India-China Relations

The People’s Republic of China (PRC) was established on October 1, 1949, and India was the first non-communist country to establish an Embassy in PRC. On April 1, 1950, India and China established diplomatic relations. The two countries also jointly expounded the Panchsheel (Five Principles of Peaceful Co-existence) in 1954. Chinese Premier Zhou Enlai visited India in June 1954 and Prime Minister Nehru visited China in October 1954. Premier Zhou Enlai again visited India in January 1957 and in April 1960. The India-China conflict in 1962 led to a serious setback in bilateral relations. India and China restored ambassadorial relations in August 1976. Higher political level contacts were revived by the visit of the then External Affairs Minister, A.B. Vajpayee in February 1979. The Chinese Foreign Minister Huang Hua paid a return visit to India in June, 1981. Prime Minister Rajiv Gandhi visited China in December 1988. During this visit, both sides agreed to develop and expand bilateral relations in all fields. It was also agreed to establish a Joint Working Group (JWG) – to seek fair, reasonable and mutually acceptable solution on the boundary question – and a Joint Economic Group (JEG). From the Chinese side, Premier Li Peng visited India in December 1991. Prime Minister Narasimha Rao visited China in September 1993. The Agreement on the Maintenance of Peace and Tranquility along the Line of Actual Control (LAC) in the India – China Border Area was signed during this visit, providing for both sides to respect the status quo on the border, clarify the LAC where there are doubts and undertake CBMs. President R. Venkataraman paid a state visit to China in May 1992. This was the first Head of State-level visit from India to China. President Jiang Zemin’s state visit to India in November 1996 was similarly the first by a PRC Head of State to India. The four agreements signed during his visit included the one on CBMs in the Military Field along the LAC covering adoption of concrete measures between the two militaries to enhance exchanges and to promote cooperation and trust. India-China political relations are enhanced and strengthened by various mechanisms. There is a close and regular interaction between strategic and foreign policy think-tanks.

Relations After Nuclear Test

After the nuclear tests in May 1998, the relations faced a minor setback. External Affairs Minister Jaswant Singh visited China in June 1999 and both sides reiterated that neither country is a threat to the other. President K.R. Narayanan’s visit to China in May – June 2000 marked a return to high level exchanges. Premier Zhu Rongji visited India in January 2002. Prime Minister A.B. Vajpayee visited China in June 2003 during which a Declaration on Principles for Relations and Comprehensive Cooperation was signed. This was the first comprehensive document on development of bilateral relations signed at the highest level between India and China. India and China concluded a border trade protocol to add a border crossing between Sikkim and Tibet Autonomous Region. The two Prime Ministers appointed Special Representatives to explore from the political perspective of the overall bilateral relationship the framework of a boundary settlement.

Indian Companies in China

With the growth in bilateral trade between India and China in the last few years, many Indian companies have started setting up Chinese operations to service both their Indian and MNC clientele in China. Indian enterprises operating in China either as representative offices, Wholly Owned Foreign Enterprises or Joint Ventures with Chinese companies are into manufacturing (pharmaceuticals, refractories, laminated tubes, auto-components, wind energy etc.), IT and IT enabled services (including IT education, software solutions, and specific software products), trading, banking and allied activities. While the Indian trading community is primarily confined to major port cities such as Guangzhou and Shenzhen, they are also present in large numbers in places where the Chinese have set up warehouses and wholesale markets such as Yiwu. Most of the Indian companies have a presence in Shanghai, which is China’s financial center; while a few Indian companies have set up offices in the capital city of Beijing. Some of the prominent Indian companies in China include Dr. Reddy’s Laboratories, Aurobindo Pharma, Matrix Pharma, NIIT, Bharat Forge, Infosys, TCS, APTECH, Wipro, Mahindra Satyam, Dr. Reddy’s, Essel Packaging, Suzlon Energy, Reliance Industries, SUNDARAM Fasteners, Mahindra & Mahindra, TATA Sons, Binani Cements, etc. In the field of banking, ten Indian banks have set up operations in China. State Bank of India (Shanghai), Bank of India (Shenzhen), Canara Bank (Shanghai) and Bank of Baroda (Guangzhou), have branch offices, while others (Punjab National Banks, UCO Bank, Allahabad Bank, Indian Overseas Bank, Union Bank of India etc.) have representative offices. Apart from PSU banks, private banks such as Axis, ICICI also have representative offices in China.

Chinese Companies in India

According to information available with the Embassy of India, close to 100 Chinese companies have established offices/operations in India. Many large Chinese state-owned companies in the field of machinery and infrastructure construction have won projects in India and have opened project offices in India. These include Sinosteel, Shougang International, Baoshan Iron & Steel Ltd, Sany Heavy Industry Ltd, Chongqing Lifan Industry Ltd, China Dongfang International, Sino Hydro Corporation etc. Many Chinese electronic, IT and hardware manufacturing companies also have operations in India. These include Huawei Technologies, ZTE, TCL, Haier etc. A large number of Chinese companies are involved in EPC projects in the Power Sector. These include Shanghai Electric, Harbin Electric, Dongfang Electric, Shenyang Electric etc. Chinese automobile major Beijing Automotive Industry Corporation (BAIC) has recently announced plans to invest US$ 250 million in an auto plant in Pune. TBEA a Xinjiang-based transformer manufacturer has firmed up plans to invest in a manufacturing facility in Gujarat. During the visit of Premier Wen to India, Huawei announced plans to invest in a telecom equipment manufacturing facility in Chennai. India-China economic relations constitute an important element of the strategic and cooperative partnership between the two countries. Several institutional mechanisms have been established for enhancing and strengthening economic cooperation between the two countries. Besides the India-China Joint Economic Group on Economic Relations and Trade, Science and Technology (JEG) and the India-China Strategic and Economic Dialogue (SED), a Financial Dialogue has also been taking place between the two countries since 2006.

India-China Financial Dialogue:

In accordance with the MoU on the Launch of the Financial Dialogue between India and China, signed during Chinese Prime Minister Wen Jiabao’s visit to India in April 2005, the two sides have since successfully held Financial Dialogues. A Joint Statement was signed and released at the end of the Dialogue. During the Dialogue, both sides exchanged views on the global macro economic situation and policy responses, with specific reference to current risks to the global economy and the role of India and China in the post crisis recovery phase. Discussions also took place on G20 issues including reforms in the International Monetary System and the Framework for Strong, Sustainable and Balanced Growth.

Banking Links:

Many Indian banks have established their presence in mainland China in the last few years. Four Indian banks, namely, State Bank of India (Shanghai), Canara Bank (Shanghai), Bank of Baroda (Guangzhou) and Bank of India (Shenzhen) have branch offices in China. At present, State Bank of India is the only Indian bank to have authorization to conduct local currency (RMB) business at its branch in Shanghai. More Indian banks are planning to upgrade their Representative Offices in China to branch offices and existing branch offices are applying for RMB license. Various Government institutions and agencies from the two countries have also been interacting with each other for furthering cooperation in the areas such as taxation, human resource development and employment, health, urban development and tourism. There is a close exchange and interaction between the economic think tanks and scholars as well.

Recent Developments On Border Management (MAY 2013) Five basics to handle our border differences China and India have recently reached understanding on proper settlement of the incidents in the western section of the China-India boundary through consultation. Border troops of the two sides have now pulled back from the area of stand-off at the Tiannan River Valley area/Daulat Beg Oldie sector by the Indian side. Two countries have the ability and wisdom to manage any differences or problems between us as long as they keep the larger interest of bilateral relations in mind, and jointly work on the differences or problems through friendly consultations with a constructive and cooperative approach.

Mature relations

China and India have five basics to properly handle the border-related differences. First, both sides have reached consensus. The two governments have all along held that properly handling border-related issues and maintaining peace and tranquillity in the border areas serves the fundamental interests of both sides, and plays a vital role in the overall development of bilateral relations. Both sides have realised that the final settlement of border issues requires patience. Pending that, the two sides should steadily push forward the negotiation process through equal and friendly consultation and continue to maintain peace and tranquillity in the border areas so as not to let the border issues affect the overall development of bilateral relations. Second, both sides have the willingness. Leaders of both countries have expressed strong political desire for the early settlement of the boundary question by including it as one of “outstanding issues” in the “Ten-pronged Strategy” they committed themselves to in 2006. Since 2003, the Special Representatives of China and India on the boundary question have held 15 rounds of talks, and made positive progress. The two sides have signed the Agreement on Political Parameters and Guiding Principles for the Settlement of China-India Boundary Question, and reached an 18-point consensus on the resolution framework. Third, both sides have the experience. China and India are important neighbours sharing a border which has yet been formally demarcated. Even though both sides hold different perceptions of the Line of Actual Control, for a long time, under the effective control of the two governments, peace and tranquillity has been maintained in the border areas with no misfire accident. Thus, both sides have accumulated a wealth of experience to properly handle border-related issues, which also highlights the maturity of China-India relations. Fourth, both sides have means. As of now, China and India have set up border-related mechanisms including the Special Representatives Talks, working mechanism for consultation and coordination over the border affairs, defence and security consultation, border flag meetings, etc, which prove to be effective platforms established with joint efforts by two countries. Meanwhile, smooth communication has been kept through the diplomatic channels. Giving full play to the role of these platforms and channels not only helps solve the border-related issues, but contributes to maintenance of peace and stability in border areas and promotion of bilateral relations. Fifth, both sides have confidence. At present, the comprehensive development of China-India relations has created favourable conditions for solving border-related issues. Both countries hope to maintain the hard-won sound momentum of healthy and stable development of China-India relations. China and India kept smooth communication and had a candid and in-depth discussion on the incident this time. The end of the current stand-off further strengthened the confidence of both sides in the early settlement of border-related issues. As long as the two sides bear in mind the fundamental interests and well-being of our two peoples, and unswervingly adhere to the process of peaceful negotiations, we will be able to find a fair, reasonable and mutually acceptable solution to the boundary question.

Sensitive and complex The China-India boundary question is a problem left over from history. It is complex and sensitive, with a bearing on the feelings of the two peoples. Both countries have made tremendous efforts for an early solution to this issue. Finding a mutually acceptable agreement requires patience and perseverance, and more importantly needs a friendly and favourable atmosphere. As stressed by the Government of India, a peaceful periphery is essential for India to achieve her multifarious developmental goals. Both China and India cherish the current peaceful, friendly and stable evolvement of the situation, and no one can afford the liability of the reversal of history. As the saying goes: “Good fences make good neighbours.” To strengthen good-neighbourly and friendly cooperation with India is China’s strategic choice and established policy which will not change. Both sides should proceed from a strategic height and a holistic perspective, hold the spirit of peace and friendship, equal consultation, mutual respect and mutual understanding, stick to the consensus that has been reached, maintain and make good use of existing mechanisms, continue to promote the process of the framework negotiation, and strive for a fair, reasonable and mutually acceptable solution to the boundary question at an early date.

Chinese President XI Jinping’s Vist (In September 2014)

Recently, Chinese President XI visited India. China’s President Xi Jinping’s visit to India will go down the history in five major aspects.

FIRSTLY, there were many unprecedented departures from the past in these interactions. Prime Minister Narendra Modi receiving Xi at Ahmadabad signifies the onset of regional diplomacy in India. Possibly for the first time, agreements were signed at the regional (Gujarat state) level on sister cities, sister states and development related issues. This has been the trend recently after Tamil Nadu, West Bengal, Andhra Pradesh and other states pushed the envelope of diplomacy by engaging — in the economic field — with others. Ahemdabad’s agreement further legitimizes this process of regional state’s outreach. Also, resembling the California meeting between Presidents Xi and Obama in June 2013 that yielded a “new type of major power relations” for the two, the interactions in Ahmadabad were conducted in a very informal manner with possibly very few formal issues coming up on the agenda. Unlike his predecessors Jiang Zemin and Hu Jintao, Xi and his wife Peng Liyuan have shown remarkable flexibility and were at ease during the Sabarmati River side events. It is said that both Jiang and Hu were very stiff during their interactions not only with domestic actors but with foreign leaders as well. Hu is also known never to have publicly interacted with children. In contrast, during the Sabarmati trip, Xi displayed flexibility by squatting at the Mahatma’s floor, trying his hand at charkha, sitting along with Peng on a jhoola, etc.

SECONDLY, China and India interactions indicated the tough bargaining at Hyderabad House and both Modi and Xi expressed strong opinions on economic, territorial dispute and other issues. While China was the first to reach out to Modi after his elections — reflected in Premier Li Keqiang’s phone call in May, foreign minister Wang Yi’s visit in June and the BRICS interaction on July 14 — China’s diplomatic initiatives faced a challenge as Maritime Silk Road was not endorsed; Bangladesh-India-China Myanmar Economic corridor was conditionally accepted provided it ensures “peaceful, stable and cooperative environment”. India also did not receive $100-300 billion from China in investments.

THIRDLY, China finally opened up its money bags to India, although just a trickle at $20 billion in investments in the next five years. While for the last four years Indian leaders have been complaining about the burgeoning trade deficits (with which India lost $169 billion in trade deficits to China between 2007 and 2013) and non-opening of China’s economy to Indian products, etc, the agreements suggest to some breakthrough, although we need to monitor the progress.

FOURTHLY, Indian leaders stood their ground on the territorial dispute, visas, river waters and the like. Modi stated in his media interaction to the conditional normalisation of relations with China thus: “a climate of mutual trust and confidence; respect for each other’s sensitivities and concerns; and, peace and stability in our relations and along our borders are essential for us to realise the enormous potential in our relations”. In the light of the increasing border transgressions at Chumar and other areas, this signalling from India is significant.

FIFTHLY, and most significant of all the above, however, is the emerging personal chemistry between the two leaders of two rising Asian countries. The Ahmadabad outing and discussion at Delhi between Modi and Xi are useful and are of long-term significance and will have a definite bearing on the stability in relations in years to come. As two credible nuclear powers, these personal interactions are necessary. This is important for the long-term economic development of both the countries. The personal rapport and chemistry that developed in this Modi-guided tour at Ahmadabad should be reflected in certain intangibles in the bilateral relations for at least the next five to ten years of Modi-Xi tenures.

OUTCOMES OF XI VISIT

  • Annual Visits at the level of heads of State/Govt.
  • A city in each country identified for a smart city demonstration project
  • Increase speed on the existing line from Chennai to Mysore via Bangalore
  • Training in heavy haul for 100 Indian Rai;lways officials
  • Redevelopment of existing railway stations and establishment of a railway university in India
  • 2015 as the ‘Visit India Year’ in China and 2016 as the ‘Visit China Year’ in India
  • Promotoing toursism products and routes in India based on the historical travels of the Chinese-monk scholar Xuan Zang to India in the 7th century AD
  • China to be partner country at the Delhi International Book Fair 2016
  • China to be guest country at Indian International Film Festival 2014
  • Strengthen exchanges in movies, broadcasting and television shows
  • First round of maritime cooperation dialogue to be held this year.

 

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