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Saturday, 20 September 2014 00:00
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New maturity in India-China relations

Prime minister Narendra Modi did well to bring up the issue of Chinese incursions across the Line of Actual Control, along with the issue of stapled visas, in his bilateral dialogue with Chinese President Xi Jinping—the day before, while returning from Vietnam, President Pranab Mukherjee pointed out that the oil blocks offered to OVL, blocks the Chinese government have been objecting to, were well within the territorial limits of Vietnam. The decision to raise the issues, and the Chinese assurance that a solution would be found, are important for two reasons. For one, it confirmed that it is possible to do business amidst all the tension between the two countries—though significantly less than the $100 billion investment talked of earlier, Xi’s delegation has made significant investment promises. Two, it proved that, amidst the hoopla over the new-found camaraderie, it is possible to raise issues relating to national security. It is a maturity which also needs to be brought to bear on relations with Pakistan though, it has to be conceded, keeping relations alive is a two-way street and it is easier with China which has a lot to offer India by way of both investments as well as technology.

While it is true the $20-odd billion of investments signed are a pittance compared to the $100 billion talked of by Chinese officials earlier, the number will go up significantly once the costs of the industrial parks in Maharashtra and Gujarat are taken into account. Though much of the Indian focus has been on the trade imbalance and its skewed nature—India exports raw materials but imports finished products—China is already a significant player in India’s energy and telecom market. While most mobile phones/parts are imported from China, large Indian power plants, such as those from Reliance Power have been using Chinese equipment which has also been financed from Chinese banks. While Reliance Power is looking to refinance its purchase of JP Associate’s power plants from Chinese banks, China’s EXIM Bank has just signed $2.8 billion worth of refinancing agreements with Indian banks for companies importing goods from China. More than just the funds, it is the promise of how cooperation with China can revitalise the Indian economy. With FDI opened up in the railways sector, China is going to help India increase the speed of several existing railway lines; it seems to be a toss-up right now between whether it will be Japanese or Chinese firms that will bag the bullet train corridors when they finally come up. Chinese investments in railway stations—a potentially huge area of investment – are also expected. Chinese industrial parks are another potential game-changer and, should they take off, will help change the face of manufacturing in India. The key here, of course, will be the necessary change in rules, including in the land acquisition Act and in labour rules, which India makes to be able to absorb not just the Chinese investments but also the Japanese ones promised a few weeks ago.



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