India Offers China a Wary Embrace

Chinese premier's visit to India doesn't erase imbalances.

Ever since China became an economic superpower, the question of why it does what it does has been a major intellectual growth industry.

There's probably nothing that excites an editor in New York more (the latest "Fifty Shades of Grey" imitation being one exception) than a book proposal on some aspect of Chinese power and its world-changing implications.

Now, the Indian political and journalistic establishment is getting a chance to play this Great Game.

In mid-April -- a little more than a month before Premier Li Keqiang made India a major stop on his first overseas trip as head of China's government -- Chinese forces suddenly ramped up the tension in the border region of Ladakh in north India.

This is one of two areas (the other being Arunachal Pradesh on India's northeastern frontier) that are the focus of disputes between India and China. But after the short border war of 1962 -- in which India, woefully underprepared, was left with a bloody nose -- the territorial tensions have been fairly well-managed. Yet the matter has never been clearly sorted out, and, instead of formal borders, both sides only agree on a vaguely defined Line of Actual Control.

On April 15, about 50 Chinese soldiers set up camp on Indian soil in the Depsang valley, 19 kilometers (11 miles) inside the LAC, and hoisted a banner that said: "You are in Chinese side." This infiltration was unanticipated, particularly with the Chinese premier's visit looming and a scheduled visit to China by Salman Khurshid , India's external affairs minister. India moved troops to the border while the high command raised the matter with Chinese counterparts. The press, particularly the hawks on India's hectoring television news channels, bayed for retaliation.

China refused to acknowledge, however, that it had breached India's boundaries but agreed to resolve the dispute "through peaceful negotiations." In India's Economic Times, the foreign-policy analyst Brahma Chellaney explained the shape of the gambit:

"In a classic replay of its old game, China intruded stealthily into a strategic border area in Ladakh and then disingenuously played conciliator by counselling `patience', `wisdom' and `negotiations'. The incursion bore all the hallmarks of Chinese brinkmanship, including taking an adversary by surprise, seizing an opportunistic timing, masking offence as defence, and discounting risks of wider escalation."

It was three weeks before the Chinese platoon dismantled its post and retreated, ending the standoff.

Skirmishes on the border have been a major strand of Sino-Indian relations since the two countries became sovereign states. The border war of 1962, as the foreign-policy expert Srinath Raghavan observed this year in an essay called "The Fifty Year Crisis," still colors Indian perceptions of China.

Tensions between the two countries over India's offer of safe haven to the Dalai Lama of Tibet since 1959 are another point of dispute. As Madhav Nalapat points out in the Diplomat, it's improbable that China will consent to a definite border settlement until India agrees to shut down the Tibetan settlement in the northern town of Dharamsala, where the Dalai Lama runs a government-in-exile. Just this week,a man was arrested in Dharamsala by the Indian police on the suspicion that he was a Chinese spy.

But, at least since 2000, the major, and positive, addition to the narrative of bilateral relations between the two countries has been the growth in trade.

China is now India's largest trading partner. Trade between the two countries is now around $70 billion annually. Much of that flows from China to India, though, generating a disadvantage of about $40 billion for India, one-third of its overall trade deficit. There's a vast market among Indian consumers for cheap Chinese goods, and this has destabilized Indian manufacturing. Equally, Chinese imports allow Indian consumers, especially those from the lower middle classes and the poor, to experience the sort of upscaling that the state couldn't offer their parents in the pre-liberalization era -- whether it's a mobile phone or a pair of spectacles.

While visiting India this month, Li Keqiang published a signed piece that outlined his vision for Sino-Indian relations. In the Hindu, the Chinese premier offered India "a handshake across the Himalayas" and said the two countries could together become the engine of the world economy:

"Together, the populations of our two countries exceed 2.5 billion and account for nearly 40 per cent of the world's total. We are viewed as the two most important emerging markets. However, our bilateral trade volume was less than $70 billion last year. This is incompatible with the strength and status of our two countries, but it also points to the huge potential for expanding and upgrading our bilateral trade and business cooperation. This is an issue that the two sides must work to resolve together. The world looks to Asia to be the engine driving the global economy. This would be impossible without the two powerhouses of China and India."

Over the four days of Li Keqiang's visit, Chinese and Indian delegations worked out agreements on several issues, including setting a target of $100 billion in bilateral trade in 2015, working together on matters such as hydrology, irrigation and sewage treatment, and deciding to translate "25 books of classic and contemporary works of each side over a period of five years into both Chinese and Indian languages." It seemed like the tensions of April had been laid to rest.

But does that mean that India will continue to play second fiddle to China, bearing the brunt of a swelling trade deficit and carrying out a largely passive and reactive policy in disputes over territory? In the business newspaper Mint, an editorialist spelled out the need for India to envision a more ambitious and assertive foreign policy and trade strategy:

"India began a Look East policy with much fanfare some years earlier. That seems to have lost steam. It is time that India aggressively pursued political and military ties with countries such as Vietnam and Japan. New Delhi also needs to have a frank dialogue with Washington on China. This does not imply hostility but amounts to paying China back in its own coin. Meeting the Chinese challenge requires careful coordination with other countries. For this to happen, India has to shed its timidity and the fear of how its big neighbour will respond."

(Chandrahas Choudhury, a novelist, is the New Delhi correspondent for World View. Follow him on Twitter. The opinions expressed are his own.)

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.