India-China warming pops US pipe dream

India's Narendra Modi and China's Xi Jinping are moving closer together
Image: Handout

US envisions India as democratic counterweight to China but Asian powers are moving toward more economic cooperation and less strategic conflict, writes ‘The Asia Times’.

India’s Finance Minister Nirmala Sitharaman on July 25 endorsed her economic advisor’s proposal to open the country to direct investment from China, effectively frozen since the Sino-Indian border clashes of 2020.

Earlier this week, Reuters reported, “India’s Chief Economic Adviser V Anantha Nageswaran said… that to boost its global exports New Delhi can either integrate into China’s supply chain or promote foreign direct investment (FDI) from China.

“Among these choices, focusing on FDI from China seems more promising for boosting India’s exports to the US, similar to how East Asian economies did in the past,’” Nageswaran said according to Reuters.

The proposed opening to China — a rebuke to American diplomacy in the region — followed Russian President Vladimir Putin’s visit to New Delhi earlier this month.

Asia Times’ newsletter Global Risk-Reward Monitor reported exclusively July 11, “Modi asked Putin to help India resolve its longstanding border dispute with China. This is the most important military conflict in Asia, limited as it is, because it puts the region’s two largest countries at odds. Russian mediation, however informal, would entail a diplomatic revolution, and make a mockery of America’s hope of rallying Asian countries against China.”

The Ukraine war has driven these prospective rivals together. India’s bottomless appetite for discounted Russian oil propelled its imports from Russia to US$67 billion in 2023 from only $8.7 billion in 2022. India, moreover, acts as Russia’s distribution agent, re-selling Russian oil and distillates to third countries.

It is noteworthy that although India and China have an ongoing border dispute, India has never joined the US and its allies in condemning China’s treatment of its Uyghur Muslim population. The United States meanwhile has accused India of human rights abuses against its Muslim minority.

China’s mushrooming trade with the Global South, notably including India, has advanced the prospects for rapprochement between the world’s two largest countries.

India depends on Chinese supply chains to support its export industry. It imports components and capital goods from China and assembles finished products for developed markets, as do Mexico, Vietnam, Indonesia and other Chinese trading partners.

India’s imports from China have more than doubled since the Covid epidemic, as the bulk of China’s export trade shifted away from the US and Europe toward the Global South.

Wall Street Journal columnist and author Walter Russell Mead told the National Conservatism Conference on July 9, “The rise of India has the potential to create the kind of Asia Americans have always wanted to see… China which has developed with enormous rapidity has this illusion that China can dominate all of Asia and impose an order in it. The rise of India – and it will be accompanied by Vietnam, by Indonesia, by many other Asian states – the economic development of India to its full potential will end that illusion in China... As India develops, it demonstrates to China that its road to hegemony is closed.”

Contrary to Mead’s wishful thinking, China’s export prowess is a magnet that realigns all of Asia’s economies around its economic sphere. Contrary to Mead, China does not want to “impose an order” on Asia – it is incurious about the way its neighbors govern themselves – but it does want to incorporate Asia into its broader economic sphere.

There is an expectation that Prime Minister Narendra Modi would prioritise a historic turnaround in India’s relations with China as a legacy of his 15 years in power. Things are indeed moving in such a direction, notes M.K. Bhadrakumar, Indian Ambassador and prominent international observer.

A senior Indian official told the national news agency PTI about the need to take a “nuanced approach” towards foreign direct investments (FDI) from China, and that the government is open to considering FDI proposals from Beijing in sectors involving high-end technologies like electric vehicles and batteries as well as modern capital equipment of different types.

This is of a piece with a palpable shift in Indian policy through the past six-month period. The interplay of three key factors accounts for this shift. First, the stabilisation of the border situation, thanks to the new mechanism for managing border tensions — ‘buffer zones’ to separate the two armies where both sides would withdraw troops and cease all patrols — is having positive fallouts.

Washington’s weaponisation of sanctions in the wake of the Ukraine war has also not gone down well in Southeast Asia. After all, if the Collective West could freeze Russia’s reserves (approximately, $400 billion) and spend the interest out of it flouting international financial law, what prevents such brigandage vis-a-vis smaller countries of the region?

To be sure, the growing attraction of BRICS in the southeast Asian region carries a big message. Thailand and Malaysia are the latest regional states to express interest in joining the bloc. This will naturally further enhance their relationship with China. 

Meanwhile, India’s relations with the US are also somewhat under the weather lately following the latter’s renewed involvement with Khalistani separatists based in North America. The US allegations of India hatching assassination plots, hinting at the ‘smoking gun’ leading to the top echelons of the political leadership in Delhi have created a perception that the US has ulterior motives to create pressure points on the country’s leadership. Clearly, the US is incapable of understanding the resilience and centrality of India’s strategic autonomy. 

In such an environment, the Quad has lost its gravitas. Quad is out of step with the needs of the regional countries in Asia-Pacific, where the strategic choice of the vast majority of countries is for economic development. China’s comfort level is rising that India is not ganging up with the US’ containment strategy against it.

Beijing would view with satisfaction the comments by External Affairs Minister S. Jaishankar following the Quad FMs meeting in Tokyo slamming the door shut firmly on any third-party role for Quad in the fraught India-China ties. He said, “We have a problem, or, I would say, an issue between India and China… I think it is for two of us to talk it over and to find a way.”

“Obviously, other countries in the world would have an interest in the matter, because we are two big countries and the state of our relationship has an impact on the rest of the world. But we are not looking to other countries to sort out what is really an issue between us,” Jaishankar added. 

India shares the misgivings of the ASEAN states about the US-driven expansion of NATO as a global organisation with focus on the Asia-Pacific. India’s reaction has been one of further strengthening its strategic independence. Interestingly, Modi’s visit to Russia coincided with the NATO Summit in Washington.

India is very much attuned to these trends in the ASEAN region. The centrality of ASEAN is the cornerstone of India’s Act East policy, whereas, the US pays only lip-service to it and has worked behind the scene to weaken the group’s cohesion and unity.

Succinctly put, the phobia whipped up by American think tanks, media and US officials over the Sino-Russian entente has lost traction. India, on the contrary, has strengthened its ties with Russia and is  moving towards the stabilisation of its relations with China, making them predictable.

Given the above scenario, the period between now and October when the BRICS is scheduled to hold its summit meeting under the chairmanship of Russia is going to be a formative phase. The latest meeting of the foreign ministers of India and China in Vientiane last week appears to have gone off well.

The Chinese readout highlighted Jaishankar’s statement that “Maintaining stable and predictable development of the bilateral relations is entirely in the interests of the two sides, and holds special significance to upholding regional peace and promoting multi-polarity. India and China have broad converging interests and face the shadow brought by the situation in the border areas. But the Indian side is ready to take a historic, strategic and open perspective to find solutions to the differences and get the bilateral relations back to a positive and constructive track.”

The clincher is going to be how far the agreement at the FM-level meeting in Vientiane to resolve the residual border issues gets translated into action. India’s ‘nuanced approach’ to attracting FDI from China is a step in the right direction. A meeting between Modi and Chinese President Xi Jinping on the sidelines of the upcoming BRICS summit in Kazan on 22-24 October is entirely conceivable, M.K. Bhadrakumar concludes.

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