Asia Rising — No. 2, June 2015

A Monthly Letter from ASPI President Kevin Rudd

China-India Relations

Last month, Prime Minister Narendra Modi of India visited China for a summit with President Xi Jinping that many watched closely for signals about the future of the China-India relationship — a relationship that has gone through a complex evolution. From the halcyon 1950s presided over by Jawaharlal Nehru and Zhou Enlai, through the difficulties of the border conflict in the early 1960s, to the period where India allied itself with the Soviet Union, to the 1970s when China’s strategic orientation shifted to the United States, the history of the China-India relationship echoes through the ongoing interactions between the two countries, including the latest leadership summit.

The joint statement that Prime Minister Modi and President Xi released at the end of their summit had a noteworthy focus on three general priorities:

  • Affirming China’s and India’s shared interest in resolving their dispute over their territorial boundary, and making this resolution a strategic objective for the two governments;
  • Increasing economic and trade cooperation, with investment deals estimated to be worth more than $20 billion and new measures to balance a trade relationship that is heavily tilted toward China; and
  • Strengthening cultural and people-to-people exchanges in various sectors, including a pledge to improve diplomatic ties by opening consulates in Chengdu and Chennai

These pledges are informed by a wider set of strategic interests on both sides, which are worth taking into consideration when assessing the outcomes of the summit meeting and the future direction of the China-India relationship.

Security

The Xi-Modi summit was framed by the January meeting between Prime Minister Modi and President Barack Obama, when President Obama attended India’s National Day as a guest of Prime Minister Modi. Given India’s equivocal relationship with the United States in recent years, President Obama’s visit was heralded in Delhi as a turning point for the India-U.S. relationship: not just their cooperation on civil nuclear matters, but their broader geostrategic engagement. Beijing had equal reason to see this visit as a turning point, though one with different implications. From Beijing’s perspective, the joint declaration from Prime Minister Modi and President Obama on the sort of Asia-Pacific region both countries would like to see in the future could easily be read as a warning about China’s postures in the South China Sea and elsewhere.

India has its own concerns about maritime security, given China’s increasing naval movements into the Indian Ocean. China’s dependency on oil supplies out of the Gulf gives it a long-term strategic interest in securing safe passage for oil through the Indian Ocean. This has led China to expand its naval cooperation with states around the Indian Ocean. China is also working more with other navies, including the U.S. Navy, to enhance security from the coast of Somalia to the Arabian Sea.

China’s long-term and continuing military cooperation with Pakistan has also left a set of deep negative concerns in Delhi. These sensitivities are heightened by the threat to India’s domestic security posed by terrorists whom India regards as direct or indirect associates of the Pakistani state. These threats reached their peak with the horrendous attacks in Mumbai in 2008. Any repeat of these attacks in the future would have a disastrous impact on India-Pakistan relations.

But the dominant dynamic in the India-China relationship, at least from India’s perspective, is their land border dispute. This dispute has persisted since the beginning of Indian independence and the Chinese Communist Party’s rise to political power the two years later in 1949. Divided into two long sections, the China-India border has been a theater for military activities for half a century — including border operations during President Xi’s visit to Delhi last September.

Economics

China’s aspiration is to stabilize and reduce strategic tensions with India. China’s general approach to relations with its neighbors, whether friendly or problematic, has been to put bilateral economic interests first. Its logic is robust: If economic engagement flourishes, political relationships tend to improve. As political relationships improve, foreign policy behaviors tend to change. And when foreign policy behaviors change, national security postures can evolve for the better.

China has indicated its intention to become a much larger investor across the Eurasian continent by way of its “One Belt, One Road” initiative. Of course, India lies at the center of the Eurasian continent. In my own discussions in Delhi during a number of recent visits, it has been clear that Prime Minister Modi’s economic program depends heavily on tapping new sources of capital to remedy India’s huge infrastructure gap, which at present places severe impediments on the country’s long-term economic growth prospects.

India’s concerns about the geopolitical effects of “One Belt, One Road” have kept it from formally embracing this proposal, which positions China as the source of as much as $150 billion in capital from the Asian Infrastructure Investment Bank and the Silk Road Investment Fund. Nonetheless, I expect that our friends in India will ultimately want to secure a portion of that capital for domestic infrastructure investment. And a close reading of the statements, observations, and agreements by Prime Minister Modi during his visit to China suggests that China’s prospective investment in India in general, and its rail network in particular, remains an Indian priority.

As one think tank recently observed, the first “hat” that Prime Minister Modi wore to China was that of the economics-minded leader wishing to do business with China — the CEO of India, Inc. His second “hat” was that of India’s chief security officer: a role that pulls him in the reverse direction, away from China. And while it must be said that the countries made no real progress on the border question, their joint statement affirmed their shared strategic interest in settling the border question. This language recognized the burden that the border dispute puts on the overall relationship, and their common desire to deal with this challenge near the top of the bilateral political agenda.

Global Challenges

China and India could also make common cause in two new areas that have a global scope. One is countering violent global jihadism. India’s exposure to jihadism is well-documented. Less well known is China’s exposure to jihadism, which mostly occurs in the Xinjiang autonomous region that adjoins central Asia and is connected by traditional land routes with Afghanistan and Pakistan. Because violent jihadism intensifies and threatens domestic security in both India and China, I believe we are seeing the emergence of a low-level strategic dialogue on how to deal with extremists from Afghanistan and the least controlled areas of Pakistan and in Kashmir.

Another challenge that China and India face together is climate change: its long-term effects, and their similar need to mitigate those effects by reducing their greenhouse gas emissions. China and India have had no high-level bilateral discourse on climate policy in recent times. The headline agreement from Prime Minister Modi and President Xi after their summit, which said both sides are committed to the success of UN climate conference in Paris this December, is the first serious bilateral statement obliging both governments to pursue a successful outcome. This constitutes light years of progress from where we were just five years ago at the Copenhagen Summit where neither government was prepared to inject political capital necessary to bring about a global agreement.

Over time these two areas of shared interest (terrorism and climate change) will present opportunities to build strategic trust in the relationship. For the near term, I believe the China-India relationship will be driven by the economy. The Xi-Modi summit highlighted the economic mindset of both leaders and their priorities for accelerating their countries’ long term development. The impediment to achieving a more beneficial economic relationship remains on the security front, in particular the border. Nothing radically transformative in the India-China relationship can occur until the border is ultimately resolved.


Update on ASPI Initiatives

In my last letter, I said I would outline ASPI’s first major policy initiative. This initiative is aimed at resolving one of the Asia-Pacific region’s most pressing long-term challenges: its lack of robust regional institutions that are capable of managing security disputes and tensions and preventing conflicts. This challenge is particularly urgent given that the U.S. and China are each sponsoring the parallel development of separate regional institutions, creating the possibility that the region will be bifurcated by its alliances to these two global powers.

Given the complexity and sensitivity of this situation, I am pleased to share that ASPI has organized an expert Policy Commission that will advise and lead the initiative to develop Asia’s institutional architecture. Members of the Policy Commission include former U.S. National Security Advisor Tom Donilon, former Foreign Minister of Japan Yoriko Kawaguchi, former Indian National Security Advisor Shivshankar Menon, former Foreign Minister of Indonesia Marty Natalegawa, and Wang Jisi, President of the Institute of International and Strategic Studies at Peking University and a member of Foreign Policy Advisory Committee of China’s Foreign Ministry.

These senior practitioners will together assess opportunities to create pan-regional institutional arrangements and consider ways to combine security and economic functions within institutions. I hope you will be interested to learn more about this new initiative. You can watch our recent public discussion among the members of the Policy Commission. And I welcome your interest in this work as it progresses in the months ahead.

With kind regards,
Kevin Rudd
President, Asia Society Policy Institute