both countries were once approximately equal and keen to maintain an even keel in their political relationship. This was manifested in a series of agreements in 1993, 1996 and 2005 to not just establish peace and tranquillity, but actually resolve their most vexed problem — their disputed border.

But as China moved up in global rankings, especially after the global financial crisis of 2008, the dynamics of its relationship with India changed. Beijing became more assertive on the international border and in the South Asian region; within a decade, it began to mark its presence in the Indian Ocean Region as well. The 2020 eastern Ladakh crisis was a culmination of that process.

India’s only option to manage this situation has been to use negative incentives — restrict Chinese investments in India, block the increasingly popular Chinese apps in the country and downgrade aviation links. Simultaneously, it took decisions to signal to the US that it would be part of its larger Indo-Pacific coalition to check Chinese assertiveness.

Yet, India has not been able to take advantage of the growing disconnect between the West and China that had resulted in its so-called ‘China Plus One Strategy’. Neither has it been able to break its dependence on China for a range of industrial products and active pharmaceutical ingredients.

So far, the Indian policy to deal with China remains negative — a refusal to normalise ties till the Chinese agree to a status quo ante as of March 2020 in eastern Ladakh. This has been the nostrum that has been retailed by External Affairs Minister S Jaishankar during his several meetings with his counterpart Wang Yi.

What India now needs to do is move on to a positive track to manage China. This has to be a two-track policy of self-strengthening. Last month, in a signal of sorts, the Ministry of Finance sprang a surprise when, in the annual Economic Survey, it called for increased FDI (foreign direct investment) flows from China to upscale India’s participation in the global supply chain and exports. It added, “It is more effective to have Chinese companies invest in India and then export the products to these markets rather than importing from China, adding minimal value.”

India also needs to build strategic deterrence to ensure that Beijing does not repeat the 2020 LAC misadventure. This is essentially a military project to build effective military capacity along the land border with China as well as in the Indian Ocean Region. One area that needs greater attention now is nuclear deterrence, as China is rapidly enhancing its nuclear capability.

There is little doubt that this management exercise requires New Delhi to cooperate with like-minded partners in other parts of the world, not just the developed world, but the Global South as well. These are all a medium for long-term objectives, but it would be best to begin now.